<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Amendment No. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS.240.14a-11(c) or SS.240.14a-12
STORAGE TECHNOLOGY CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
REGISTRANT
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------
(3) Filing Party:
----------------------------------------------------
(4) Date Filed:
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<PAGE> 2
STORAGETEK LOGO
April 6, 1998
Dear StorageTek Stockholder:
I am pleased to invite you to attend the 1998 Annual Meeting of
Stockholders of Storage Technology Corporation to be held at 10:00 a.m., MDT, on
Thursday, May 21, 1998, at the Adam's Mark Hotel in Denver, Colorado.
The Annual Meeting will begin with a formal business session during which
stockholders will vote on the proposals identified and described in the enclosed
proxy statement. Following this, I plan to present a report on our progress
during the last year and our plans for 1998.
Thank you for your continued support. Whether or not you plan to attend the
Annual Meeting, please vote as soon as possible, by completing, signing and
mailing the enclosed proxy card.
Sincerely,
/s/ DAVID E. WEISS
David E. Weiss
Chairman, President and
Chief Executive Officer
<PAGE> 3
LOGO
STORAGE TECHNOLOGY CORPORATION
2270 South 88th Street
Louisville, Colorado 80028-0001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
To the Stockholders:
The Annual Meeting of Stockholders of Storage Technology Corporation
("StorageTek" or the "Company"), a Delaware corporation, will be held on
Thursday, May 21, 1998, at 10:00 a.m., MDT, at the Adam's Mark Hotel, 1550 Court
Place, Denver, Colorado 80202, for the following purposes:
1. To elect 10 Directors;
2. To approve an amendment to the Amended and Restated 1987 Employee Stock
Purchase Plan to reserve an additional 1,400,000 shares of Common Stock
for issuance thereunder;
3. To approve an amendment to the Amended and Restated Stock Option Plan
for Nonemployee Directors to reserve an additional 250,000 shares of
Common Stock for issuance thereunder;
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the current fiscal year; and
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of Common Stock of record at the close of business on
March 27, 1998, will be entitled to notice of and to vote at the meeting. The
stock transfer books of the Company will remain open.
WE INVITE EACH OF YOU TO ATTEND THE MEETING. IF YOU CANNOT ATTEND, PLEASE
MARK, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENVELOPE
PROVIDED. NO STAMP IS NECESSARY IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Lizbeth J. Stenmark
Assistant Secretary
Louisville, Colorado
April 6, 1998
YOUR VOTE IS IMPORTANT
WHETHER YOU OWN A FEW OR MANY SHARES OF STOCK AND WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN YOUR PROXY
CARD PROMPTLY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES
AND IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE PROMPT RETURN OF
YOUR SIGNED PROXY WILL AID THE COMPANY IN REDUCING THE EXPENSE OF PROXY
SOLICITATION.
<PAGE> 4
STORAGE TECHNOLOGY CORPORATION
PROXY STATEMENT
April 6, 1998
PROCEDURAL MATTERS
THIS PROXY STATEMENT IS FURNISHED TO THE STOCKHOLDERS OF STORAGE TECHNOLOGY
CORPORATION ("STORAGETEK" OR THE "COMPANY") IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD
OF DIRECTORS" OR "BOARD") TO BE VOTED AT THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON THURSDAY, MAY 21, 1998, AT 10:00 A.M., MDT, OR AT ANY ADJOURNMENT OR
POSTPONEMENT THEREOF. Stockholders of record of Common Stock of the Company at
the close of business on March 27, 1998 (the "Record Date") will be entitled to
notice of and to vote at the meeting. The Annual Meeting will be held at the
Adam's Mark Hotel, 1550 Court Place, Denver, Colorado 80202.
Proxies received prior to the meeting will be voted in accordance with the
instructions contained in the proxy and, if no choice is specified, will be
voted in favor of each of management's nominees for Director; in favor of the
amendment to the 1987 Employee Stock Purchase Plan; in favor of the amendment to
the Amended and Restated Stock Option Plan for Nonemployee Directors; in favor
of ratification of the appointment of the independent accountants; and, in the
appointed proxies' discretion, upon such other matters that may properly come
before the meeting. Any stockholder giving a proxy using the enclosed proxy may
revoke it at any time before it is voted by a written revocation delivered to
any of the proxy holders named therein, by submitting another valid proxy
bearing a later date to the Company or its transfer agent prior to the voting or
by attending the meeting and voting in person. Beneficial owners wishing to vote
at the meeting who are not stockholders of record on the Company's books (e.g.,
persons holding stock in street name) must bring to the meeting a Power of
Attorney or proxy in their favor signed by the holder of record in order to be
able to vote.
SOLICITATION OF PROXIES
Initial solicitation of proxies by the Board of Directors will be by mail.
Further solicitation by the Board or employees of the Company can also be made
by mail, telephone, telegraph or personal interview. No additional compensation
will be paid to the Directors or employees of the Company for solicitation of
proxies. As of this date, the Company has no plans to retain an outside firm to
solicit proxies. If, after the mailing of this Proxy Statement and prior to the
Annual Meeting, the Company determines it is advisable to retain an outside firm
to solicit proxies, the Company will pay the cost of soliciting proxies, which
the Company estimates will range from $10,000 to $15,000, plus out-of-pocket
expenses not to exceed $15,000. In addition, the Company may also reimburse
intermediaries for their expenses in forwarding solicitation materials to
beneficial owners. This Proxy Statement and the form of proxy are first being
mailed to the stockholders beginning April 6, 1998.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The quorum required for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date (excluding treasury stock). All shares that are voted "FOR," "AGAINST" or
"WITHHELD FROM" a matter will count for purposes of establishing a quorum and
will be treated as shares entitled to vote at the Annual Meeting (the "Votes
Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business, and (ii) the total number of Votes
Cast with respect to a matter (other than the election of Directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the matter.
<PAGE> 5
The Company intends to count broker non-votes for purposes of determining
the presence or absence of a quorum for the transaction of business, but not to
consider broker non-votes as Votes Cast with respect to a particular matter as
to which the broker has expressly not voted. Accordingly, broker non-votes will
have no effect upon the outcome of voting on matters presented to the
stockholders at the Annual Meeting.
Based upon New York Stock Exchange rules, the Company believes that all of
management's proposals are considered "discretionary," and accordingly,
brokerage firms may vote shares held for customers if no voting instructions
have been furnished by such customers within 10 days prior to the meeting.
ANNUAL REPORT
This Proxy Statement is accompanied by the Company's 1997 Summary Annual
Report (the "Annual Report") and the Company's Annual Report on Form 10-K for
the fiscal year ended December 26, 1997 (the "Form 10-K"). Stockholders are
referred to the Form 10-K for information concerning the Company's business and
operations, but the Annual Report and Form 10-K are not part of the proxy
solicitation materials. CERTAIN OTHER INFORMATION ABOUT THE COMPANY FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST. PLEASE CONTACT INVESTOR RELATIONS, STORAGE TECHNOLOGY CORPORATION, 2270
SOUTH 88TH STREET, LOUISVILLE, COLORADO 80028-4315, TELEPHONE 1-800-785-2217, IF
YOU WOULD LIKE TO REQUEST SUCH ADDITIONAL INFORMATION. THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES ARE LOCATED AT 2270 SOUTH 88TH STREET, LOUISVILLE, COLORADO
80028, TELEPHONE (303) 673-5151.
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VOTING SECURITIES OF THE COMPANY
On the Record Date for the Annual Meeting, March 27, 1998, the Company had
issued, outstanding and entitled to vote 53,644,787 shares of its common stock,
$.10 par value per share ("Common Stock"). Holders of shares of the Common Stock
on the Record Date are entitled to vote at the Annual Meeting and at all
adjournments or postponements thereof. Each holder of shares of the Common Stock
is entitled to one vote for each share. In the election of Directors, such
holder has the right to vote the number of shares owned for as many persons as
there are Directors to be elected. There is no cumulative voting in the election
of Directors.
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of the Record Date: (i) by all persons known by the Company to
be beneficial owners of more than 5% of the voting power of the Company's
outstanding Common Stock based on information obtained from Schedule 13D and 13G
filings received prior to the Record Date; (ii) by each current Director and
management's additional nominee for Director; (iii) by each executive officer
listed in the Summary Compensation Table under the heading "COMPENSATION OF
EXECUTIVE OFFICERS" (the "Named Executive Officers"); and (iv) by all current
Directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER OF OWNERSHIP(1) CLASS
- - ------------------------ ----------------- -------
<S> <C> <C>
J.&W. Seligman & Co., Incorporated.......................... 2,815,600(2) 5.25%
and William C. Morris
100 Park Avenue
New York, NY 10017
Legg Mason, Inc............................................. 3,647,703(3) 6.80
100 Light Street
Baltimore, MD 21202
Mellon Bank Corporation..................................... 3,661,731(4) 6.83
One Mellon Bank Center
Pittsburgh, PA 15258
David E. Weiss.............................................. 294,460(5) (23)
Gary D. Francis............................................. 8,088(6) (23)
L. Thomas Gooch............................................. 42,028(7) (23)
David E. Lacey.............................................. 71,254(8) (23)
Victor M. Perez............................................. 16,397(9) (23)
W. Russell Wayman........................................... 3,324(10) (23)
John V. Williams............................................ 8,475(11) (23)
William L. Armstrong........................................ 7,305(12) (23)
J. Harold Chandler.......................................... 6,305(13) (23)
Paul Friedman............................................... 83,867(14) (23)
William R. Hoover........................................... 17,805(15) (23)
Stephen J. Keane............................................ 31,350(16) (23)
William T. Kerr............................................. 500(17) (23)
Robert E. La Blanc.......................................... 45,433(18) (23)
Robert E. Lee............................................... 26,738(19) (23)
Harrison Shull.............................................. 50,396(20) (23)
Richard C. Steadman......................................... 50,507(21) (23)
All current Directors and executive officers (15 persons) as
a group................................................... 717,147(22) 1.34%
</TABLE>
- - ---------------
(1) Unless otherwise indicated, the persons named have sole voting and
dispositive power over the shares shown as beneficially owned by them. The
number of shares reported as beneficially owned by Directors and executive
officers includes stock options that are exercisable within 60 days of the
Record Date and
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Common Stock equivalents that will be settled in shares of Common Stock.
Share ownership by greater than 5% holders is based upon the respective
Schedule 13G filings, which reflect ownership as of December 31, 1997.
(2) Represents shares owned by J. & W. Seligman & Co., Incorporated ("JWS"), an
investment adviser. William C. Morris is a control person of JWS, and may
be deemed to beneficially own the shares held by JWS. Mr. Morris and JWS
have shared voting power and shared dispositive power with respect to all
these shares.
(3) Legg Mason, Inc. is a parent holding company that beneficially owns shares
held by the following subsidiaries: Legg Mason Special Investment Trust,
Inc. and Legg Mason Value Trust, Inc., with respect to which Legg Mason
Fund Adviser, Inc., an investment adviser with discretion, has dispositive
power; and various clients of Legg Mason Wood Walker, Inc. (a broker/dealer
with discretion); Legg Mason Capital Management, Inc. (an investment
adviser with discretion); Legg Mason Trust Company; and Batterymarch
Financial Management, Inc. (an investment adviser with discretion), each of
which has dispositive power. Legg Mason, Inc. has sole voting power over
3,536,800 shares and sole dispositive power over 3,647,703 shares.
(4) Represents shares owned by Mellon Bank Corporation and its direct or
indirect subsidiaries in their fiduciary capacities, none of which
individually owns more than 5% of the Company's outstanding Common Stock.
Mellon Bank Corporation has sole voting power over 3,260,651 shares, shared
voting power over 28,770 shares, sole dispositive power over 3,522,884
shares and shared dispositive power over 73,047 shares.
(5) Includes 279,808 shares of Common Stock issuable upon exercise of options
held by Mr. Weiss, which options are exercisable within 60 days of the
Record Date.
(6) Includes 6,423 shares of Common Stock issuable upon exercise of options
held by Mr. Francis, which options are exercisable within 60 days of the
Record Date.
(7) Includes 15,542 shares of Common Stock issuable upon exercise of options
held by Mr. Gooch, which options are exercisable within 60 days of the
Record Date. Mr. Gooch resigned as an executive officer of the Company
effective March 1, 1998.
(8) Includes 60,461 shares of Common Stock issuable upon exercise of options
held by Mr. Lacey, which options are exercisable within 60 days of the
Record Date.
(9) Includes 8,467 shares of Common Stock issuable upon exercise of options
held by Mr. Perez, which options are exercisable within 60 days of the
Record Date.
(10) Includes 3,324 shares of Common Stock issuable upon exercise of options
held by Mr. Wayman, which options are exercisable within 60 days of the
Record Date. Mr. Wayman resigned as an executive officer of the Company on
October 6, 1997, and as an employee of the Company on February 27, 1998.
(11) Includes 1,024 shares of Common Stock issuable upon exercise of options
held by Mr. Williams, which options are exercisable within 60 days of the
Record Date. Mr. Williams resigned as an executive officer of the Company
on June 26, 1997.
(12) Includes (i) 6,000 shares of Common Stock issuable upon exercise of options
held by Mr. Armstrong, which options are exercisable within 60 days of the
Record Date, and (ii) 305 Common Stock equivalents, which will be settled
in shares of Common Stock upon Mr. Armstrong's resignation or other
termination from the Board.
(13) Includes (i) 5,000 shares of Common Stock issuable upon exercise of options
held by Mr. Chandler, which options are exercisable within 60 days of the
Record Date, and (ii) 305 Common Stock equivalents, which will be settled
in shares of Common Stock upon Mr. Chandler's resignation or other
termination from the Board.
(14) Mr. Friedman currently serves as a Director, but is not standing for
re-election at the Annual Meeting. Includes 40,500 shares of Common Stock
issuable upon exercise of options held by Mr. Friedman, which options are
exercisable within 60 days of the Record Date.
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(15) Includes (i) 15,000 shares of Common Stock issuable upon exercise of
options held by Mr. Hoover, which options are exercisable within 60 days of
the Record Date, and (ii) 305 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Hoover's resignation or other
termination from the Board.
(16) Includes 25,952 shares of Common Stock issuable upon exercise of options
held by Mr. Keane, which options are exercisable within 60 days of the
Record Date.
(17) Mr. Kerr has been nominated to stand for election as a Director for the
first time at the Annual Meeting.
(18) Includes 38,000 shares of Common Stock issuable upon exercise of options
held by Mr. La Blanc, which options are exercisable within 60 days of the
Record Date.
(19) Includes (i) 25,500 shares of Common Stock issuable upon exercise of
options held by Mr. Lee, which options are exercisable within 60 days of
the Record Date, and (ii) 154 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Lee's resignation or other
termination from the Board.
(20) Includes (i) 40,500 shares of Common Stock issuable upon exercise of
options held by Mr. Shull, which options are exercisable within 60 days of
the Record Date, and (ii) 305 Common Stock equivalents, which will be
settled in shares of Common Stock one year after Mr. Shull's resignation or
other termination from the Board.
(21) Includes (i) 40,500 shares of Common Stock issuable upon exercise of
options held by Mr. Steadman, which options are exercisable within 60 days
of the Record Date, and (ii) 305 Common Stock equivalents, which will be
settled in shares of Common Stock one year after Mr. Steadman's resignation
or other termination from the Board.
(22) Includes (i) 599,132 shares of Common Stock issuable upon exercise of
options within 60 days of the Record Date held by 10 current Directors and
five current non-Director executive officers, and (ii) 1,679 shares of
Common Stock to be issued upon the settlement of Common Stock equivalents
held by six current Directors.
(23) Less than 1% of the class.
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PROPOSAL 1.
ELECTION OF DIRECTORS
At the Annual Meeting, 10 Directors are to be elected to serve until the
next Annual Meeting or until their respective successors will be elected and
qualified. Management's nominees include all of the persons who currently serve
as Directors, except for Paul Friedman, who is not standing for re-election. In
addition, management has nominated William T. Kerr to stand for election as a
Director for the first time at this year's Annual Meeting. The 10 nominees are
set forth below. If the enclosed Proxy is duly executed and received in time for
the meeting, it is the intention of the persons named therein to vote the shares
represented thereby, unless otherwise directed, in favor of each of the 10
nominees listed below. The 10 nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to be voted
for them shall be elected as Directors. Votes withheld from any Director will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, but will have no other effect on the outcome of the
vote on the election of Directors.
If, at the time of the meeting, one or more of the nominees have become
unavailable to serve, shares represented by proxies will be voted for the
remaining nominees and for any substitute nominee or nominees designated by the
Governance and Nominating Committee of the Board of Directors. The Governance
and Nominating Committee knows of no reason why any of the 10 nominees will be
unavailable or unable to serve. The names of each of the 10 nominees and certain
other information is set forth below:
WILLIAM L. ARMSTRONG; AGE 61; CHAIRMAN, CHERRY CREEK MORTGAGE COMPANY
Mr. Armstrong has been a Director since 1991. He has served as Chairman of
Cherry Creek Mortgage Company since 1991; Chairman of El Paso Mortgage Company
since 1993; Chairman of Centennial State Mortgage Company and Frontier Real
Estate, Inc. since 1994; and Chairman of Transland Financial Services, Inc.
since 1996. Mr. Armstrong served as a United States Senator for the State of
Colorado from 1979 to 1991. Mr. Armstrong also currently serves as a director of
Provident Companies, Inc. and Helmerich & Payne.
