<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 Rule 14a-11(c) or Rule 14a-12
Storage Technology Corporation
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
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[ ] Fee paid previously with 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 of Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[STORAGETEK LOGO]
April 11, 2000
Dear StorageTek Stockholder:
I am pleased to invite you to attend the 2000 Annual Meeting of
Stockholders of Storage Technology Corporation, to be held on May 18, 2000, at
10:00 a.m., Mountain Daylight Time, at the Omni Interlocken Resort, 500
Interlocken Boulevard, Broomfield, Colorado 80021.
The Annual Meeting will begin with a formal business session during which
stockholders will vote on the proposals identified in the enclosed Notice of
Annual Meeting and Proxy Statement. Following this portion of the Annual
Meeting, I plan to present a report on our accomplishments during 1999 and our
plans for the remainder of 2000. I will also announce the results of the voting
on the proposals described in the Company's Proxy Statement for the Annual
Meeting and be available to answer questions from the floor. The Company will
have available at the sign-in desk a copy of the Annual Meeting Agenda and the
Annual Meeting Rules of Conduct. The Company intends to conduct the Annual
Meeting in the sequence described in the Agenda and to adhere strictly to the
Rules of Conduct.
Even if you are unable to attend the Annual Meeting in person, I urge you
to vote on the proposals presented in the Proxy Statement. You can vote by
telephone, via the Internet or by completing the enclosed proxy card. Detailed
voting instructions are included on the proxy card. A prompt response is
appreciated.
Thank you for your continued interest in StorageTek.
Sincerely,
/s/ David E. Weiss
David E. Weiss
Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 3
[STORAGETEK LOGO]
STORAGE TECHNOLOGY CORPORATION
One StorageTek Drive
Louisville, Colorado 80028-0001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2000
To the Stockholders:
The 2000 annual meeting of the stockholders (the "Annual Meeting") of
Storage Technology Corporation ("StorageTek" or the "Company"), a Delaware
corporation, will be held on Thursday, May 18, 2000, at 10:00 a.m., MDT, at the
Omni Interlocken Resort, 500 Interlocken Boulevard, Broomfield, Colorado 80021.
At the Annual Meeting, stockholders will be requested to act on the following
matters:
1. To elect eight Directors, to serve for a one-year term or until their
respective successors are duly elected;
2. To adopt a resolution amending Section 4.1 of the Company's 1995 Equity
Participation Plan, as amended (the "Equity Plan"), to reserve an
additional 10,000,000 shares of Common Stock for issuance thereunder;
3. To adopt a resolution amending the Equity Plan to increase the limit on
Stock Options and Stock Appreciation Rights (as those terms are defined
in the Equity Plan) that may be granted in any one fiscal year to any
single individual from 1,000,000 shares to 2,000,000 shares (the
"Individual Limit") and to permit the Company to grant a newly-hired
employee of the Company (a "New Hire"), in the fiscal year in which he
or she became a New Hire, Stock Options and Stock Appreciation Rights to
purchase shares at up to twice the Individual Limit.
4. To adopt a resolution ratifying the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants for
the current fiscal year;
5. To consider a stockholders' proposal; and
6. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The only class of securities that is eligible to vote at the Annual Meeting
is the Company's common stock, par value $0.10 per share (the "Common Stock").
Only stockholders of Common Stock of record at the close of business on March
24, 2000 will be eligible to vote at the Annual Meeting and at any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey M. Dumas
Jeffrey M. Dumas
Secretary
Louisville, Colorado
April 11, 2000
YOUR VOTE IS IMPORTANT
WE INVITE EACH OF YOU TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN
TO ATTEND THE ANNUAL MEETING, WE URGE YOU TO VOTE. THIS WILL ENSURE THE PRESENCE
OF A QUORUM AT THE ANNUAL MEETING. PLEASE USE THE INTERNET VOTING INSTRUCTIONS,
OR TOLL-FREE TELEPHONE NUMBER, OR MARK, SIGN, DATE AND RETURN YOUR PROXY CARD SO
THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. A PROMPT RESPONSE
IS HELPFUL AND YOUR COOPERATION IS APPRECIATED.
<PAGE> 4
STORAGE TECHNOLOGY CORPORATION
PROXY STATEMENT
April 11, 2000
PROCEDURAL MATTERS
THIS PROXY STATEMENT (THE "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 THE "BOARD"), TO BE VOTED
AT THE ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL MEETING"), TO BE HELD ON
THURSDAY, MAY 18, 2000, AT 10:00 A.M., MOUNTAIN DAYLIGHT TIME, AT THE OMNI
INTERLOCKEN RESORT, 500 INTERLOCKEN BOULEVARD, BROOMFIELD, COLORADO 80021 AND
ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Only stockholders of record of the Company's common stock, par value $.10
per share (the "Common Stock") at the close of business on March 24, 2000 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
and any adjournment or postponement thereof. Shares of Common Stock that you
beneficially own, but are held of record through a brokerage account or an
account with a financial institution, are referred to as being held "in street
name." If you are a beneficial owner of shares of Common Stock held in street
name, you are not the stockholder of record. In order to vote your beneficially
owned shares held in street name at the Annual Meeting, you must obtain a Power
of Attorney or proxy from the record holder in your favor signed by the holder
of record.