J. HAROLD CHANDLER; AGE 48; CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
PROVIDENT COMPANIES, INC.
Mr. Chandler has been a Director since 1997. Since 1993, Mr. Chandler has
served as Chairman, President and Chief Executive Officer of Provident
Companies, Inc., a holding company of insurance subsidiaries that provides
disability, life and related coverage to both individuals and to the employee
benefits marketplace. From 1991 to 1993, Mr. Chandler served as President of the
Mid-Atlantic Banking Group of NationsBank Corporation. Mr. Chandler also serves
as a director of Provident Companies, Inc.; AmSouth Bancorporation; and Herman
Miller, Inc.
WILLIAM R. HOOVER; AGE 68; CHAIRMAN OF EXECUTIVE COMMITTEE, COMPUTER SCIENCES
CORPORATION
Mr. Hoover has been a Director since 1995. He has served as Chairman of the
Executive Committee of Computer Sciences Corporation, a provider of information
technology services, since 1997. From 1972 to 1997, Mr. Hoover served as
Chairman of the Board of Computer Sciences Corporation. From 1972 to 1995, Mr.
Hoover also served as Chief Executive Officer and President of Computer Sciences
Corporation. Mr. Hoover also currently serves as a director of Computer Sciences
Corporation; Merrill Lynch & Co., Inc.; Eltron International, Inc.; and
Rofin-Sinar Technologies, Inc.
STEPHEN J. KEANE; AGE 69; MANAGEMENT CONSULTANT
Mr. Keane has been a Director since 1987. Mr. Keane has been a management
consultant since 1985. Prior to that time, Mr. Keane served in various
management positions, including President and Chief Executive Officer, of
MAI/Basic Four-Small Business Computer Systems; and was Chairman of the Board of
Alloy Computer Products.
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<PAGE> 10
WILLIAM T. KERR; AGE 56; CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MEREDITH
CORPORATION
Mr. Kerr has been nominated to fill the directorship resulting from a
Director not standing for re-election. Since January 1998, Mr. Kerr has served
as Chairman and Chief Executive Officer of Meredith Corporation, a media and
marketing company, centering on magazine and book publishing, television
broadcasting, residential real estate marketing and franchising, and brand
licensing. From January 1997 to January 1998, Mr. Kerr served as President and
Chief Executive Officer, and from May 1994 to January 1997, he served as
President and Chief Operating Officer. Prior to that time, from September 1991
to April 1994, he served as President of the Magazine Group and Executive Vice
President. Mr. Kerr currently serves as a director of Meredith Corporation and
Principal Mutual Life Insurance Company.
ROBERT E. LA BLANC; AGE 64; PRESIDENT, ROBERT E. LA BLANC ASSOCIATES, INC.
Mr. La Blanc has been a Director since 1979. Mr. La Blanc is the founder
and President of Robert E. La Blanc Associates, Inc., an information
technologies consulting and investment banking firm, and has served in that
capacity since 1981. Mr. La Blanc formerly served as Vice Chairman of
Continental Telecom Corp. and was a general partner at Salomon Brothers. Mr. La
Blanc is also a director of Salient 3 Communications, Inc.; Titan Corp.; Tribune
Company; and a family of Prudential Mutual Funds.
ROBERT E. LEE; AGE 62; EXECUTIVE DIRECTOR EMERITUS, THE DENVER FOUNDATION
Mr. Lee has been a Director since 1989. He currently serves as the
Executive Director Emeritus of The Denver Foundation, a community foundation;
from 1989 to 1996, he served as its Executive Director. Until his retirement in
1989, Mr. Lee served as the Chairman of First Interstate Bank of Denver. Mr. Lee
also serves as a director of ING Group North American Insurance, Inc.; Meredith
Corporation; and Source Capital Corporation.
HARRISON SHULL; AGE 74; FORMER PROVOST, NAVAL POSTGRADUATE SCHOOL
Mr. Shull has been a Director since 1983. Mr. Shull was Provost, Naval
Postgraduate School, Monterey, California, from 1988 until his retirement in
1995.
RICHARD C. STEADMAN; AGE 65; PRIVATE INVESTOR
Mr. Steadman has been a Director since 1970. Mr. Steadman has been a
private investor since 1981. Mr. Steadman previously served as Chairman of the
Board of National Convenience Stores, Inc., a retail chain, until his retirement
in 1995.
DAVID E. WEISS; AGE 54; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, STORAGETEK
Mr. Weiss has served as Chairman, President and Chief Executive Officer of
StorageTek since May 1996. Prior to that, he served in the following positions
at StorageTek: Chief Operating Officer from March 1995 to May 1996; Executive
Vice President of Systems Development from January 1993 to March 1995; Senior
Vice President of Marketing and Program Management Process from June 1992 to
January 1993; and Corporate Vice President of Market Planning from August 1991
to June 1992. Mr. Weiss joined the Company in February 1991 as Staff Vice
President.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held seven meetings during fiscal 1997.
The Board of Directors has a standing Audit Committee, Governance and Nominating
Committee, and Human Resources and Compensation Committee.
Audit Committee. The Audit Committee currently consists of Directors Shull
(Chair), Friedman, Hoover, La Blanc and Steadman. The Audit Committee held six
meetings during fiscal 1997. The Audit Committee's principal functions are to
review the arrangements for and the scope of the independent audit, as well as
the results of the audit engagement; review the scope of non-auditing services
performed by the
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independent accountants and their independence; review the Company's internal
auditing procedures and personnel; review the appropriateness of significant
accounting policies utilized by the Company; and appraise the Company's
financial reporting activities (including its Annual Report on Form 10-K). The
members of the Audit Committee are not employees of the Company and are, in the
opinion of the Board, free from any relationship that would interfere with the
exercise of independent judgment.
Governance and Nominating Committee. The Governance and Nominating
Committee met five times during fiscal 1997, and currently consists of Directors
Armstrong (Chair), Hoover and Keane. None of the members of the Governance and
Nominating Committee is an employee of the Company. The Committee's
responsibilities include the selection of potential candidates for director and
the recommendation of candidates to the Board. The Committee also assesses the
Board's performance, makes recommendations to the Board regarding the
organization and structure of the Board and Committees of the Board, and reviews
the Company's corporate governance process.
The Governance and Nominating Committee will consider nominees recommended
by stockholders. Such recommendations should be directed to the Chair of the
Governance and Nominating Committee at the Company's principal executive
offices. In addition, under the Company's Bylaws, nominations for the election
of Directors may be made by any stockholder entitled to vote in the election of
Directors, but only if written notice of such stockholder's intent to make such
nominations has been received by the Company at its principal executive office
not less than 60 days nor more than 90 days prior to the meeting at which
Directors are to be elected; provided, however, that in the event that less than
70 days' notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice must set forth: (a) with respect
to each proposed nominee, the name, age, business and residence address,
principal occupation or employment, class and number of shares of stock of the
Company owned and any other information that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Regulation 14A of
the Securities Exchange Act of 1934 (the "Exchange Act"); and (b) with respect
to the stockholder giving the notice, the name, address and class and number of
shares of the Company that are beneficially owned by such stockholder. The
presiding officer of the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
Human Resources and Compensation Committee. The Human Resources and
Compensation Committee (the "Compensation Committee") currently consists of
Directors Keane (Chair), Armstrong, Chandler and Lee. The Compensation Committee
held six meetings during fiscal 1997. The Compensation Committee's primary
responsibilities are to evaluate the performance of executive management; review
succession planning; and review compensation policies and agreements for
executive management and key employees of the Company, other than the Chief
Executive Officer. The Compensation Committee recommends to the Board for
approval the total compensation for the Chief Executive Officer. The
Compensation Committee approves salary recommendations for executive management
and administers the Company's bonus, stock purchase and stock option plans. The
members of the Compensation Committee are not employees of the Company and are,
in the opinion of the Board, free from any relationship that would interfere
with the exercise of independent judgment.
During fiscal year 1997, no Director attended fewer than 75% of the
aggregate number of meetings of the Board and the Committees of the Board on
which he served. The average attendance at the Board meetings and Committee
meetings which the Directors were scheduled to attend was 99%.
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<PAGE> 12
STANDARD ARRANGEMENTS FOR COMPENSATION OF DIRECTORS
CASH COMPENSATION
The Company pays each Director who is not an employee of the Company a
standard annual retainer of $27,000. Commencing May 1997, the chair of each
committee is paid an additional annual retainer of $5,000. Prior to that time,
committee chairs were paid an additional fee of $2,000. During 1997, all
nonemployee Directors were paid an additional fee of $1,000 for each meeting of
the Board attended in excess of eight per year and $1,000 for each committee
meeting attended. Commencing in 1998, Directors are paid a meeting fee of $1,000
for each Board meeting and Committee meeting attended. Directors also receive a
fee of $1,000 per day for time spent on StorageTek business pursuant to a
specific request by the Chairman of the Board. Each year, a nonemployee Director
may irrevocably elect to defer receipt of all or a portion of their cash
compensation. Nonemployee Directors also receive medical and dental coverage.
STOCK FOR FEES
To further align the nonemployee Directors' interests with the long-term
interests of the stockholders, the Company's 1995 Equity Participation Plan
allows Directors to elect to receive a portion of their annual retainer either
in shares of the Company's Common Stock or in Common Stock equivalents, in lieu
of receiving cash compensation. In 1997, the Board adopted stock ownership
guidelines for Directors, including a minimum ownership threshold of 2,500
shares of Common Stock or Common Stock equivalents. Nonemployee Directors who
have not achieved the ownership threshold will elect to receive a minimum of 50%
of their annual retainer in the form of Common Stock or Common Stock equivalents
until such time as they have achieved the minimum stock ownership goal.
STOCK OPTIONS
The Company has a Stock Option Plan for Nonemployee Directors (the
"Director Plan"). Under the Director Plan, the Company has granted nonemployee
Directors nonstatutory stock options to purchase shares of Common Stock, at an
exercise price equal to 100% of the fair market value of the Common Stock on the
date of grant, on a predetermined schedule. All options expire ten years from
the date of grant, unless earlier terminated pursuant to the provisions of the
Director Plan.
Each nonemployee Director is granted a stock option to purchase 25,000
shares of Common Stock (the "Initial Option") on the date of his or her initial
election or appointment to the Board. These stock options become exercisable
over a period of six years, in installments: 5,000 shares become exercisable six
months following the date of grant; and the remaining shares become exercisable
in equal installments on the six anniversary dates following the date of grant,
provided that the optionee remains a Director of the Company.
Each nonemployee Director is also granted a second option to purchase an
additional 18,000 shares of the Company's Common Stock (the "Additional Option")
on the third anniversary of his or her first election or appointment to the
Board. The Additional Option becomes exercisable in three equal installments on
the first, second and third anniversaries of the first date on which all shares
that are subject to the Initial Option have become exercisable, provided that
the optionee remains a Director of the Company.
Each nonemployee Director, except Mr. Chandler and Mr. Hoover, has been
granted, at varying times and in varying increments, stock options to purchase
an aggregate of 43,000 shares of Common Stock. The vesting schedules for these
options conform to the vesting schedules described above. To date, Directors
Chandler and Hoover have each been granted a stock option to purchase 25,000
shares of Common Stock. All nonemployee Directors who have served on the Board
for nine or more consecutive years hold fully vested options.
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<PAGE> 13
As of the Record Date, the Director Plan had 321,334 shares available for
future grant, including the 250,000 shares subject to stockholder approval at
the Annual Meeting (see "Proposal 3. Amendment to the Nonemployee Director Stock
Option Plan"), and 278,952 shares subject to outstanding options. During 1997,
an option to purchase 25,000 shares was granted under the Director Plan to Mr.
Chandler upon his election to the Board, and options to purchase 21,334 shares
were terminated in connection with the decision of one Director not to stand for
re-election at the 1997 Annual Meeting. At the 1998 Annual Meeting, stockholders
are being asked to approve an amendment to the Director Plan to reserve 250,000
additional shares of Common Stock for issuance thereunder.
PROPOSAL 2.
AMENDMENT TO THE
1987 EMPLOYEE STOCK PURCHASE PLAN
On February 2, 1982, the Board of Directors (the "Board") adopted the 1982
Employee Stock Purchase Plan, which was amended, restated and renamed in 1987
and has been further amended from time to time since 1987 (the Employee Stock
Purchase Plan, as so amended and restated, shall hereinafter be referred to as
the "Purchase Plan"). At the 1998 Annual Meeting, stockholders are being asked
to approve the reservation of an additional 1,400,000 shares of Common Stock for
issuance under the Purchase Plan, bringing the total number of shares authorized
for issuance under the Purchase Plan to 6,100,000 shares. As of the Record Date,
3,573,436 shares had been issued under the Purchase Plan, and 2,526,564 shares,
including the 1,400,000 shares subject to stockholder approval, remain available
for issuance under the Purchase Plan.
The Purchase Plan is an integral component of the Company's efforts to
stimulate employee stock ownership. In addition, the Purchase Plan serves as a
financing source for the Company. During the last five years, the Company has
received, through payroll deductions made by StorageTek employees, approximately
$59 million to purchase shares of Common Stock in connection with offerings
under the Purchase Plan and similar plans assumed by the Company in connection
with an acquisition.
It is the intention of the Company that the Purchase Plan continue to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986 (the "Code"), as amended from time to time. The provisions
of the Purchase Plan will, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of Section 423 of the
Code.
SUMMARY OF THE PURCHASE PLAN
General. The Purchase Plan provides employees of the Company and its
subsidiaries an opportunity to acquire shares of the Company's Common Stock
through payroll deductions during each offering period. The Purchase Plan is
implemented by offering periods (each an "Offering Period"), which currently
last six months, but may be changed by the Board or Committee of the Board
administering the Purchase Plan. Participation in the Purchase Plan is
voluntary.
Administration of the Purchase Plan. The Purchase Plan is administered by
the Human Resources and Compensation Committee of the Board (the "Committee"),
which consists solely of nonemployee Directors of the Company. All questions of
interpretation and construction of any provision of the Purchase Plan are
determined by the Committee, which also is responsible for adopting rules and
regulations for administering the Purchase Plan. Determinations made by the
Committee (and approved by the Board, if necessary) with respect to any matter
or provision contained in the Purchase Plan are final, conclusive and binding
upon all participants.
Eligibility. With the exceptions described below, any person who is
customarily employed by the Company or one of its majority-owned subsidiaries
for more than 20 hours per week and more than five months in any calendar year
is eligible to participate in the Purchase Plan. In order to participate in an
offering, a person must be employed at least 15 days prior to the commencement
of an Offering Period and remain continuously employed through the last day of
the last full payroll period immediately preceding the termination of the
Offering Period. Employees of certain subsidiaries outside of the United States
are not
10
<PAGE> 14
eligible to participate in the Purchase Plan. As of the Record Date,
approximately 6,700 employees were eligible to participate in the Purchase Plan.
An employee will not be granted a right to purchase stock in the Purchase
Plan if: (i) immediately after the grant, such employee would own 5% or more of
the total combined voting power or value of all classes of stock of the Company;
(ii) his or her rights to purchase stock under all employee stock purchase plans
of the Company accrue at a rate that exceeds $25,000 worth of Common Stock
(determined using the fair market value of the stock at the time such option is
granted) for each calendar year; or (iii) his or her rights to purchase Common
Stock would exceed 25,000 shares in any Offering Period.
Shares Subject to the Purchase Plan. If this proposed amendment is
approved, the number of shares of Common Stock authorized for sale under the
Purchase Plan will total 6,100,000 shares (including 3,573,436 shares previously
issued).
Allocation of Shares. The Committee currently has allocated a maximum of
300,000 shares of Common Stock (plus any share balances remaining from earlier
Offering Periods) for issuance during each Offering Period. The Committee may,
in its discretion, increase or decrease the maximum shares available for any
Offering Period prior to the commencement of the affected Offering Period,
provided that the change is announced at least five days prior to the affected
Offering Period. If fewer than the number of shares allocated with respect to
any Offering Period are purchased during such Offering Period, the number of
shares not purchased will be carried over and will be available for sale during
any subsequent Offering Period. If the total number of shares that participants
would otherwise be allowed to purchase on the termination date of an Offering
Period exceeds the maximum number of shares available for sale, the Company will
make a pro rata allocation of the shares available in as nearly uniform a manner
as is practicable. The balance of all remaining accumulated deductions will be
returned to each participant, together with the net earnings.
Participation; Payroll Deductions. To participate in the Purchase Plan, an
eligible employee must authorize payroll deductions pursuant to the Purchase
Plan. Such payroll deductions may not exceed 10% of a participant's base pay
during the Offering Period. For purposes of this calculation, base pay will
include, at the participant's election, either (i) base salary only; or (ii)
base salary plus bonus, incentive and commission compensation. All payroll
deductions are held by the Company in a segregated account. Once an employee
becomes a participant in the Purchase Plan, the employee will automatically
participate in each successive Offering Period until such time as the employee
withdraws from the Purchase Plan or the participant terminates employment with
the Company. On the first day of the Offering Period (the "Offering Commencement
Date"), each participant is automatically granted a right to purchase shares of
the Company's Common Stock. The right expires at the end of the Offering Period
(the "Offering Termination Date") or upon termination of employment, whichever
is earlier, but is exercised on each Offering Termination Date to the extent of
the payroll deductions accumulated in the participant's account during the
Offering Period.
Purchase Price. Shares of Common Stock may be purchased under the Purchase
Plan at a price equal to 85% of the lesser of the price of the Common Stock on
(i) the Offering Commencement Date, or (ii) the Offering Termination Date. The
"price" of the Common Stock means the closing price per share of the Common
Stock on the New York Stock Exchange as reported in The Wall Street Journal for
the Offering Commencement Date or Offering Termination Date. The number of
shares of Common Stock a participant purchases in each Offering Period is
determined by dividing the total amount of payroll deductions accumulated in the
participant's account during an Offering Period by the purchase price. As of the
Record Date, the closing price of the Common Stock was $75.50 per share.
Fractional Shares. The Committee may issue fractional shares in order to
utilize the full amount of a participant's deductions. In the event the
Committee determines not to issue fractional shares under the Purchase Plan, a
participant's accumulated payroll deductions that would have been used to
purchase fractional shares will, at the Committee's discretion, either be
returned to the participant or automatically credited to the participant's
account and applied toward his or her option to purchase shares in the next
Offering Period. For the current Offering Period, the Committee has determined
not to issue fractional shares.
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<PAGE> 15
In addition, if a participant's deductions exceed the limitations of the
Purchase Plan, the excess deductions, together with net earnings, will be
returned to the participant following the Offering Termination Date.
Termination of Employment; Withdrawal. Termination of a participant's
employment for any reason, including disability or death, or the failure of the
participant to remain in the continuous scheduled employ of the Company for at
least 20 hours per week, cancels his or her right and participation in the
Purchase Plan immediately. In such event, the payroll deductions credited to the
participant's account will be returned to him or her or, in the case of death,
to the person or persons entitled thereto as provided in the Purchase Plan.
Generally, a participant may withdraw from an Offering Period without
affecting his or her eligibility to participate in future Offering Periods.
However, once a participant withdraws from a particular offering, that
participant may not participate again in the same offering. In order to
withdraw, a participant must make such election prior to the 15th day of the
month in which the Offering Termination Date is scheduled to occur.
Adjustment Upon Change in Capitalization. In the event that the Common
Stock is changed or exchanged by reason of any stock dividend, stock split,
reverse stock split, consolidation, or combination of shares, reclassification,
recapitalization, or any action of a similar nature affecting the Company's
Common Stock (excluding, however, any reorganization under the United States
Bankruptcy Code), then the number of shares of Common Stock reserved for
issuance under the Purchase Plan, the number and class of shares of stock
subject to rights outstanding under the Purchase Plan, and the exercise price of
any such outstanding rights will be adjusted. The extent and manner of
adjustment will be determined by the Board based upon the recommendations of the
Compensation Committee as appropriate under the Purchase Plan.
Merger or Sale of Assets. Unless the Board determines otherwise, in
connection with StorageTek's merger with another entity or acquisition of all or
substantially all of StorageTek's assets by another corporation, the successor
corporation will assume or substitute outstanding rights under the Purchase
Plan. If such rights are not assumed or substituted, then either the Offering
Period then in progress will be shortened by setting a new Offering Termination
Date and the Board or the Committee will notify each participant that his or her
right will be exercised automatically on the new Offering Termination Date,
unless prior to such date, the participant has withdrawn from the Offering
Period, or the outstanding rights to purchase will be canceled and deductions
credited to participants' accounts will be returned to the participants.
Amendment and Termination. The Board may, at any time, amend or terminate
the Purchase Plan unless stockholder approval is required or desirable under
applicable law or regulation, including federal and state corporate laws,
securities laws, tax laws and the rules of the New York Stock Exchange. However,
no such action can make any change in any option already granted under the
Purchase Plan that would adversely affect the rights of any participant.
Federal Income Tax Consequences. The Purchase Plan and the right of
participants to make purchases thereunder, is intended to qualify under the
provisions of Sections 421 and 423 of the Code. Under these provisions, the
participant has no liability for federal income tax, and the Company does not
withhold any taxes, at the time of grant of the option or the participant's
purchase of shares. Upon the subsequent sale or other disposition of the shares
by a participant, the participant will generally be subject to tax and the
amount of the tax will depend upon the holding period. If the shares are sold or
otherwise disposed of more than two years from the Offering Commencement Date
and more than one year from the Offering Termination Date (which is the date
that the shares are transferred to a participant), then the participant will
recognize ordinary income measured as the lesser of (i) the excess of the fair
market value of the shares at the time of such sale or disposition over the
purchase price, or (ii) an amount equal to 15% of the fair market value of the
shares as of the Offering Commencement Date. Any additional gain will be treated
as long-term capital gain. If the shares are sold or otherwise disposed of
before the expiration of these holding periods, the participant will recognize
ordinary income generally measured as the excess of the fair market value of the
shares on the Offering Termination Date over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term capital
gain or loss, depending on the holding period. Different rules may apply to
participants who are subject to Section 16(b) of the Exchange Act.
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<PAGE> 16
The Company does not deduct amounts taxed as ordinary income or capital
gain to a participant, except to the extent of ordinary income reported by
participants upon a sale or other disposition of shares prior to the expiration
of the holding periods described above. Any such deduction may be limited in the
case of the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers under Section 162(m) of the Code.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the Company with respect to the shares purchased under
the Purchase Plan. The foregoing does not purport to be complete, and does not
discuss the tax consequences of a participant's death or the income tax laws of
any municipality, state or foreign country in which the participant resides.
PARTICIPATION IN THE EMPLOYEE STOCK PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. Nonemployee Directors are not eligible to
participate in the Purchase Plan. No options have yet been granted with respect
to the 1,400,000 shares that are subject to stockholder approval. The following
table sets forth certain information regarding shares purchased under the
Purchase Plan during the last fiscal year and the payroll deductions accumulated
at the end of the last fiscal year in accounts under the Purchase Plan for each
of the Named Executive Officers, for all current executive officers as a group
and for all other employees who participated in the Purchase Plan as a group.
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<PAGE> 17
AMENDED PLAN BENEFITS
1987 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
PAYROLL
NUMBER OF DEDUCTIONS
SHARES DOLLAR AS OF FISCAL
NAME OF INDIVIDUAL OR IDENTITY OF GROUP AND POSITION PURCHASED(#) VALUE($)(1) YEAR END($)(2)
- - ---------------------------------------------------- ------------ ----------- --------------
<S> <C> <C> <C>
David E. Weiss..................................... -0- -0- -0-
Chairman of the Board, President and CEO
Gary D. Francis.................................... 241 $ 5,639 $ 1,615
Vice President and General Manager, Enterprise
Nearline Business Group
L. Thomas Gooch(3)................................. -0- -0- -0-
Executive Vice President and General Manager,
Network Systems
David E. Lacey..................................... -0- -0- -0-
Executive Vice President and Chief Financial
Officer
Victor M. Perez.................................... 849 4,498 5,538
Executive Vice President, Enterprise Operations
W. Russell Wayman.................................. 844 4,447 3,385(4)
Former Corporate Vice President, General Counsel
and Secretary
John V. Williams................................... -0- -0- -0-
Former Executive Vice President, Worldwide Field
Operations
All Current Executive Officers as a Group (6
persons)......................................... 1,153 10,468 7,154
All Other Employees as a Group (2,872 persons)..... 467,844 8,109,665 2,067,081(5)
</TABLE>
- - ---------------
(1) Dollar Value is the fair market value of shares on date of purchase minus
the purchase price under the Purchase Plan.
(2) Payroll Deductions as of fiscal year end are comprised of employee
contributions made to the Purchase Plan in 1997 during the first two months
of the Offering Period that commenced on November 1, 1997.
(3) On March 1, 1998, Mr. Gooch resigned from his position as an executive
officer of the Company, and is currently serving in a non-executive officer
capacity in the Multiplatform Business Group.
(4) Mr. Wayman's employment with the Company terminated on February 27, 1998,
and his accumulated payroll deductions were returned to him.
(5) Payroll Deductions as of fiscal year end for all other employees as a group
do not include deductions for employees of any subsidiaries located outside
of the United States.
VOTE REQUIRED
Approval of the amendments to the 1987 Employee Stock Purchase Plan
requires the affirmative vote of a majority of the Votes Cast. See "PROCEDURAL
MATTERS -- Quorum; Abstentions; Broker Non-Votes" above. Proxies received by the
Company will be voted "FOR" this proposal unless a contrary vote is specified.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE AMENDMENT TO THE 1987 EMPLOYEE STOCK PURCHASE PLAN.
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<PAGE> 18
PROPOSAL 3.
AMENDMENT TO
THE NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Management believes it is in the best interest of the Company to compensate
nonemployee Directors for their continued service by giving them a direct
interest in the Company's future success. Granting stock options to nonemployee
Directors also enables the Company to attract and retain the services of
experienced individuals with outstanding qualifications and abilities. In 1987,
the Company's stockholders established the Storage Technology Corporation Stock
Option Plan for Nonemployee Directors (the "1987 Director Plan"). Since that
time, the stockholders have twice approved amendments to the 1987 Director Plan
to, among other things, add additional shares of stock for issuance, alter the
formula for granting awards, change certain expiration terms of the options and
extend the term of the 1987 Director Plan. The 1987 Director Plan as amended and
restated is referred to herein as the "Director Plan."
At the Annual Meeting, stockholders are being asked to approve the
reservation of an additional 250,000 shares of Common Stock for issuance under
the Director Plan. As of the Record Date, 278,952 shares had been issued under
the Director Plan and 321,334 shares, including the 250,000 shares subject to
shareholder approval, remain available for issuance under the Director Plan.
SUMMARY OF THE DIRECTOR PLAN
General. Under the Director Plan, each of the Company's nonemployee
Directors receives a stock option to purchase 25,000 shares of the Company's
Common Stock (the "Initial Option") upon his or her first election or
appointment to the Board. This option becomes exercisable over a period of six
years, in installments: 5,000 shares become exercisable six months following the
date of grant; and the remaining 20,000 shares become exercisable in equal
installments on each of the first through the sixth anniversaries of the date of
grant, provided that the optionee remains a Director of the Company. In
addition, each nonemployee Director who was such on July 26, 1995, or who
subsequently joined the Board, has been or will be granted a second stock option
to purchase 18,000 shares of the Company's Common Stock (the "Additional
Option") on the third anniversary of his or her first election or appointment to
the Board. The Additional Option becomes exercisable in three equal installments
of 6,000 shares each on the first, second and third anniversaries of the first
date on which all shares that are subject to the Initial Option have become
exercisable, provided that the optionee remains a Director of the Company.
Options issued under the Director Plan do not qualify as incentive options under
Section 422 of the Code.
At various times, each Director who was elected prior to 1991, has been
granted options to purchase an aggregate of 43,000 shares of Common Stock. These
grants were made in increments of either 2,500, 2,500, 20,000 and 18,000 shares
or 2,500, 22,500 and 18,000 shares. The vesting schedules for these options
conform to the vesting schedules described above. The stock options held by
nonemployee Directors who have served as nonemployee Directors for nine or more
consecutive years are fully vested.
Administration of the Director Plan. The Director Plan is administered by
the Human Resources and Compensation Committee of the Board (the "Committee").
All questions of interpretation and construction of any provision of the
Director Plan are determined by the Committee, which is also responsible for
adopting rules and regulations for administering the Director Plan, subject to
limitations. The principal terms of stock options granted under the Director
Plan are fixed pursuant to the terms of the Director Plan. As a result, the
Committee does not have discretion to determine who will receive options, the
number of shares subject to options, the exercise price, or the applicable
vesting periods. Determinations made by the Committee (and approved by the Board
if necessary) with respect to any matter or provision contained in the Director
Plan are final, conclusive and binding. The Committee consists of nonemployee
Directors who have received, and may in the future receive, options under the
Director Plan.
Eligibility. Only nonemployee Directors are eligible to receive option
grants under the Director Plan. As of the Record Date, there were nine
nonemployee Directors.
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<PAGE> 19
Option Terms; Exercise of Options. All options granted under the Director
Plan have an exercise price equal to 100% of the fair market value of the
Company's Common Stock on the date of grant and have a term of ten years. For
purposes of the Director Plan, "fair market value" means the closing price per
share of the Common Stock on the New York Stock Exchange as reported in The Wall
Street Journal for the last trading day prior to the date of grant, or the par
value of the Common Stock, whichever is greater. The options may be exercised by
delivering a notice of exercise and the exercise price to the Company. The
exercise price may be paid in cash or in shares of the Company's Common Stock.
Options granted under the Director Plan are not transferable other than (i) by
testamentary will or pursuant to the laws of descent and distribution, (ii)
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended from time to time, or Title I of the Employee
Retirement Income Security Act, or (iii) as may otherwise be permitted by
applicable law, including Rule 16b-3 of the Exchange Act.
If a nonemployee Director retires at or after age 70, all outstanding
options held by the former Director vest and are immediately exercisable in full
for six months or the full term of the option, depending upon the date of option
grant and period of service. If a nonemployee Director dies, all outstanding
options held by the former Director vest and are immediately exercisable in full
for 12 months or the full term of the option, depending upon the date of option
grant and period of service. If a nonemployee Director becomes disabled, all
vested options held by the former Director are exercisable for 12 months or the
full term of the option, depending upon the date of option grant and period of
service. If a nonemployee Director terminates service for any reason other than
death, disability or retirement, all previously vested options held by the
former Director are exercisable for six months or the full term of the option,
depending upon the date of option grant and period of service.
Shares Subject to the Director Plan. There are currently 321,334 shares of
Common Stock reserved for future issuance under the Director Plan, including the
250,000 shares that are subject to stockholder approval. The number of shares of
Common Stock reserved for issuance under the Director Plan and the number of
shares reserved for issuance under any outstanding options will be adjusted in
the event of any stock dividend, stock split, reverse stock split, combination,
reclassification, recapitalization, or other similar event that would cause
changes in the Company's Common Stock. In such event, a corresponding adjustment
will be made to the exercise price per share for any outstanding options.
If any outstanding option under the Director Plan expires or is terminated
for any reason before the end of the option term, the shares of stock allocable
to the unexercised portion of such option will be available for future grants
under the Director Plan.
Merger or Sale of Assets. In the event the Company is merged or
consolidated with another entity and the stockholders of the Company,
immediately prior to such merger or consolidation, own 50% or less of the voting
power of the surviving entity; or in the event all or substantially all of the
assets of the Company are acquired, or more than 50% of the outstanding voting
stock of the Company is acquired by another person or entity; or in case of
reorganization (except a reorganization under the United States Bankruptcy Code)
or liquidation of the Company (i) all outstanding options will be assumed or
substituted on an equitable basis by the successor or reorganized entity, and
(ii) all outstanding options under the Director Plan will automatically become
exercisable in full upon stockholder approval of the event if required or, if
approval is not required, upon the occurrence of the event.
Amendment and Termination. The Board may, at any time, amend or terminate
the Director Plan, unless stockholder approval is required or desirable under
applicable law or regulation, including federal and state corporate laws,
securities laws, tax laws and the rules of the New York Stock Exchange. However,
no such action can adversely affect the rights of any Director holding
outstanding options under the Director Plan without the Director's consent. The
Director Plan will terminate whenever the Board adopts a resolution to that
effect or on March 29, 2010.
Federal Income Tax Consequences. Nonemployee Directors who receive stock
options do not recognize any taxable income at the time of grant. A nonemployee
Director will recognize ordinary income upon the exercise of the option in an
amount generally measured as the excess of (i) the fair market value of the
shares purchased at the time of exercise, and (ii) the exercise price paid for
the shares. In general, the Company will
16
<PAGE> 20
be entitled to a compensation expense deduction in connection with a nonemployee
Director exercising an option to the extent of ordinary income reported by the
nonemployee Director.
PARTICIPATION IN THE DIRECTOR PLAN
Future grants of stock options under the Director Plan are determined by a
fixed formula, as described above. However, the recipients and exercise prices
of the options can only be determined based on the future status of current
Directors and the future appointment or election of additional directors.