This Proxy Statement, the enclosed, related proxy card and the enclosed
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 are first
being mailed to the stockholders beginning on or about April 11, 2000.
VOTING OF PROXIES
Proxies received prior to the Annual Meeting will be voted in accordance
with the instructions contained in the Internet or telephone instructions or on
the proxy card, as the case may be. If no instructions are given with respect to
a matter, shares will be voted in accordance with the recommendation of the
Board of Directors set forth in this Proxy Statement and, at the appointed
proxies' discretion, upon such other business matter that may properly come
before the Annual Meeting.
VOTING PROCEDURES
There are three methods by which a stockholder may vote shares of Common
Stock:
1. complete and return the enclosed proxy card;
2. access the Internet address on the proxy card; or
3. call the toll-free telephone number listed in the voting instructions
attached to the proxy card.
The Internet and telephone voting procedures are designed to authenticate
stockholders by use of a control number. The Internet and telephone voting
procedures allow a stockholder to vote shares and to confirm that his or her
instructions have been properly recorded. If shares of Common Stock are held in
the name of a brokerage house or financial institution, the beneficial owner may
be able to vote over the Internet or by telephone, if the record holder permits
such options, in which case the beneficial owner shall follow the instructions
given by the record holder. A beneficial owner who is not the owner of record,
if voting at the Annual Meeting, must bring to the Annual Meeting an executed
Power of Attorney or proxy in the beneficial owner's name signed by the record
holder, in order to be able to vote.
<PAGE> 5
Proxies by stockholders may be revoked at any time prior to the Annual
Meeting by giving written notice of revocation to the Secretary of the Company,
or by submitting another valid proxy bearing a later date to the Company or its
transfer agent, or by voting in person at the Annual Meeting.
SOLICITATION OF PROXIES
StorageTek has retained Beacon Hill Partners, Inc. ("Beacon Hill") to
solicit proxies at a cost of approximately $8,500 plus certain out-of-pocket
expenses. If the Company requests Beacon Hill to perform additional services,
Beacon Hill will bill the Company at its usual rates. In addition, StorageTek
will reimburse intermediaries for their expenses in forwarding solicitation
materials to beneficial owners. The cost of solicitation of proxies on behalf of
the Board will be borne by the Company. Further solicitation may be made by
certain directors, officers and other employees of the Company by telephone,
mail or other means of communication, for which no additional compensation will
be paid.
QUORUM
In order to conduct any business at the Annual Meeting, a quorum must be
present in person or represented by valid proxies. A quorum consists of 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
"WITHHOLD FROM" any matter will count for purposes of establishing a quorum and
will be treated as shares entitled to vote at the Annual Meeting (the "Votes
Present").
ABSTENTIONS
Abstentions will count as Votes Present and shall have the same effect as a
vote against a matter. While there is no definitive statutory or case law
authority in Delaware, the Company's state of incorporation, as to the proper
treatment of abstentions, StorageTek believes that abstentions should be counted
for purposes of determining both: (i) the total number of Votes Present, for the
purpose of determining whether a quorum is present; and (ii) the total number of
Votes Present that are cast ("Votes Cast") with respect to a matter (other than
in the election of the Board of Directors). In the absence of controlling
precedent to the contrary, StorageTek intends to treat abstentions in this
manner.
BROKER NON-VOTES
Shares of Common Stock held in street name that are present by proxy will
be considered as Votes Present for purposes of determining whether a quorum is
present. With regard to certain proposals, the holder of record of shares of
Common Stock held in street name is permitted to vote as it determines, in its
discretion, in the absence of direction from the beneficial holder of the shares
of Common Stock.
The term "broker non-vote" refers to shares held in street name that are
not voted with respect to a particular matter, generally because the beneficial
owner did not give any instructions to the broker as how to vote such shares and
the broker is not permitted under applicable rules to vote such shares in its
discretion because of the subject matter of the proposal. The Company intends to
count broker non-votes as Votes Present for the purpose of determining whether a
quorum is present. Broker non-votes will not be counted as Votes Cast with
respect to matters as to which the record holder has expressly not voted.
Accordingly, broker non-votes will have no effect upon the outcome of voting on
any of the business matters set forth in this Proxy Statement.
Based upon New York Stock Exchange rules, the exchange on which the Common
Stock is traded, the Company believes that Proposal 1 relating to the election
of Directors, Proposal 3 relating to an increase in the number of Stock Options
and Stock Appreciation Rights that may be granted under the Company's 1995
Equity Participation Plan to any single individual during a fiscal year, and
Proposal 4 relating to the ratification of the Company's independent accountants
are considered "discretionary" proposals. Accordingly, a record holder that is
not the beneficial owner of the Common Stock may vote such shares of Common
Stock held for the beneficial owner as such record holder deems appropriate,
unless voting instructions have been furnished by such beneficial owner to the
record holder within 10 days prior to the Annual Meeting. The remaining
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Proposals are not considered "discretionary" and brokerage firms may not vote
shares held for beneficial owners without specific instructions from the
beneficial owners.