Accordingly, future awards are not determinable. Only nonemployee Directors are
eligible to participate in the Director Plan; executive officers and other
employees of the Company are not eligible to receive any stock options or other
benefits under the Director Plan. During fiscal 1997, the only option granted
under the Director Plan was an Initial Option to purchase 25,000 shares at
$42.50 per share granted to J. Harold Chandler upon his initial election to the
Board of Directors at last year's Annual Meeting of Stockholders.
In the event that Mr. Kerr is elected to the Board of Directors at this
Annual Meeting, he will be granted an Initial Option to purchase 25,000 shares
at an exercise price equal to the fair market value on May 21, 1998.
VOTE REQUIRED
Approval of the amendment to the Director Plan requires the affirmative
vote of a majority of the Votes Cast. See "PROCEDURAL MATTERS -- Quorum;
Abstentions; Broker Non-Votes" above.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE AMENDMENT TO THE NONEMPLOYEE DIRECTOR STOCK OPTION PLAN.
PROPOSAL 4.
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP ("Price Waterhouse") served as the
Company's auditors for the year ended December 26, 1997, and has been engaged by
the Audit Committee to serve as auditors for the fiscal year ending December 25,
1998.
The Board of Directors requests that stockholders ratify the engagement of
Price Waterhouse for fiscal year 1998. A representative of Price Waterhouse is
expected to be present at the Annual Meeting and available to respond to
appropriate questions, and although Price Waterhouse has indicated that no
statement will be made, an opportunity for a statement will be provided. In the
event the proposal to ratify the selection of Price Waterhouse is defeated, the
adverse vote will be considered as a recommendation to the Board of Directors to
select other independent auditors for the next year. However, because of the
expense and difficulty in changing independent auditors after the beginning of
the year, the Board of Directors intends to allow the appointment for 1998 to
stand, unless the Board of Directors finds other reasons for making a change.
Even if the selection is ratified, the Board of Directors, in its discretion,
may select a new independent accounting firm at any time during the year if the
Board of Directors believes that such a change would be in the best interests of
the Company and its stockholders.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS.
17
<PAGE> 21
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned during the last
three fiscal years by the Chief Executive Officer ("CEO"); each of the other
four most highly compensated executive officers of the Company (based on 1997
salary plus bonus) who were serving as such at December 26, 1997, the Company's
fiscal year-end; and two individuals whose service as executive officers
terminated during fiscal 1997 and who would have been listed as two of the four
most highly compensated executive officers had they been serving as executive
officers at the end of the fiscal year.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------------------ -------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(1) COMPENSATION($)(2) AWARDS($)(3) OPTIONS(#)
------------------ ---- ------------ ----------- ------------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
DAVID E. WEISS 1997 $616,769 $992,000 $119,000 -0- -0-
Chairman of the Board, 1996 497,116 834,900 51,000 -0- 304,804
President and CEO 1995 333,943 -0- -- $296,348 71,269
GARY D. FRANCIS 1997 202,294 166,250 -- -0- 15,000
Vice President and 1996 152,241 95,948 -- -0- 1,960
General Manager, 1995 128,627 24,252 -- -0- 3,427
Nearline Business Group
L. THOMAS GOOCH(5) 1997 274,545 275,000 73,360 -0- -0-
Executive Vice President 1996 262,000 262,000 31,440 -0- 13,808
and General Manager, 1995 255,539 -0- -- 182,673 26,048
Network Systems
DAVID E. LACEY 1997 288,462 335,000 61,200 -0- -0-
Executive Vice President 1996 238,077 293,250 25,800 -0- 49,060
and Chief Financial 1995 169,342 -0- -- 149,909 21,376
Officer
VICTOR M. PEREZ 1997 274,462 378,000 51,877(6) -0- 20,000
Executive Vice President, 1996 205,365 242,880 21,833(6) -0- 15,444
Enterprise Operations 1995 170,000 -0- 16,463(6) 118,544 10,141
W. RUSSELL WAYMAN(7) 1997 219,538 99,000 47,628 -0- -0-
Former Corporate Vice 1996 209,615 189,000 24,000 -0- 6,627
President, General 1995 199,424 -0- -- 139,446 11,930
Counsel and Secretary
JOHN V. WILLIAMS(8) 1997 314,308 157,500 70,256 -0- -0-
Former Executive Vice 1996 299,039 300,000 107,935(9) -0- 15,817
President, Worldwide 1995 275,001 -0- 71,257(9) 191,738 27,341
Field Operations
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION($)(4)
------------------ ------------------
<S> <C>
DAVID E. WEISS $ 71,186
Chairman of the Board, 39,722
President and CEO 9,758
GARY D. FRANCIS 15,887
Vice President and 8,242
General Manager, 1,951
Nearline Business Group
L. THOMAS GOOCH(5) 39,238
Executive Vice President 25,229
and General Manager, 15,043
Network Systems
DAVID E. LACEY 28,276
Executive Vice President 19,267
and Chief Financial 5,329
Officer
VICTOR M. PEREZ 34,036
Executive Vice President, 16,474
Enterprise Operations 8,227
W. RUSSELL WAYMAN(7) 241,292
Former Corporate Vice 17,747
President, General 7,689
Counsel and Secretary
JOHN V. WILLIAMS(8) 30,863
Former Executive Vice 24,692
President, Worldwide 4,957
Field Operations
</TABLE>
- - ---------------
(1) Salary and bonus are reported in the year earned even if not actually paid
until the following year. Any compensation that was deferred at the Named
Executive Officer's election is included in the salary or bonus column for
the year in which it was earned. All bonuses were awarded under the
Company's Management by Objective Bonus Program, except for discretionary
cash bonuses of $108,900 and $38,250 awarded to Mr. Weiss and Mr. Lacey,
respectively, in 1996.
(2) Other Annual Compensation (except as noted in Footnotes 6 and 9 below)
consists entirely of special cash bonuses to cover the personal income tax
liabilities associated with the vesting of restricted stock. Perquisite
amounts are not required to be reported if total perquisites for the Named
Executive Officer were not more than the lesser of $50,000 or 10% of the
Named Executive Officer's annual salary and bonus. The numbers shown for
1996 reflect certain adjustments to the perquisite calculations.
(3) As of December 26, 1997, the aggregate number of restricted shares held by
Named Executive Officers and their fair market values were as follows: Mr.
Weiss: 3,210 shares valued at $186,061; Mr. Francis: 1,564 shares valued at
$90,654; Mr. Gooch: 14,080 shares valued at $816,119; Mr. Lacey: 5,005
shares valued at $290,105; Mr. Perez: 3,732 shares valued at $216,318; Mr.
Wayman: 6,011 shares valued at
18
<PAGE> 22
$348,416; and Mr. Williams: 9,092 shares valued at $527,000. The fair market
value was calculated by multiplying the number of restricted shares held by
the officer by the closing price of the Company's Common Stock of $58.063
per share as reported in The Wall Street Journal at fiscal year-end and
subtracting the purchase price. The restricted stock awarded in fiscal 1995
(11,442 shares to Mr. Weiss; 7,053 shares to Mr. Gooch; 5,788 shares to Mr.
Lacey; 4,577 shares to Mr. Perez; 5,384 shares to Mr. Wayman; and 7,403
shares to Mr. Williams) vested incrementally: 44% of the shares vested on
December 14, 1996, 28% vested on June 14, 1997, and the remaining 28% vested
on December 14, 1997. Mr. Wayman and Mr. Williams elected to defer the
foregoing vesting dates, as follows: the first vesting date occurred on
February 24, 1997; the second vesting date occurred on July 30, 1997 and the
third vesting date occurred on February 24, 1998. The executive officer has
all the rights of a stockholder with respect to any shares of restricted
stock, including the right to receive dividends, if any, except that the
stock and any stock dividends are subject to a right of repurchase by the
Company at the original purchase price paid by the executive officer and the
shares may not be disposed of until the repurchase right lapses.
(4) Amounts shown for 1997 include: (i) the value of premiums paid by the
Company for Executive Group Term Life Insurance on behalf of the Named
Executive Officers, as follows: Mr. Weiss: $18,068; Mr. Francis: $2,165; Mr.
Gooch: $7,968; Mr. Lacey: $7,462; Mr. Perez: $4,592; Mr. Wayman: $6,350; and
Mr. Williams: $9,497; (ii) above-market interest earned on deferred
compensation, as follows: Mr. Weiss: $12,966; Mr. Francis: $438; Mr. Gooch:
$14,796; Mr. Lacey: $2,046; Mr. Perez: $11,318; Mr. Wayman: $554; and Mr.
Williams: $932; (iii) contributions made by the Company during fiscal 1997
to the 401(k) plan, as follows: Mr. Weiss: $8,496; Mr. Francis: $10,350; Mr.
Gooch: $10,350; Mr. Lacey: $7,510; Mr. Perez: $8,558; Mr. Wayman: $8,496;
and Mr. Williams: $8,854; (iv) contributions by the Company to the deferred
compensation plan, as follows: Mr. Weiss: $31,656; Mr. Francis: $2,934; Mr.
Gooch: $6,124; Mr. Lacey: $11,258; Mr. Perez: $9,568; Mr. Wayman: $5,892;
and Mr. Williams: $11,580; and (v) a severance payment of $220,000 paid to
Mr. Wayman in 1998.
(5) Mr. Gooch ceased serving as an executive officer of the Company on March 1,
1998.
(6) The 1997 amount includes $4,277, representing tax equalization payments, and
a $47,600 special cash bonus paid to Mr. Perez to cover the personal income
tax liabilities associated with the vesting of restricted stock. The entire
amounts shown for 1996 and 1995 represent tax equalization payments.
(7) Mr. Wayman ceased serving as an executive officer of the Company on October
6, 1997, and as an employee on February 27, 1998.
(8) Mr. Williams ceased serving as an executive officer of the Company on June
26, 1997.
(9) Amounts reflect payments of $48,196 in 1996 and $55,249 in 1995 made in lieu
of relocation expense reimbursements provided for in Mr. Williams' offer of
employment, and $59,739 in 1996 and $16,008 in 1995 representing a special
cash bonus to cover the personal income tax liabilities associated with the
vesting of restricted stock.
19
<PAGE> 23
STOCK OPTION GRANTS TABLE
The following table sets forth information regarding stock options granted
to the Named Executive Officers during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------------
NAME GRANTED(#) 1997 ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David E. Weiss........... -0- 0% -- -- -- --
Gary D. Francis.......... 5,000(2)(3) 0.75% $45.875 02/06/07 $144,253 $365,565
5,000(2)(4) 0.75% 41.000 05/21/07 128,923 326,717
5,000(5) 0.75% 41.000 05/21/07 128,923 326,717
L. Thomas Gooch.......... -0- 0% -- -- -- --
David E. Lacey........... -0- 0% -- -- -- --
Victor M. Perez.......... 10,000(2)(6) 1.51% 41.000 05/21/07 257,847 653,434
10,000(5) 1.51% 41.000 05/21/07 257,847 653,434
W. Russell Wayman........ -0- 0% -- -- -- --
John V. Williams......... -0- 0% -- -- -- --
</TABLE>
- - ---------------
(1) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rate shown (5%
and 10%), compounded annually, from the date of grant of the option until
the end of the option term (10 years). The value is net of the exercise
price but is not adjusted for the taxes that would be due upon exercise. THE
5% AND 10% ASSUMED RATES OF APPRECIATION ARE MANDATED BY THE RULES OF THE
SECURITIES AND EXCHANGE COMMISSION AND DO NOT IN ANY WAY REPRESENT THE
COMPANY'S ESTIMATE OR PROJECTION OF FUTURE STOCK PRICES. Actual gains, if
any, upon future exercise of any of these options will depend on the actual
performance of the Company's Common Stock, the continued employment of the
Named Executive Officer holding the option through its vesting period, and
the subsequent exercise of the option by the Named Executive Officer.
(2) Standard stock options are granted under the 1995 Equity Participation Plan
at an exercise price equal to 100% of fair market value on the date of
grant. Options become exercisable in three installments on the first three
anniversary dates from the date of grant, and expire 10 years from the date
of grant. Options generally are exercisable for 90 days after a voluntary
termination to the extent vested at that time, but will terminate
immediately upon a termination for cause. In the event of a
recapitalization, merger, consolidation or reorganization (excluding any
reorganization under the U.S. Bankruptcy Code), or sale of all or
substantially all of the assets of the Company, the number and kind of
shares and exercise price will be adjusted, as appropriate. In the event of
a hostile tender offer, the vesting period of all options outstanding will
accelerate. Options are not transferable, except upon disability, or upon
death by testamentary will or pursuant to the laws of descent and
distribution or, if permitted by applicable laws, the Committee may permit
transfers to a limited class of persons.
(3) Mr. Francis was granted a standard stock option to purchase 5,000 shares of
Common Stock on February 6, 1997, which becomes exercisable as follows:
1,650 shares vest on each of February 6, 1998 and February 6, 1999, and
1,700 shares vest on February 6, 2000.
(4) Mr. Francis was granted a standard stock option to purchase 5,000 shares of
Common Stock on May 21, 1997, which becomes exercisable as follows: 3,500
shares vest on May 21, 1998; 1,000 shares vest on May 21, 1999 and 500
shares vest on May 21, 2000.
(5) Performance-based stock options are granted under the 1995 Equity
Participation Plan at an exercise price equal to 100% of fair market value
on the date of grant. Performance-based options generally become exercisable
on the sixth anniversary of the date of grant, unless accelerated to the
first three
20
<PAGE> 24
anniversary dates based on achieving performance goals, and expire 10 years
from the date of grant. Performance-based options generally are exercisable
for 90 days after a voluntary termination to the extent vested at that time,
but will terminate immediately upon a termination for cause. In the event of
a recapitalization, merger, consolidation or reorganization (excluding any
reorganization under the U.S. Bankruptcy Code), or the sale of all or
substantially all of the assets of the Company, the number and kind of
shares and exercise price will be adjusted, as appropriate. In the event of
a hostile tender offer, the vesting period of all options outstanding will
accelerate. Options are not transferable, except upon disability, or upon
death by testamentary will or pursuant to the laws of descent and
distribution or, if permitted by applicable law, the Committee may permit
transfers to a limited class of persons.
(6) Mr. Perez was granted a standard stock option to purchase 10,000 shares of
Common Stock on May 21, 1997, which becomes exercisable as follows: 5,000
shares vest on May 21, 1998; 3,000 shares vest on May 21, 1999; and 2,000
shares vest on May 21, 2000.
STOCK OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information regarding stock options
exercised by Named Executive Officers during fiscal 1997 and options held by
them at fiscal year-end 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/26/97(#) AT 12/26/97($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David E. Weiss........... -0- -0- 177,542 247,455 $4,466,635 $5,455,452
Gary D. Francis.......... 2,538 $ 63,347 1,765 19,071 44,260 324,983
L. Thomas Gooch.......... 35,471 672,836 18,340 30,671 463,821 665,006
David E. Lacey........... -0- -0- 43,654 47,424 1,163,353 1,026,946
Victor M. Perez.......... -0- -0- 14,915 38,874 376,947 711,933
W. Russell Wayman(2)..... 21,814 468,040 5,430 14,576 127,052 315,248
John V. Williams......... 21,816 629,536 14,232 32,917 311,513 699,285
</TABLE>
- - ---------------
(1) Value is calculated by (i) subtracting the exercise price per share from the
fiscal year-end market value of $58.063 per share and (ii) multiplying by
the number of shares subject to the option. Options that have an exercise
price equal to or greater than the fiscal year-end market value are not
included in the value calculation.
(2) Mr. Wayman's employment with the Company terminated on February 27, 1998. On
that date, options to purchase 11,252 shares, reported as outstanding but
unexercisable on December 26, 1997, terminated unexercised.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On June 24, 1996, the Company and Mr. Weiss entered into an employment
agreement, which expires in May 1999. The agreement provides for annual base
compensation and participation in the Company's MBO bonus program, which amounts
are subject to adjustment from time to time. For 1997, Mr. Weiss' base
compensation was set at $620,000 and his on-target bonus percentage was set at
80%. For 1998, Mr. Weiss' base compensation has been set at $700,000 and his
on-target bonus percentage is 80%. In the event of an involuntary termination
without cause, or in the event of death, the agreement provides for a severance
payment equal to the greater of (i) his annual base compensation through the end
of the employment term, or (ii) 100% of his annual base compensation plus 100%
of his then-current bonus percentage (whether or not such bonus would have been
otherwise payable). In the event of a change in control followed by voluntary
termination within 24 months, Mr. Weiss would receive an amount equal to the
greater of two times his annual base salary plus two times 100% of the
then-current bonus percentage or the amount described above,
21
<PAGE> 25
and his outstanding stock options and restricted stock would become fully
vested. Upon termination for cause, compensation would be paid only through the
date of termination. The agreement also provides for medical and life insurance,
financial services and an automobile allowance.
On June 24, 1996, the Company and Mr. Lacey entered into an employment
agreement that provides for annual base compensation and participation in the
Company's MBO bonus program, which amounts are subject to adjustment from time
to time. In May 1997, Mr. Lacey's base compensation was set at $300,000 and at
year-end, his on-target bonus percentage was 60%. For 1998, Mr. Lacey's base
compensation has been set at $330,000 and his on-target bonus percentage is 60%.
In the event of an involuntary termination without cause, or in the event of his
death, the agreement provides for a severance payment equal to his then-current
annual base compensation plus 100% of his then-current bonus percentage (whether
or not such bonus would have been otherwise payable). In the event of a change
in control followed by voluntary termination within 24 months, Mr. Lacey would
receive an amount equal to two times his annual base salary plus two times 100%
of the then-current bonus percentage, and his outstanding stock options and
restricted stock would become fully vested. Upon termination for cause,
compensation would be paid only through the date of termination. The agreement
also provides for medical and life insurance, financial services and an
automobile allowance.
In February 1995, the Company entered into employment agreements with Mr.
Gooch, Mr. Perez, Mr. Wayman and Mr. Williams, which provide for annual base
compensation and participation in the Company's MBO bonus program. In 1997, the
base compensation level for Mr. Gooch was set at $275,000 and for Mr. Perez,
effective June 1997, $360,000. At year-end, the on-target bonus percentage was
50% for Mr. Gooch and 60% for Mr. Perez. For 1998, base compensation for Mr.
Perez has been set at $360,000 and his on-target bonus percentage is 60%. Under
the agreement with Mr. Perez, in the event of involuntary termination without
cause, or in the event of death, the agreement provides for a payment equal to
100% of his annual base compensation plus 100% of his then-current bonus
percentage. In the event of a change in control followed by voluntary
termination within 24 months, the agreement provides for payment of an amount
equal to twice his base salary plus two times 100% of the then-current bonus
percentage, and all outstanding stock options and restricted stock would become
fully vested. No compensation would be paid under the agreement in the event of
a termination for cause. The agreement also provides for medical and life
insurance and an automobile allowance.
The Company and Mr. Gooch terminated the 1995 agreement in February 1998 in
connection with the completion of his assignment with the Company's Network
Systems Group, and his resignation from the position of Executive Vice President
of the Company. Commencing March 1, 1998, Mr. Gooch transitioned his assignment
and position to serve as a vice president in the Company's Multiplatform
Business Group. In connection with the completion of his two-year assignment
with the Network Systems Group, Mr. Gooch received a payment of $687,500, which
is equal to two-times his base salary plus 100% of his on-target bonus
percentage.
On August 19, 1997, in connection with his appointment as Vice President
and General Manager of the Nearline Business Group, the Company entered into an
agreement with Mr. Francis. For 1997, Mr. Francis' base salary was set at
$210,000 and for 1998, his base salary has been set at $240,000. At the end of
1997, Mr. Francis' MBO on-target bonus percentage was 40% and is set at 40% for
1998. This agreement provides that, in the event of involuntary termination
without cause, Mr. Francis will receive a severance payment equal to his annual
base compensation, plus 100% of his then-current bonus percentage upon the
achievement of applicable performance targets and the Company generally making
payments to other eligible participants under the MBO bonus program.
For purposes of the agreements described above, between the Company and Mr.
Weiss, Mr. Lacey, Mr. Perez, Mr. Wayman and Mr. Williams, respectively, a
"change in control" is deemed to have occurred in the case of (i) a merger where
the Company is not the surviving corporation or where the Company's stockholders
immediately prior to the merger own 50% or less of the Company after the merger;
(ii) sale of all or substantially all of the assets of the Company; or (iii)
acquisition of more than 25% of the Company's outstanding voting stock by
another person or group. In addition, each of these agreements provides that, in
the event that the payments due under the agreement would constitute "parachute
payments" within the
22
<PAGE> 26
meaning of Section 280G of the Code and would otherwise be subject to the excise
tax imposed by Section 4999 of the Code, the severance benefits provided for in
the agreement will either be delivered in full or will be delivered to such
lesser extent as will not result in any such excise tax, whichever results in
the greatest amount of after-tax severance benefits to the former employee. For
purposes of the agreements described above, between the Company and Mr. Weiss,
Mr. Lacey, Mr. Perez and Mr. Francis, "cause" means (i) willful breach of any
provisions of the employment agreement between the Company and employee; (ii)
gross negligence or dishonesty in performing duties for the Company; (iii)
engaging in conduct that materially conflicts with the interests of the Company;
(iv) engaging in conduct that is materially detrimental to the business of the
Company; or (v) any intentional violation of the Company's policies.
The Company and Mr. Wayman entered into an agreement on October 6, 1997,
concerning the terms of his resignation from the positions of Corporate Vice
President, General Counsel and Secretary. Under the terms of the agreement, Mr.
Wayman continued to be an employee of the Company through February 27, 1998, and
was compensated at an annual rate of $220,000, through the date of his
termination as an employee. In 1998, Mr. Wayman also received a severance
payment of $220,000, a special cash bonus of $16,000 to cover personal income
tax liabilities associated with the vesting of restricted stock that he had
received in 1995, and a MBO bonus of $99,000 as a result of the Company
achieving the 1997 performance goals.
The Company and Mr. Williams entered into an agreement on June 26, 1997,
concerning the terms of his resignation as Executive Vice President, Worldwide
Field Operations. Under the terms of the agreement, Mr. Williams continued to
serve as a corporate officer (but not an executive officer) through February 28,
1998, received an annual base compensation of $315,000 and was entitled to
executive officer benefits, including executive life insurance, automobile
allowance, tax planning, executive medical coverage and certain airfare. Mr.
Williams also received a MBO bonus in the amount of $157,500, as the Company
achieved its 1997 performance goals. The agreement provides that from March 1,
1998 through December 31, 1998, Mr. Williams will continue to serve the Company
in a part-time capacity. He will be compensated at an annual base compensation
of $157,500, but will not participate in any bonus or incentive programs, and
will receive benefits generally available to full-time employees of the Company.
Under the terms of the agreement, Mr. Williams agrees not to accept employment
with a competitor through December 31, 1998.
For a discussion of the determination by the Compensation Committee of the
salary and bonus amounts for the Named Executive Officers, see "REPORT OF THE
HUMAN RESOURCES AND COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE
COMPENSATION" below.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires certain persons, including the
Company's Directors and Section 16 Officers, to file reports of ownership and
changes in ownership of the Company's securities with the Securities and
Exchange Commission ("Commission"). The Company is required to disclose in this
Proxy Statement any late or missed filings of those reports during 1997 by its
Directors, Officers (as defined in the rules under Section 16 of the Exchange
Act) and greater than 10% stockholders. Based upon the Company's review of the
reporting forms received by it, and written representations from certain persons
that no Form 5 reports were required to be filed by those persons, the Company
believes that all filing requirements applicable to its Directors, Officers and
10% stockholders were complied with for fiscal 1997, except that Gary Francis, a
Named Executive Officer of the Company, was late in reporting one transaction
that should have been reported on a Form 4 for the month of November 1997. This
transaction was subsequently reported on a Form 5, which was timely filed with
the Commission.
23
<PAGE> 27
The information provided below is expressly excluded from incorporation by
reference into any filings under the jurisdiction of the Securities and Exchange
Commission.
REPORT OF THE HUMAN RESOURCES AND COMPENSATION
COMMITTEE OF THE BOARD ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the Human
Resources and Compensation Committee of the Board of Directors (the
"Compensation Committee"), which consists entirely of nonemployee Directors. The
current members of the Compensation Committee are Directors Keane (Chair),
Armstrong, Chandler and Lee.
Executive Compensation Overview. The philosophy of the Company's
compensation programs is based on achievement of Company goals from the combined
efforts of individuals. The Company's goals include business objectives that are
designed to focus on meeting the expectations of the Company's customers and
stockholders. The Company uses a leveraged compensation package for officers
that consists of a number of elements, which are designed to align the
individual's compensation with the short-term and long-term success of the
Company, and is formulated based on three principles:
- Pay for achievement of results. The Company's executive officers are
rewarded based upon achieving short-term and long-term business goals and
strategies. Performance is measured based upon both the Company's
performance and the individual's performance and is evaluated by
reviewing the extent to which the strategic and operating plan goals and
individual management and development goals are attained.
- Pay competitively. The Company's compensation levels are set at levels
that will allow it to attract and retain key employees. To ensure that
the Company's compensation levels are competitive with those of other
companies in comparable markets, the Company regularly reviews up to
three compensation surveys of primarily high-tech computer companies,
each covering at least 20 companies, and sets its compensation ranges
based upon the results of such reviews. The Compensation Committee
believes that the surveyed companies are a close reflection of the
companies that comprise the S & P Computer Systems Index.
- Align compensation with the expectations of customers and stockholders.
The purpose of including equity-based vehicles in the compensation
package for executive officers is to motivate the individual to operate
the business in a manner that will best serve the customers and increase
shareholder value.
Total Compensation. The combined compensation and benefit package for
officers consists of four elements: (1) base salary, (2) annual performance
bonus, (3) stock options and other equity-based vehicles, and (4) various other
benefits. The particular mix of these elements determines the level of emphasis
placed on risk-based incentives (including the performance bonus and
equity-based vehicles) and fixed compensation (including base salary and other
benefits). The Compensation Committee periodically assesses the mix to ensure
that the principles of the compensation program are being maximized. For 1997,
the mixture of the various elements could have resulted in total compensation
ranges for the Chief Executive Officer of 29% to 122% of the targeted
competitive compensation, and 40% to 120% for the other executive officers.
These ranges reflect the interrelationship between share appreciation,
performance goals and the bonus, and total compensation. As a result of the
Company's overall performance in 1997, the total compensation for the Chief
Executive Officer and each of the other Named Executive Officers was above the
adjusted market average for competitive companies.
Base Salary. The salaries of the Company's executive officers are reviewed
annually and in connection with promotions. The Compensation Committee
determined that the base salary levels for the executive officers were
approximately 4% below the competitive market median. As a result, for 1997, the
Compensation Committee adjusted the base compensation opportunity, including
base salary, for all executive officers. In addition, the Committee increased
the base salaries of two of the Named Executive Officers in 1997, in conjunction
with their promotions. However, these adjustments did not entirely erase the
disparity and the base salary for the Company's executive officers, which
remained below the competitive market level. See
24
<PAGE> 28
"Compensation of Executive Officers -- Employment Contracts and Termination of
Employment and Change-of-Control Arrangements" above, for additional information
regarding agreements between the Company and the Chief Executive Officer and
other Named Executive Officers.
Annual Performance Bonus. The Company maintains a management by objectives
(MBO) bonus program that provides an opportunity for officers to earn a bonus
based upon the performance of the Company and the individual. The officers'
bonus potential is stated as a percentage of their base salary. In 1997, the MBO
bonus program included three levels of corporate performance (minimum, target
and stretch) and focused on a number of performance criteria. For officers of
the Company, these performance measurements were: earnings per share; revenue
growth; market and customer awareness and presence; and, a value-added per
employee measurement. The earnings per share measurement served as a threshold
criteria for any payments under the 1997 MBO program; unless the established
earnings per share goal was achieved, no bonuses would be paid to any officer.
If the earnings per share performance goal was achieved, it would be included in
a formula to determine the total bonus payout level. The financial and operating
performance criteria were established based upon the operating plan presented to
the Board of Directors at the end of 1996.
In 1997, the Company achieved record financial results. Based upon this
performance and the other measurement criteria, the Company paid cash bonuses to
the executive officers at the maximum level contained in the MBO bonus program,
equaling up to twice the officer's on-target bonus percentage. Because the
Company's record financial performance resulted in maximizing the bonus payout,
the total cash compensation paid to the Company's officers for 1997 exceeded the
projected total cash compensation levels of competitors included in the salary
surveys reviewed by the Company. The Committee believes that this result is
consistent with the "pay for achievement of results" principle.
Under the MBO bonus program, the Committee retains the right to review and
adjust the bonus payout levels for all participants and specific individuals
based on its evaluation of the Company's overall performance, individual
performance and any extraordinary circumstances. In considering bonuses for
officers other than the CEO, the Compensation Committee considers the CEO's
performance assessment of the officer. The Committee did not adjust the
pre-established overall bonus payout levels for 1997.
Stock Options and Other Equity-Based Vehicles. The Compensation Committee
believes that stock options serve to directly link the amounts earned by the
executive officers with the amount of appreciation realized by the Company's
stockholders and serve as a retention device. The option program uses several
types of options and vesting periods that are structured to encourage key
employees to continue in the employ of the Company and motivate performance that
will meet the expectations of shareholders. In determining the size of any
option award, the Compensation Committee considers the value of the option,
using a modified Black-Scholes model, calculated by a third-party consultant,
the position held by the individual and their base cash compensation.
The Compensation Committee considers option grants for officers annually,
as well as in connection with promotions. In 1997, the Compensation Committee
determined to change the option program to better align the vesting schedule
utilized for performance-based options with the Company's annual financial
results. Instead of considering option grants in the latter part of the fiscal
year, the Compensation Committee determined to review option grants in the first
quarter of the year. As a result of this change, in 1997, none of the executive
officers were granted any options, except in two instances. In connection with
their promotions and to address competitive compensation issues, both Mr.
Francis and Mr. Perez were granted stock options in 1997.
Based on the Company's financial performance in fiscal 1997, the
Compensation Committee accelerated the vesting of a portion of performance-based
options in accordance with the terms of such options granted to a number of
officers, including the CEO and each of the other Named Executive Officers, in
1994, 1995 and 1996. Concurrently, the Compensation Committee approved the
acceleration of the vesting of 50,000 and 7,000 performance-based options
granted to Mr. Weiss and Mr. Lacey, respectively, in May 1996, in connection
with their promotions to their current positions.
25
<PAGE> 29
The Company also periodically awards restricted stock to certain key
employees. The Compensation Committee has discretion to structure a vesting
period tied to the Company's performance or, in the alternative, the lapse of
certain time periods. In connection with restricted stock awards granted to a
number of key officers in 1995 concurrent with the adoption of a restructuring
plan, the Compensation Committee established a special cash bonus program
designed to cover a portion of the individual tax obligations associated with
the vesting of the restricted stock. In 1997, the established restructuring
cost-savings goals were achieved and the Compensation Committee awarded bonuses
to these officers, including the CEO and the other Named Executive Officers,
other than Mr. Francis who was not awarded restricted stock in 1995.
Other Benefits. The executive officers participate in the employee stock
purchase plan and various medical, dental, life, disability and benefit programs
that are generally made available to all salaried employees. The officers also
receive additional benefits, as the Company reimburses officers for certain
out-of-pocket expenses associated with such programs, up to a maximum of $5,000
per year, and provides the officers with an individually owned universal life
insurance policy in an amount equal to three times the officer's base salary (as
compared to two times base salary as is the case for other employees). The
officers of the Company also have the opportunity to participate in a deferred
compensation plan, and may participate in the employee stock purchase plan on a
consistent basis with other employees of the Company.
CEO Compensation. David Weiss has served as Chairman, President and CEO of
the Company since May 1996. The Compensation Committee adheres to the same
general compensation principles described above for all officers to determine
Mr. Weiss' compensation. The Compensation Committee then recommends the annual
compensation for Mr. Weiss to the full Board for approval. For 1997, Mr. Weiss'
base salary was set at $620,000, and for 1998, Mr. Weiss' base salary has been
increased 13%. The adjustment was based on competitive factors and the Board's
evaluation of Mr. Weiss' achievement of the Company's strategic and operating
performance objectives during 1997. The Compensation Committee reviews the same
salary surveys described above when evaluating salary adjustments for Mr. Weiss.
For 1997, Mr. Weiss' MBO on-target bonus percentage was 80%. The
Compensation Committee awarded Mr. Weiss an MBO bonus for 1997, which equals
approximately two-times his on-target bonus. The MBO bonus payment reflects the
Company's achievement of the stretch level performance objectives and the
Board's assessment of Mr. Weiss' individual performance and achievements in
1997. Mr. Weiss was not granted any stock options in 1997 as a result of the
Compensation Committee's decision to change the option program time schedule to
better align the program with a review of the Company's year-end results. The
Compensation Committee considers the same factors as described above for all
officers in determining the size of any option award for Mr. Weiss. In 1997, Mr.
Weiss also was awarded a special cash bonus to cover certain tax obligations in
connection with restricted stock that he received in 1995 as a result of the
Company's achievement of established cost-savings objectives associated with the
1995 restructuring plan.
Stock Ownership Guidelines. In January 1998, the Compensation Committee
considered the stock ownership guidelines for executive officers of the Company
and implemented guidelines for the CEO, executive officers and corporate
officers. The guidelines are expressed in terms of a set number of shares of
stock, including Common Stock equivalents and vested restricted stock, but
excluding any unexercised stock options. Officers are expected to achieve the
stock ownership guidelines over a three-year period from the time of their first
election or appointment as an officer. Current officers are expected to satisfy
the stock ownership guideline by January 2001. The Compensation Committee
believes that these guidelines will further align the interests of the officers
with those of the stockholders.
Tax Deductibility of Executive Compensation. The Compensation Committee has
considered the potential impact of Section 162(m) of the Internal Revenue Code,
and the regulations thereunder ("Section 162(m)"). Section 162(m) disallows a
tax deduction for any publicly-held corporation for individual compensation
exceeding $1 million in any taxable year for any of the Named Executive
Officers, unless such compensation is performance-based. The Company's policy is
to qualify, to the extent reasonable, its executive officers' compensation for
deductibility under applicable tax laws. However, the Compensation Committee
believes that its primary responsibility is to provide a compensation program
that will attract, retain and reward the executive talent necessary to further
the Company's success. Consequently, the
26
<PAGE> 30
Compensation Committee recognizes that the loss of a tax deduction could be
necessary in some circumstances. The Company's cash bonus plan for executive
officers and its stock option plan are designed to qualify as performance-based
plans within the meaning of the Section so as to preserve deductibility by the
Company of compensation paid under such plans.
This report has been provided by the Compensation Committee.
Stephen J. Keane, Chair
William L. Armstrong
J. Harold Chandler
Robert E. Lee
Judith E.N. Albino (until May 23, 1997)
Robert A. Burgin (until May 23, 1997)
27
<PAGE> 31
The information provided below is expressly excluded from incorporation by
reference into any filings under the jurisdiction of the Securities and Exchange
Commission.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock during the five years ended December 31, 1997, with the
cumulative total return on the S&P 500 Index and the S&P Computer Systems Index.
The comparison assumes $100 was invested on December 31, 1992, in the Company's
Common Stock and in each of such indices and assumes reinvestment of dividends,
if any. Note that historic stock price is not necessarily indicative of future
stock price performance.
LOGO
DATA POINTS
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Storage Technology Corporation 100 154 140 115 229 299
S&P 500 Index 100 110 112 153 189 252
S&P Computer Hardware Index 100 104 134 178 239 350
</TABLE>
The report of the Compensation Committee and the Performance Graph shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts and is not to be deemed to be
soliciting material.
28
<PAGE> 32
OTHER MATTERS
The Company knows of no other matters to be presented for consideration at
the meeting other than those matters stated in the Notice of Annual Meeting of
Stockholders; however, several stockholders presented proposals for inclusion in
the Proxy Statement, which the Company excluded pursuant to Rule 14a-8 under the
Exchange Act. It is the intention of the proxy holders named in the enclosed
proxy card to vote in accordance with their judgment on any other matters that
may properly come before the meeting. Under the Company's Bylaws, in order for a
matter to be deemed properly presented by a stockholder, notice must be
delivered to or mailed and received by the Company, not less than 60 days nor
more than 90 days prior to the Annual Meeting; provided, however, if less than
70 days' notice or prior public disclosure of the date of the Annual Meeting has
been given, notice by the stockholder to be timely must be received by the
Company not later than the close of business on the tenth day following the day
on which such notice of the Annual Meeting was mailed or publicly disclosed. The
stockholder's notice must set forth, as to each proposed matter: (a) a brief
description of the business and reason for conducting such business at the
meeting; (b) the name and address (as they appear on the Company's books) of the
stockholder proposing such business, or the name of the beneficial holder or
other party on whose behalf the proposal is made; (c) the class and number of
shares of the Company owned by the stockholder or beneficial holder or other
party on whose behalf the proposal is made; and (d) any material interest of the
stockholder or beneficial holder or other party on whose behalf the proposal is
made in such business. The presiding officer of the meeting may refuse to
acknowledge any matter not made in compliance with the foregoing procedure.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder may desire to present to the Company's 1999
Annual Meeting of Stockholders must be received in writing by the Secretary of
the Company on or before December 7, 1998, in order to be considered for
possible inclusion in the Company's proxy materials relating to such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Lizbeth J. Stenmark
Assistant Secretary
April 6, 1998
29
<PAGE> 33
(LOGO)
Printed on recycled paper
<PAGE> 34
STORAGE TECHNOLOGY CORPORATION
AMENDED AND RESTATED
1987 EMPLOYEE STOCK PURCHASE PLAN
1. Recitals. On February 2, 1982, Storage Technology Corporation, a
Delaware corporation (together with its Subsidiary Corporations, hereinafter
referred to, unless the context otherwise requires, as the "Company"),
established the Storage Technology Corporation 1982 Employee Stock Purchase
Plan. Such plan was subsequently amended and restated by the Board of Directors
(the "Board") on June 15, 1987 and renamed the Storage Technology Corporation
1987 Employee Stock Purchase Plan (the "1987 Plan" or the "Plan"). Under the
provisions of Paragraph 19 of the 1987 Plan, the Company reserved the power,
through its Board of Directors, to amend the Plan from time to time, subject in
certain instances to approval of the Company's stockholders. Pursuant to that
power, the Plan was amended and restated in its entirety on December 14, 1995,
effective at the time and under the conditions set forth in Paragraph 22 below.
The Plan was further amended on each of September 23, 1997 and December 19,
1997, effective at the time and under the conditions set forth in Paragraph 22
below.
2. Purposes. The 1987 Plan is intended to provide a method whereby
employees of the Company will have an opportunity to acquire a proprietary
interest in the Company through the purchase of shares of the $.10 par value
voting Common Stock of the Company (the "Common Stock"). It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code"). The provisions of the Plan shall, accordingly, be construed so as
to extend and limit participation in a manner consistent with the requirements
of that section of the Code.
3. Definitions.
(a) "Account" means an Employee's interest in the Segregated
Account based on the contributions made thereto and the interest earned
thereon.
(b) "Base Pay" means, at the Employee's election, either: (i)
an Employee's rate of base salary (before deduction for contributions to plans
maintained pursuant to Sections 401(k) and 125 of the Code) in effect during
the Offering Period, but EXCLUDING payments for overtime, shift premium,
incentive compensation, bonuses, and other similar payments; or (ii) Employee's
rate of base salary (before deduction for contributions to plans maintained
pursuant to Sections 401(k) and 125 of the Code) in effect during the Offering
Period, EXCLUDING payments for overtime, shift premium, incentive compensation,
<PAGE> 35
bonuses, and other similar payments, but INCLUDING all payments for bonuses,
incentive compensation and various forms of commissions. Base Pay shall also
include payments for short-term disability.
(c) "Committee" means the Compensation Committee of the
Company's Board of Directors or such other committee as is designated by the
Board of Directors to administer the Plan.
(d) "Employee" means any person who is a Regular Employee (per
CP-3-3-14) customarily employed for more than 20 hours per week and more than
five months in a calendar year by Storage Technology Corporation or any
Subsidiary Corporation.
(e) "Offering Commencement Date" shall mean January 1, 1991
and each following November 1 and May 1 thereafter, unless otherwise specified
by the Committee.
(f) "Offering Periods" shall mean the period commencing
January 1, 1991 and ending October 31, 1991 and thereafter the periods
commencing each November 1 and May 1 and ending on the next following April 30
and October 31, respectively. The duration of Offering Periods may be changed
pursuant to Paragraphs 5 and 21 of this Plan.
(g) "Offering Termination Date" shall mean October 31, 1991
and each following April 30 and October 31 thereafter, unless otherwise
specified by the Committee.
(h) "Segregated Accounts" shall mean the depository accounts
established by the Company and by Subsidiary Corporations for collection of
Employee contributions to the Plan.
(i) "Subsidiary Corporation" shall mean any present or future
corporation which (i) would be a subsidiary corporation with respect to the
Company as that term is defined in Section 425 of the Code, and (ii) is
designated as a participant in the Plan by the Committee described in Paragraph
14.
4. Eligibility.
(a) Participation in the Plan is completely voluntary. An
Employee will be eligible to become a participant in each Offering Period if
employed by the Company prior to the applicable Offering Commencement Date.
(b) Any provision of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan:
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<PAGE> 36
(i) if, immediately after the grant, such Employee
would own stock, and/or hold outstanding options to purchase stock,
possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company or of any Subsidiary Corporation
(for purposes of this Paragraph the rules of Section 425(d) of the
Code shall apply in determining stock ownership of any Employee); or
(ii) if such option would permit his or her rights to
purchase stock under all employee stock purchase plans of the Company
and its Subsidiary Corporations to accrue at a rate that exceeds
$25,000 of the fair market value of the stock (determined at the time
each option is granted) for each calendar year in which such option is
outstanding; or
(iii) for shares in excess of 25,000 in respect of
any Offering Period, provided that this limitation is subject to
increase or decrease by the Committee prior to the commencement of any
Offering Period in respect of such Offering Period.
5. Plan Offerings.
(a) The Plan is authorized to issue a total of 6,100,000
shares of Common Stock (of which 1,400,000 shares are subject to stockholder
approval at the next annual meeting of stockholders).
(b) The Plan will be implemented by consecutive Offering
Periods, with a new Offering Period commencing on each Offering Commencement
Date and ending on the next Offering Termination Date, or on such other dates
as the Committee shall determine prior to the commencement of the relevant
Offering Period, and continuing until terminated in accordance with Paragraph
19 hereof. The Committee shall have the power to change the duration of
Offering Periods (including the commencement and termination dates thereof)
with respect to future offerings without stockholder approval if such change is
announced at least five (5) days prior to the scheduled beginning of the first
Offering Period to be affected.
(c) A maximum of 300,000 shares of Common Stock, plus any
unsold balances from earlier Offering Periods, shall be issued during any one
Offering Period. The maximum number of shares to be issued in respect of any
Offering Period may be increased or decreased by the Committee prior to the
commencement of the affected Offering Period within the limits of total shares
then available under the Plan.
(d) Participation in any Offering Period under the Plan shall
neither limit, nor require, participation in any other Offering Period (except
as set forth in paragraphs 4(b)(i) and 4(b)(ii) hereof).
-3-
<PAGE> 37
6. Participation.
(a) An eligible Employee may become a participant by enrolling
and authorizing payroll deductions on an Interactive Voice Response system
("IVR") in such manner as is prescribed by the Company or, if such Employee
does not have access to IVR, by completing an authorization for payroll
deduction on the form provided by the Company and filing it with the department
designated by the Company or the designated country coordinator by the deadline
established by the Company, which must precede the first day of the Plan for
which the participant enrolls.
(b) Payroll deductions for a participant shall commence on the
applicable Offering Commencement Date when an authorization for a payroll
deduction becomes effective and shall end on the Offering Termination Date of
the Offering Period to which such authorization is applicable unless sooner
terminated by the participant as provided in Paragraph 11.
7. Payroll Deductions.
(a) At the time a participant enrolls and authorizes payroll
deductions, the participant shall elect to have deductions made from his or her
Base Pay and deposited in a Segregated Account during the time the Employee is
a participant in an Offering Period. Deductions can be made at the rate of 1,
2, 3, 4, 5, 6, 7, 8, 9, or 10% of Base Pay.
(b) All payroll deductions made for a participant shall be
transferred to a Segregated Account as soon as practicable. For administrative
convenience, the Company may offset amounts advanced by the Company to pay
participant withdrawals pursuant to Paragraph 11 against amounts of payroll
deductions otherwise payable into the Segregated Account. A participant may not
make any separate cash payments into the Segregated Account. The Company shall
maintain appropriate accounting records to reflect at all times the interest
and total deductions of all participants in the Segregated Account.
(c) A participant may discontinue participation in the Plan as
provided in Paragraph 11, but no other change can be made during an Offering
Period and, specifically, a participant may not alter the rate of payroll
deductions for that Offering Period.
8. Terms and Conditions of Options.
(a) On the applicable Offering Commencement Date, when a
participant's
-4-
<PAGE> 38
authorization for a payroll deduction becomes effective, the participant shall
be deemed to have been granted an option to purchase a maximum number of shares
of Common Stock, subject to the limitations pursuant to Paragraph 4(b) above,
equal to the lesser of: (a) the Option Price (as defined below) divided into
the Employee's total deductions under the Plan in respect of the Offering
Period or (b) the Employee's pro-rata share of all shares available for
issuance under the Plan for that Offering Period, determined pursuant to
Paragraph 13, below.
(b) The option price per share (hereinafter "Option Price") of
Common Stock purchased with payroll deductions made during each Offering Period
shall be the lesser of:
(i) 85% of the closing price per share of the Common
Stock as quoted in The Wall Street Journal for the applicable Offering
Commencement Date (or on the next business date on which shares of the
Common Stock shall be traded on the New York Stock Exchange in the
event that no shares of the Common Stock shall have been traded on the
Offering Commencement Date); or
(ii) 85% of the closing price per share of the Common
Stock as quoted in The Wall Street Journal for the applicable Offering
Termination Date (or for the next preceding business date on which
shares of the Common Stock shall be traded on the New York Stock
Exchange in the event that no shares of the Common Stock shall have
been traded on the Offering Termination Date).
(c) The Committee may determine in its sole discretion from
time to time to issue fractional shares under the Plan. If the Committee
determines not to issue fractional shares, any accumulated payroll deductions
that would have been used to purchase fractional shares shall be (i)
automatically credited to each participant's Account and applied towards his or
her option to purchase shares in the next successive Offering Period, or (ii)
returned to each participant promptly following the termination of the Offering
Period, as may be determined by the Committee. Any accumulated payroll
deductions that are in excess of the limitations of Paragraph 8(a), together
with any net income of the Segregated Account allocable to each participant,
and the amount referenced in item (ii) above, shall be returned to each
participant promptly following the termination of an Offering Period.
9. Exercise of Option. Unless a participant withdraws in accordance
with Paragraph 11, his or her option to purchase Common Stock with payroll
deductions made during any Offering Period will be deemed to have been
exercised automatically on the applicable Offering Termination Date, for the
purchase of the number of full shares of Common Stock that the accumulated
payroll deductions will purchase at the applicable Option Price (but not in
excess of the number of shares for which options have been granted to the
participant
-5-
<PAGE> 39
pursuant to Paragraph 8(a)), and any excess in his or her Account at that time
will be returned to the participant, together with any net income of the
Segregated Account allocable to his or her Account, as provided in Paragraph
13.
10. Delivery. As promptly as practicable after the Offering
Termination Date of each Offering Period, the Company will deliver to a broker
designated by the Committee to hold shares for the benefit of the participants
the shares of Common Stock purchased upon the exercise of the participant's
option. As determined by the Committee in its sole discretion from time to
time, such shares shall be delivered by physical certificates or by means of a
book entry system. A participant may instruct any such designated broker to
sell their shares at any time, subject to applicable securities laws.
11. Withdrawal and Termination.
(a) Prior to the 15th day of the month before the applicable
Offering Termination Date, any participant may withdraw payroll deductions and
net earnings thereon credited to the participant by following the procedures
specified by the Company for effecting a withdrawal on the IVR system or, if
the participant does not have access to IVR, by giving written notice of
withdrawal to the department designated by the Company or the designated
country coordinator. As promptly as practical after the participant's
withdrawal, the payment to the participant of all the participant's payroll
deductions credited to his or her account, together with any net earnings of
the Segregated Account allocable to the participant's Account shall be made. No
further payroll deductions for such participant will be made during such
Offering Period. The Company may, for administrative convenience, elect to pay
to participants (or beneficiaries) the amount of any withdrawals and earnings
thereon and may then offset the amount of any such payments against payroll
deductions otherwise payable to the Segregated Account. The Company may, at its
option, treat any attempt to borrow by a participant on the security of the
accumulated payroll deductions allocated to the participant's Account as an
election under this Paragraph 11(a) to withdraw such amounts from the
Segregated Account.
(b) A participant's withdrawal from any Offering Period will
not have any effect upon eligibility to participate in any subsequent Offering
Period or in any similar plan that may hereafter be adopted by the Company.
(c) Upon termination of the participant's employment with the
Company for any reason (including retirement but excluding death or, in certain
cases, disability while in the employ of the Company) on or prior to the last
day of the last full payroll period immediately preceding an Offering
Termination Date, the payroll deductions credited to the participant, together
with any net earnings of the Segregated Account allocable to his or her
-6-
<PAGE> 40
Account, will be returned to the participant, or, in the case of a
participant's death subsequent to the termination of employment, to the person
or persons entitled thereto under Paragraph 15. For purposes of the Plan, a
participant shall be considered disabled if the Company determines that the
participant is unable to perform the usual and customary requirements of his or
her job with the Company and will be unable to do so for at least six months;
provided, however, that such determination is subject to review by the
Committee at its discretion.
(d) Upon termination of the participant's employment because
of death or disability prior to the Offering Termination Date, the participant
or the participant's beneficiary (as defined in Paragraph 15) shall have the
right to elect, by written notice given to the Company's General Counsel prior
to the expiration of the period of 90 days commencing on the date of death or
disability of the participant, and prior to the Offering Termination Date,
either
(i) to withdraw all of the payroll deductions
credited to the participant, together with any net earnings of the
Segregated Account allocable to his or her Account, or
(ii) to exercise the participant's option to purchase
of Common Stock for the then current Offering Period on the Offering
Termination Date for the purchase of the number of full shares of
Common Stock that the amount allocated to the participant's Account at
the date of the participant's death or disability will purchase at the
applicable Option Price, and any excess credited to such Account will
be returned to said participant or his or her beneficiary.
In the event that no such written notice of election shall be duly received by
the office of the Company's General Counsel within the required time period,
the participant or beneficiary shall automatically be deemed to have elected to
withdraw the payroll deductions credited to the participant, together with the
net earnings of the Segregated Account allocable to his or her Account at the
date of the participant's death or disability, and the same will be paid
promptly to said participant or beneficiary. Notwithstanding the foregoing, if
a participant's employment with the Company and any Subsidiary Corporation
terminates because of disability more than three months prior to the Offering
Termination Date, the provisions of this Paragraph 11(d) shall not apply and
the provisions of Paragraph 11(c) shall apply to such participant.
12. Income and Accounting.
(a) Separate accounts shall not be established by the Company
for Employees who participate in the Plan. The Employee's payroll deductions
shall be transferred to the Segregated Account as soon as practical after each
pay period and credited to the participant.
-7-
<PAGE> 41
(b) Each participant shall share proportionately in the income
and expense of the Segregated Account and any net income shall be taxable to
the participant, who shall be responsible for paying any income or other taxes
applicable thereto.
13. Stock.
(a) The maximum number of shares of Common Stock that shall be
made available for sale under the Plan during any Offering Period under the
Plan shall be the number of shares set forth in Paragraph 5, subject to
adjustment upon changes in capitalization of the Company as provided in
Paragraph 18; provided, however, that if less than the number of shares
specified in Paragraph 5 with respect to any Offering Period are purchased
during any period, the number of shares not purchased may be carried over and
made available for sale under the Plan during any subsequent Offering Period.
(For example, if only 250,000 shares were purchased during an Offering Period
under the Plan, the shares not purchased will be carried over to the next
succeeding Offering Period so that a maximum of 350,000 shares shall be made
available for purchase during the next Offering Period.) If the total number of
shares subject to options that would otherwise be exercised on any Offering
Termination Date in accordance with Paragraph 9 exceeds the maximum number of
shares available for sale, subject to adjustment as aforesaid, the Company
shall make a pro rata allocation of the shares available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as it
shall determine to be equitable, and the balance of payroll deductions credited
to each participant, together with the net earnings of the Segregated Account
allocable thereto, shall be returned to him or her as promptly as possible.
(b) A participant will have no interest in Common Stock
covered by the participant's option until such option has been exercised.
Participants in the Plan shall have no rights as stockholders with respect to
any shares covered by the Plan until the date of issue of a stock certificate
to him or her for such shares. Except as otherwise expressly provided in the
Plan or in the corporate action relating to such event, no adjustment shall be
made for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
(c) Common Stock to be delivered to a participant under the
Plan will be registered in the name of the participant.
(d) The Board of Directors may, in its discretion, require as
conditions to the exercise of any option that the shares of Common Stock
reserved for issuance upon the exercise of the option shall have been duly
listed, upon official notice of issuance, upon the New York Stock Exchange, and
that either
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<PAGE> 42
(i) a Registration Statement under the Securities Act
of 1933, as amended, with respect to said shares shall have become
effective, or
(ii) the participant shall have represented in form
and substance satisfactory to the Company that it is the participant's
intention to purchase for investment the shares being purchased under
such option.
14. Administration. The Plan shall be administered by the Committee.
The interpretation and construction of any provision of the Plan or any
Segregated Account agreement and the adoption of rules and regulations for
administering the Plan shall be made by the Committee, subject, however, at all
times to the final concurrence of the Board of Directors of the Company.
Determinations made by the Committee and approved by the Board of Directors
with respect to any matter or provision contained in the Plan shall be final,
conclusive and binding upon the Company and upon all participants, their heirs
or legal representatives. Any rules, regulations or interpretations adopted by
the Committee shall remain in full force and effect unless and until altered,
amended, or repealed by the Committee or the Board of Directors.
15. Designation of Beneficiary. A participant may file with the
Company, pursuant to rules adopted by the Committee, a written designation of a
beneficiary who is to receive any Common Stock and/or cash pursuant to the
provisions of the Plan in the event of the participant's death. Such
designation of beneficiary may be changed by the participant at any time by
written notice. Upon the death of a participant and upon receipt by the Company
of proof of the identity and existence at the participant's death of a
beneficiary validly designated by him under the Plan, the Company shall deliver
such Common Stock to such beneficiary and/or pay any cash in the participant's
Account in the Segregated Account to the beneficiary, as may be required under
the provisions of Paragraph 11(d). In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall cause such
cash to be paid to the person or persons or the entity duly designated by the
participant, as shown on the Company's records, as his or her beneficiary for
the proceeds of Company paid life insurance. In the absence of such a
beneficiary who is living at the time of the participant's death, the Company
shall cause such cash to be paid to the executor or administrator of the estate
of the participant, or if no such executor or administrator of the estate has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may cause such cash to be paid to the spouse or to any one or more
dependents of the participant as the Company may designate. No beneficiary
shall, prior to the death of the participant by whom he or she has been
designated, acquire any interest in the Common Stock or in amounts credited to
the participant's Account.
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<PAGE> 43
16. Transferability. Neither payroll deductions credited to a
participant, nor earnings thereon, nor any rights with regard to the exercise
of an option or to receive Common Stock under the Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way by the participant
otherwise than by will or the laws of descent and distribution. Any such
attempted assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Paragraph 11.
17. Ownership of ESPP Assets. All contributions paid into Segregated
Accounts shall be the property of the respective participants in the Plan and
the Company shall have no interest in such amounts while held in the Segregated
Account.
18. Effect of Changes in Capital Structure. If the outstanding shares
of Common Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of any recapitalization,
reclassification, stock split, stock dividend, combination, or subdivision, or
if the Company takes any other action of a similar nature affecting such Common
Stock (excluding, however, any reorganization under the United States
Bankruptcy Code), then the number and class of shares of Common Stock that may
thereafter be optioned, or the rights assigned thereto (in the aggregate and to
any participant), shall be adjusted accordingly and, in the case of each option
outstanding at the time of any such action, the number and class of shares that
may thereafter be purchased pursuant to such option and the Option Price shall
be adjusted, in each case to such extent and in such manner, if at all, as may
be determined by the Board upon the recommendations of the Committee, with the
approval of independent public accountants and counsel, to be necessary to
preserve unimpaired the rights of the holder of such option.
19. Amendment or Termination. The Board of Directors of the Company
may at any time terminate or amend the Plan. No such termination can affect
options previously granted, nor may an amendment make any change in any option
theretofore granted without prior approval of the stockholders of the Company
if such approval is required under the laws or regulations administered by the
U.S. Treasury (including Section 423 of the Code), the Securities and Exchange
Commission (including Rule 16b-3), any other agency of the U.S. Government, or
the New York Stock Exchange, or any other exchange or system on which the
Company's stock is then registered or traded.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received by the General Counsel of the Company.
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<PAGE> 44
21. Dissolution, Merger or Asset Sale.
(a) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(b) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Offering Termination Date (the "New Offering Termination Date")
or to cancel each outstanding right to purchase and refund all sums collected
from participants during the Offering Period then in progress. If the Board
shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
each participant in writing, at least ten (10) business days prior to the New
Termination Date, that the Offering Termination Date for the option held by the
participant has been changed to the New Offering Termination Date and that such
option shall be exercised automatically on the New Offering Termination Date,
unless prior to such date the participant has withdrawn from the Offering
Period as provided in Paragraph 10 hereof. For purposes of this paragraph, an
option granted under the Plan shall be deemed to be assumed if, following the
sale of assets or merger, the option confers the right to purchase, for each
share of option stock subject to the option immediately prior to the sale of
assets or merger, the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in fair market value to
the per share consideration received by holders of Common Stock and the sale of
assets or merger.
22. Effective Date - Approval of Stockholders. The 1987 Plan was
adopted on behalf of the Board of Directors of the Company by the Compensation
Committee on December 14, 1995 and approved by the stockholders of the Company
on May 30, 1996. The Plan was further amended on September 23, 1997 and
December 19, 1997, and is effective on those dates, except to the extent
stockholder approval is required at the next annual meeting of stockholders
under Paragraph 19 above. Offerings may commence under the Plan prior to
approval by the stockholders but no Common Stock requiring stockholder approval
may be purchased hereunder unless and until the requisite stockholder approval
has been received.
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<PAGE> 45
STORAGE TECHNOLOGY CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
RECITALS
A. Pursuant to a resolution dated June 15, 1987, the Board of
Directors (the "Board") of Storage Technology Corporation, a Delaware
corporation (the "Company"), adopted the Stock Option Plan for Non-Employee
Directors (the "Plan"). The Plan was approved by the stockholders of the
Company at a meeting held October 20, 1987 (the "Original Adoption Date"). The
Plan was thereafter amended (the "First Amendment") by the Board on March 29,
1989 and such amendment was approved by the stockholders of the Company at a
meeting held June 28, 1989, and again amended (the "Second Amendment") by the
Board on November 7, 1990 and such amendment was approved by the stockholders
of the Company at a meeting held May 29, 1991. The Plan was further amended by
the Board on July 26, 1995 and March 6, 1996 and each of these amendments was
approved by the stockholders of the Company at a meeting held May 30, 1996.
The Plan was further amended by the Board on December 19, 1997 to increase the
number of shares available for issuance under the Plan, subject to the approval
of the stockholders at the next annual meeting of stockholders. This Amended
and Restated Plan incorporates all of the above amendments, provided that the
amendments approved on December 19, 1997 are subject to the approval of the
Company's stockholders.
B. The Board reserved the right to amend the Plan from time to time
with certain restrictions and only with the approval of the stockholders with
respect to certain amendments, all as specified in the Plan. Pursuant to such
authority, the Plan is hereby amended in its entirety as set forth below,
except that the number of shares available for issuance pursuant to Section 4.1
is subject to the approval of the Company's stockholders at the Company's next
annual meeting following the Board's adoption of this Amended Plan.
C. The purposes of the Plan are to secure for the Company the benefits
arising from capital stock ownership by its current and future non-employee
directors by providing to such directors added incentive to continue in the
service of the Company and a more direct interest in the future success of the
operations of the Company through the granting to such directors of options
("Option" or "Options") to purchase shares of the $.10 par value common stock
of the Company (the "Stock") subject to the terms and conditions described
below.
<PAGE> 46
ARTICLE I
1 GENERAL
1.1 Definitions. For purposes of this Amended Plan, and as used
herein, a "non-employee director" is an individual who (a) is a
member of the board of directors of the Company, and (b) is not an
employee of the Company. For purposes of this Amended Plan, an
employee is an individual whose wages are subject to the
withholding of federal income tax under section 3401 of the
Internal Revenue Code of 1986, as amended from time to time (the
"Code").
1.2 Options. The Options granted hereunder shall be options that are
not qualified as incentive stock options under section 422A of the
Code.
ARTICLE II
2 ADMINISTRATION
2.1 The Stock Option Committee. The Amended Plan shall be administered
by the Compensation Committee of the Board ("the Committee"), which
shall be composed in such a manner to satisfy the requirements, if
any, of Rule 16b-3 promulgated under the Securities Exchange Act of
1934 or any successor rule ("Rule 16b-3") with respect to
committees administering formula plans that comply with Rule 16b-3
and in accordance with the General Corporation Law of Delaware.
The persons comprising the Committee shall be appointed by and
serve at the pleasure of the Board. The Committee members shall
all be members of the Board.
2.2 Quorum. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at
which a quorum is present or participating by the means described
in the last sentence of this section 2.2, or acts approved in
writing by all members of the Committee, shall be the acts of the
Committee. The Committee shall keep minutes of its meetings. One
or more members of the Committee may participate in a meeting of
the Committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other.
2.3 Authority of the Committee. The Committee shall have no authority
or discretion or power to select the participants who will receive
Options, to set the number of shares to be covered by each Option,
or to set the exercise price or the period within which the Options
may be exercised or to alter any other terms or conditions
specified herein, except in the sense of administering the Amended
Plan subject to the provisions of the Amended Plan. Subject to the
foregoing limitations, the Committee shall have authority and power
to adopt such rules and regulations and to take such action as it
shall consider necessary
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<PAGE> 47
or advisable for the administration of the Amended Plan and to
construe, interpret and administer the Amended Plan and the
decisions of the Committee shall be final and binding upon the
Company, the Holders (as defined below) and all other persons. No
member of the Committee shall incur any liability by reason of any
action or determination made in good faith with respect to the
Amended Plan or any stock option agreement.
ARTICLE III
3 OPTIONS
3.1 Participation. Each individual who was a non-employee director of
the Company on the Original Adoption Date or who becomes such
thereafter shall receive Options to purchase Stock under the Plan
on the terms and conditions described herein.
3.2 Stock Option Agreements. Each Option granted under the Amended
Plan shall be evidenced by a written stock option agreement in
substantially the form attached hereto, which shall be entered into
by the Company and the non-employee director to whom the Options
are granted (the "Holder"), and which shall include or conform to
the following terms and conditions, and which may include such
other terms and conditions, if any, not inconsistent therewith or
with the terms and conditions of this Amended Plan as the Committee
considers appropriate:
3.2.1 Number of Options and Grant Dates. Each non-employee
director is entitled to receive, under the Plan, Options to
purchase shares of Stock as described below and subject to
adjustment from and after the Original Adoption Date as
provided in section 4.2 hereof.
3.2.1.1 Each non-employee director who was such on
October 20, 1987, has received an Option,
granted as of October 20, 1987, to purchase
2,500 shares of Stock (after adjustment for the
one-for-ten reverse stock split effected on May
19, 1989) pursuant to the Plan.
3.2.1.2 Each individual who became a non-employee
director of the Company after March 29, 1989,
and prior to November 7, 1990, has received an
Option, granted as of his or her election date,
to purchase 2,500 shares of Stock pursuant to
the First Amendment.
3.2.1.3 Between October 20, 1987 and November 7, 1990,
each non-employee director holding an Option
granted under 3.2.1.1 or 3.2.1.2 above who had,
after such grant, been elected to serve on the
Board at two consecutive annual meetings of
stockholders as a non-employee director after
receipt of the Option granted under 3.2.1.1 or
3.2.1.2 above, has received an additional
Option, granted as of such election date, to
purchase 2,500 shares of Stock.
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<PAGE> 48
3.2.1.4 Options granted under 3.2.1.1, 3.2.1.2 and
3.2.1.3 above will hereinafter be collectively
referred to as "Initial Options". All Initial
Options shall continue to be held pursuant to
the terms and conditions of this Amended Plan.
3.2.1.5 Each non-employee director who was such on
November 7, 1990, or who first becomes such
after November 7, 1990, shall receive an Option
(the "New Option"), granted as of the later to
occur of November 7, 1990, or his or her first
election or appointment as a non- employee
director, to purchase a number of shares of
Stock equal to 25,000 less any shares subject to
the Initial Options granted to such director.
3.2.1.6 Each non-employee director who was such on July
26, 1995 or is thereafter elected or appointed
shall receive an additional option (the
"Additional Option") granted as of the later to
occur of July 26, 1995 or the third anniversary
of his or her first election or appointment as a
non-employee director, to purchase 18,000 shares
of Stock.
3.2.1.7 In the event that any grant hereunder would
exceed the number of shares of Stock available
for issuance under the Amended Plan, or is
otherwise subject to stockholder approval, then
each such grant shall be conditioned on and
subject to subsequent stockholder approval to
the extent it exceeds that number of shares
determined by dividing the total number of
shares remaining available for grant under the
Amended Plan on such grant date by the number of
eligible non-employee directors, or to the
extent that stockholder approval is otherwise
required.
3.2.2 Price. The price at which each share of Stock covered by
an Option may be purchased shall be the greater of 100
percent of the fair market value of such share on the date
of grant of the Option or the par value per share. For
purposes of this determination, "fair market value" means
the closing price of a share of Stock as reported in the
Wall Street Journal for the last business day prior to the
date of the grant. If no such closing price is reported,
then fair market value shall mean the average of the high
and low sale prices (or if no sale prices are reported, the
average of the high and low bid prices) as reported by the
principal regional stock exchange, or if not so reported,
as reported by NASDAQ or a quotation system of general
circulation to brokers and dealers.
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<PAGE> 49
3.2.3 Service Required for Exercise.
3.2.3.1 Each Initial Option shall be exercisable in full
six months after the date of grant, or at any
time after November 7, 1990, whichever shall
occur last.
3.2.3.2 Subject to 3.2.3.5 below, for each non-employee
director who is such on November 7, 1990, such
director's New Option shall become exercisable
as follows: a number of shares equal to 5,000
less any shares subject to Initial Options
granted to such director, shall become
exercisable six months after the grant date, and
the balance shall become exercisable in four
equal amounts on the first through fourth
anniversaries of such grant date.
3.2.3.3 Subject to 3.2.3.5 below, for each non-employee
director who becomes such after November 7,
1990, such director's New Option shall become
exercisable as follows: 5,000 shares shall
become exercisable six months after the grant
date and the balance shall become exercisable in
six equal amounts on the first through the sixth
anniversaries of such grant date (with the first
four years rounded down to the nearest whole
share, and the last two years rounded up).
3.2.3.4 Subject to 3.2.3.5 below, each Additional Option
shall become exercisable as follows: 6,000
shares on each of the first, second, and third
anniversaries of the first date by which all
shares that are subject to New Options held by
such directors have become exercisable.
3.2.3.5 Except as set forth in this Article III, the
Options shall not be exercisable as to any
shares as to which the continuous service
requirement shall not be satisfied, regardless
of the circumstances under which the Holder's
service to the Company shall be terminated. The
number of shares as to which an Option may be
exercised shall be cumulative, so that once an
Option shall become exercisable as to any shares
it shall continue to be exercisable as to such
shares, until expiration or termination of the
Options as provided in the Amended Plan.
3.2.4 Option Period. The period within which each Option may be
exercised shall expire, in all cases, ten years from the
date of grant of the Option (the "Option Period"), unless
terminated sooner pursuant to subsection 3.2.5 below or
fully exercised prior to the end of such period.
3.2.5 Termination of Service. With respect to the exercise of
such Option in the event that the Holder ceases to be a
non-employee director of the Company for the reasons
described in this 3.2.5:
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<PAGE> 50
3.2.5.1 As to all options granted before July 20, 1995,
and as to options granted on or after July 20,
1995, if the option has not been outstanding, as
of the date of the director ceasing to be a
nonemployee director, for at least six years or
such director has not been an outside director
for at least ten years, the vesting of and
expiration of the right to exercise such options
shall occur as follows:
3.2.5.1.1 Disability. If the Holder
terminates his or her service as a
director due to becoming disabled
(within the meaning of section
22(e)(3) of the Code) while in a
directorship of the Company or
becomes disabled during the
six-month period after his or her
termination, Options vested as of
the date of termination may be
exercised within twelve months
following the disability (if
otherwise within the Option Period)
but will expire at the end of such
period to the extent they are not
exercised; or
3.2.5.1.2 Death. If the Holder shall die
while in a directorship of the
Company or during the six-month
period after his or her termination
of service as a director, all
Options, including, but not limited
to, Options not otherwise vested
may be exercised within twelve
months following such death (if
otherwise within the Option
Period), but not thereafter, by the
Holder's legal representative or
representatives, or by the person
or persons entitled to do so under
the Holder's last will and
testament, or if the Holder shall
fail to make testamentary
disposition of his or her Options
or shall die intestate, by the
person or persons entitled to
receive said Options under the laws
of descent and distribution; or
3.2.5.1.3 Other. If the directorship of a
Holder is terminated for any reason
prior to such director reaching age
70 (other than the circumstances
specified in 3.2.5.1.1 and
3.2.5.1.2 of this 3.2.5.1) within
the Option Period, the Options
vested as of the date of
termination may be exercised within
six months following the date of
such termination (if otherwise
within the Option Period), but not
thereafter, or
3.2.5.1.4 Retirement. If the directorship of
a Holder is terminated for any
reason after such director reaches
age 70 (other than the
circumstances specified in
3.2.5.1.1 and 3.2.5.1.2) within the
Option Period, all Options,
including, but not limited to,
Options not otherwise vested may be
exercised within six months
following the date of such
termination (if otherwise within
the Option Period), but not
thereafter.
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<PAGE> 51
3.2.5.2 As to Options granted on or after July 20, 1995,
if the Option has been outstanding, as of the
date of the director's ceasing to be a
non-employee director, for at least six years or
such director has been an outside director for
at least ten years, the vesting of and
expiration of the right to exercise such options
shall occur as follows:
3.2.5.2.1 Disability. If the Holder
terminates his or her service as a
director due to becoming disabled
(within the meaning of section
22(e)(3) of the Code) while in a
directorship of the Company,
Options vested as of the date of
termination may be exercised within
the Option Period but will expire
at the end of such period to the
extent they are not exercised; or
3.2.5.2.2 Death. If the Holder shall die
while in a directorship of the
Company all Options, including, but
not limited to, Options not
otherwise vested may be exercised
within the Option Period but not
thereafter, by the Holder's legal
representative or representatives,
or by the person or persons
entitled to do so under the
Holder's last will and testament,
or if the Holder shall fail to make
testamentary disposition of his or
her Options or shall die intestate,
by the person or persons entitled
to receive said Options under the
laws of descent and distribution;
or
3.2.5.2.3 Other. If the directorship of the
Holder is terminated for any reason
prior to such director reaching age
70 (other than the circumstances
specified in 3.2.5.2.1 and
3.2.5.2.2 of this 3.2.5.2) within
the Option Period, the Options
vested as of the date of
termination may be exercised within
the Option Period, but not
thereafter; or
3.2.5.2.4 Retirement. If the directorship of
the Holder is terminated for any
reason after such director reaches
age 70 (other than the
circumstances specified in
3.2.5.2.1 and 3.2.5.2.2) within the
Option Period, all Options,
including, but not limited to,
Options not otherwise vested may be
exercised within the Option Period,
but not thereafter.
3.2.6 Transferability. Each Option granted under the Plan or the
Amended Plan shall not be transferable by the Holder except
(i) by will or pursuant to the laws of descent and
distribution, or (ii) pursuant to a qualified domestic
relations order as
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<PAGE> 52
defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, or (iii) as
may otherwise be permitted by applicable law, including the
version of Rule 16b-3 that is applicable to this Amended
Plan at the time of the transfer. Each Option shall be
exercisable during the Holder's lifetime only by the Holder
or by his or her permitted transferee(s) pursuant to clause
(ii) or (iii) hereof.
3.2.7 Exercise of Option. The method for exercising each Option
granted pursuant to the Plan or the Amended Plan shall be
by delivery to the Company of written notice specifying the
number of shares with respect to which the Options are
being exercised. If requested by the Company, such notice
shall contain the Holder's representation that he or she is
purchasing the Stock for investment purposes only and his
or her agreement not to sell any Stock so purchased in any
manner that is in violation of the Securities Act of 1933,
as amended, or applicable state law. Such restrictions, or
notice thereof, shall be placed on the certificates
representing the Stock so purchased. The purchase of such
Stock shall take place at the principal offices of the
Company within twenty days following delivery of such
notice, at which time the purchase price of the Stock shall
be paid in full in cash, by check payable to the Company's
order, by delivery to the Company of certificates
representing the number of shares of Stock then owned by
the exercising Holder, the fair market value of which, on
the date of exercise, equals the purchase price of the
Stock purchased pursuant to exercise of the Options,
properly endorsed for transfer to the Company, or by a
combination of such methods of payment. A properly
executed certificate or certificates representing the Stock
shall be delivered to the Holder upon payment therefor.
ARTICLE IV
4 AUTHORIZED STOCK
4.1 The Stock. The total number of shares of Stock as to which Options
may be granted pursuant to the Amended Plan shall not exceed
780,000 in the aggregate (of which 250,000 shares are subject to
approval by the Company's stockholders at the next annual meeting
of stockholders), except as such number of shares shall be adjusted
from and after July 26, 1995 in accordance with the provisions of
4.2 hereof. If any outstanding Option granted under the Plan or
the Amended Plan shall expire or be terminated for any reason
before the end of the Option Period, the shares of Stock allocable
to the unexercised portion of such Option shall be available for
grants pursuant to 3.2.1.5 and 3.2.1.6 above. Fractional shares
shall not be distributed and shall remain unallocated. The Company
shall at all times during the life of any outstanding Options
retain as authorized and unissued shares or treasury shares at
least the number of shares from time to time included in the
outstanding Options, or otherwise assure itself of its ability to
perform its obligations under the Amended Plan.
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<PAGE> 53
4.2 Adjustment by Stock Split, Stock Dividend, Etc. In the event that
the outstanding shares of Stock of the Company are changed into or
exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization,
reclassification, stock split, reverse stock split, stock dividend,
combination or subdivision, appropriate adjustment shall be made in
the number and kind of shares available for grant under the Amended
Plan and reserved for issuance under any Options granted under the
Plan or the Amended Plan. Such adjustment to outstanding Options
shall be made without change in the total price applicable to the
unexercised portion of such Options, and a corresponding adjustment
in the applicable exercise price per share shall be made.
4.3 Rights as a Stockholder. The holder of an Option shall have no
rights as a stockholder with respect to any shares covered by an
Option until the date of issue of a stock certificate to him or her
for such shares. Except as otherwise expressly provided in the
Amended Plan, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock
certificate is issued.
4.4 General Adjustment Rules. No adjustment or substitution provided
for in this Article IV shall require the Company to sell a
fractional share under any stock option agreement and the total
substitution or adjustment with respect to each stock option
agreement shall be limited by deleting any fractional share. In
the case of any such substitution or adjustment, the exercise price
per share in each such stock option agreement shall be equitably
adjusted by the Committee to reflect the greater or lesser number
of shares of Stock or other securities into which the Stock subject
to an Option may have been changed. Adjustments under this Article
IV shall be made by the Committee, whose determination with regard
thereto shall be final and binding.
ARTICLE V
5 REORGANIZATION OR LIQUIDATION
In case the Company is merged or consolidated with another entity and the
stockholders of the Company as of immediately prior to such merger or
consolidation own 50% or less of the voting power of the surviving entity,
or in case all or substantially all of the assets or more than 50% of the
outstanding voting stock of the Company is acquired by any other person or
entity, or in case of a reorganization (other than a reorganization under
federal bankruptcy statutes) or liquidation of the Company that is
approved by the stockholders of the Company (i) any outstanding Options
shall be assumed or substituted on an equitable basis by the merged,
consolidated or otherwise reorganized corporation, person or entity,
provided that no additional benefits shall be conferred upon the Holders
as a result of such assumption or substitution, and the excess of the
aggregate fair market value of the shares subject to the Options
immediately after such assumption or substitution over the purchase price
thereof is not more than the excess of the aggregate fair market value of
the shares subject to the Options immediately before such
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<PAGE> 54
assumption or substitution over the purchase price thereof, and (ii) the
exercisability of all outstanding Options shall automatically be
accelerated such that the Options shall become exercisable in full
regardless of whether all conditions of exercise relating to vesting
period or length of service of a director have been satisfied. In the
event that the triggering event is an event that requires approval of the
stockholders of the Company prior to its consummation, then the
acceleration of exercisability shall be effective upon stockholder
approval of such triggering event. If the triggering event does not
require stockholder approval (such as the acquisition by a third party of
more than 50% of the outstanding stock of the Company), then the
acceleration of exercisability shall be effective upon the occurrence of
such event.
ARTICLE VI
6 GENERAL PROVISIONS
6.1 Expiration. The Amended Plan shall terminate whenever the Board
adopts a resolution to that effect. If not sooner terminated under
the preceding sentence, the Amended Plan shall wholly cease and
expire on March 29, 2010. After termination, no Option shall be
granted under this Amended Plan, but the Company shall continue to
recognize Options previously granted.
6.2 Amendments. The Board may from time to time amend, modify, suspend
or terminate the Amended Plan; provided, however, that the
provisions of the Amended Plan that determine which directors may
be granted Options, the timing of the Option grants and the number
of shares of Stock subject to Options granted hereunder may not be
amended more frequently than is permitted for formula plans by Rule
16b-3. Nevertheless, no such amendment, modification, suspension
or termination shall (a) impair any Option earlier granted under
the Plan or the Amended Plan or deprive any Holder of any shares of
Stock that he or she may have acquired through or as a result of
the Plan or the Amended Plan or (b) be made without the approval of
the stockholders of the Company if such approval is required to
retain the exemption provided by Rule 16b-3 with respect to Options
granted under the Plan or the Amended Plan.
6.3 Treatment of Proceeds. Proceeds from the sale of Stock pursuant to
Options granted under the Plan or the Amended Plan shall constitute
general funds of the Company.
6.4 Effectiveness. The effective date of the Plan was October 20,
1987. The "Effective Date" of this Plan as amended on December 19,
1997 shall be December 19, 1997 except to the extent that
stockholder approval is required at the next annual meeting of
stockholders.
6.5 Paragraph Headings. The paragraph headings are included herein
only for convenience, and they shall have no effect on the
interpretation of the Plan.
ADOPTED by the authority of the Board on December 19, 1997,
effective as of the Effective Date of the Amended Plan.
STORAGE TECHNOLOGY CORPORATION
10
<PAGE> 55
FORM OF STOCK OPTION AGREEMENT
STORAGE TECHNOLOGY CORPORATION
Office of Corporate Counsel
2270 South 88th Street
Louisville, Colorado 80028-4309
- - --------------------------------------------------------------------------------
STORAGETEK
NONEMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
Name:
Address:
City, State Zip:
Storage Technology Corporation (the "Company") has granted you a Stock Option
("Option") to purchase shares of Common Stock, $.10 par value per share, as
follows:
Number of Shares Subject to Option Granted:
Option Exercise Price Per Share: $
Aggregate Exercise Price of Shares: $
Option Type: Non-Qualified
Stock Option Plan ("Plan"): Amended and Restated Stock Option
Plan for Non-Employee Directors
Grant Number:
Date of Grant:
Expiration Date:
This Option may be exercised by you on or prior to the earlier to occur of (i)
the Expiration Date, or (ii) such earlier date as is determined in accordance
with the provisions of Article III, Section 3.2.5 of the Plan following
termination of service, in whole or in part, pursuant to this Stock Option
Agreement according to the following vesting schedule:
~ shares on or after ~; ~ shares on or after ~;
~ shares on or after ~; ~ on or after ~; and
~ shares on or after ~; ~ on or after ~; but prior to the
Expiration Date.
This Option may be exercised on a cumulative basis. If the Option is not
exercised to the maximum extent permitted by the above schedule, it will be
exercisable, in whole or in part, with respect to all remaining unexercised
shares at any time prior to the Expiration Date or earlier termination of this
Option.
This Option is granted under and is governed by the terms and conditions of the
Plan, which by reference is made a part of this Stock Option Agreement. YOUR
ACCEPTANCE OF THIS OPTION IS YOUR AGREEMENT TO COMPLY WITH THE TERMS AND
CONDITIONS OF THE PLAN. Copies of the Plan are being provided with this Stock
Option Agreement. Please consult the Plan for information regarding
administration of the Plan, vesting, exercise procedures, payment of the
purchase price, effect of termination of service, non-transferability of the
Option, reorganization or liquidation of the Company, rights as a stockholder,
and other terms governing this Option. In the event of any conflict between the
terms of the Plan and any other document or communication, the terms of the Plan
will control.
STORAGE TECHNOLOGY CORPORATION
By:
------------------------------------------
11
<PAGE> 56
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
STORAGE TECHNOLOGY CORPORATION
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints David E. Weiss and David E. Lacey, and each
of them, as the lawful agents and proxies of the undersigned (with full power of
substitution), to represent the undersigned and to vote, as specified herein,
all shares of the Common Stock of Storage Technology Corporation (the "Company")
standing in the undersigned's name as of the record date at the Annual Meeting
of Stockholders of Storage Technology Corporation to be held on May 21, 1998,
and any adjournment or postponement thereof, and, in their discretion, upon such
other matters that may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS GIVEN ON THE REVERSE OF THIS CARD, OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR ALL OF THE MANAGEMENT'S NOMINEES FOR DIRECTOR, AND
FOR PROPOSALS 2, 3 AND 4.
(To Be Signed on Reverse Side)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED
IN PROPOSAL 1 AND "FOR" PROPOSALS 2, 3 AND 4.
<TABLE>
<S> <C> <C>
1. Election of Directors. FOR All Nominees (except as indicated below) [ ] WITHHOLD from all Nominees [ ]
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Nominees: William L. Armstrong J. Harold Chandler William R. Hoover Stephen J. Keane William T. Kerr
Robert E. La Blanc Robert E. Lee Harrison Shull Richard C. Steadman David E. Weiss
</TABLE>
WITHHOLD AUTHORITY to vote for the nominees listed below:
- - --------------------------------------------------------------------------------
2. Approval of an amendment to the Amended and Restated 1987 Employee Stock
Purchase Plan to reserve an additional 1,400,000 shares of Common Stock for
issuance thereunder.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of an amendment to the Amended and Restated Stock Option Plan for
Nonemployee Directors to reserve an additional 250,000 shares of Common Stock
for issuance thereunder.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Ratification of the appointment of Price Waterhouse LLP as the Company's
independent accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the proxies are authorized to vote on any other matters
that may properly come before the meeting.
PLEASE MARK, DATE, SIGN AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE.
----------------------------------------
SIGNATURE(S)
----------------------------------------
DATE
Please mark, date and sign this Proxy
exactly as your name appears hereon. In
case of joint ownership, each joint
owner should sign. If you are acting as
a trustee, executor, attorney-in-fact or
in some other representative capacity,
please indicate beneath your signature
your title and for whom you are signing
this Proxy.