VOTE REQUIRED FOR APPROVAL
Election of Directors. The eight persons who receive the highest number of
"FOR" votes will be elected as the Company's Directors. A vote to "WITHHOLD
FROM" any Director will be counted for purposes of determining the Votes
Present, but will have no other effect on the outcome of the vote on the
election of Directors.
Other Proposals. Other than the election of Directors, the vote required
for all other business matters set forth in this Proxy Statement is the
affirmative vote of a majority of the Votes Cast.
ANNUAL REPORT AND OTHER INFORMATION
Stockholders are referred to the Company's Annual Report on Form 10-K for
the fiscal year ending December 31, 1999, for information concerning the
Company's business and operations, but such Annual Report is 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, ONE STORAGETEK DRIVE, LOUISVILLE, COLORADO 80028-4315, TELEPHONE
(800) 785-2217, E-MAIL [email protected], IF YOU WOULD LIKE TO REQUEST SUCH
ADDITIONAL INFORMATION. THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES ARE LOCATED AT
ONE STORAGETEK DRIVE, LOUISVILLE, COLORADO 80028, TELEPHONE (303) 673-5151.
VOTING SECURITIES OF THE COMPANY
On the Record Date for the Annual Meeting, March 24, 2000, the Company had
issued, outstanding and entitled to vote 100,715,922 shares of its Common Stock.
Stockholders of record as of the close of business on the Record Date are
entitled to vote at the Annual Meeting and at all adjournments or postponements
thereof. Each stockholder of record is entitled to one vote for each share of
Common Stock held. In the election of Directors, each Stockholder of record 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 OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership, as that term is
defined in Rule 13d-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), of the Company's Common Stock as of March 24,
2000, the Record Date: (i) by all persons known by the Company to be beneficial
owners of more than 5 percent of the Company's outstanding Common Stock, based
on information obtained from Schedule 13D and 13G filings with the Securities
and Exchange Commission; (ii) by each current 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>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS
- ------------------------------------ ----------------- --------
<S> <C> <C>
Legg Mason, Inc. ........................................... 14,593,044(2) 14.49%
100 Light Street
Baltimore, MD 21202
Capital Research and Management Company..................... 12,605,000(3) 12.52%
333 South Hope Street
Los Angeles, CA 90071
Dodge & Cox................................................. 7,920,050(4) 7.86%
One Sansome Street
San Francisco, CA 94104
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS
- ------------------------------------ ----------------- --------
<S> <C> <C>
Iridian Asset Management LLC................................ 6,887,190(5) 6.84%
276 Post Road West
Westport, CT 06880
Capital Group International, Inc. .......................... 5,378,960(6) 5.34%
11100 Santa Monica Blvd
Los Angeles, CA 90025
James R. Adams.............................................. 18,551(7) *
William L. Armstrong........................................ 64,367(8) *
J. Harold Chandler.......................................... 39,627(9) *
Maurice F. Holmes........................................... 14,148(10) *
William R. Hoover........................................... 44,160(11) *
William T. Kerr............................................. 29,872(12) *
Robert E. La Blanc.......................................... 87,727(13) *
Robert E. Lee............................................... 40,240(14) *
Richard C. Steadman......................................... 97,969(15) *
Donald B. Davis............................................. 21,685(16) *
Robert S. Kocol............................................. 25,672(17) *
Victor M. Perez............................................. 394,837(18) *
Jean Reiczyk................................................ 173,765(19) *
Bruce S. Taafe.............................................. 42,292(20) *
David E. Weiss.............................................. 818,934(21) *
All current Directors and executive officers (20 persons) as
a group................................................... 1,451,706(22) 1.42%(23)
</TABLE>
- ---------------
* Less than 1 percent of the class.
(1) Unless otherwise indicated, the persons named have sole voting and
dispositive power over the shares shown as 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 Common Stock equivalents that will be settled in shares of Common
Stock, as disclosed in the footnotes. Share ownership by greater than 5
percent holders is based upon Schedule 13G filings, which reflect ownership
as of December 31, 1999, or 13D filings, which reflect ownership as of the
time of the filing.
(2) This information has been derived from a Schedule 13G, filed on February
14, 2000 with the Securities and Exchange Commission. Represents shares
that are beneficially owned by Legg Mason, Inc., a parent holding company.
The shares are held by various investment trusts or funds that are related
to Legg Mason, Inc. and by various clients of various investment trusts or
funds that are related to Legg Mason, Inc. Legg Mason, Inc. or its
subsidiaries have sole voting power with regard to 10,452,355 shares,
shared voting power with regard to 4,140,689 shares, and shared dispositive
power with regard to 14,593,044 shares.
(3) This information has been derived from a Schedule 13G, filed on February
14, 2000 with the Securities and Exchange Commission. Represents shares
that are beneficially held by Capital Research and Management Company, a
registered investment advisor, for its clients. Capital Research and
Management Company has sole dispositive power, but no voting power, with
respect to these shares.
(4) This information has been derived from a Schedule 13G, filed on February
14, 2000 with the Securities and Exchange Commission. Represents shares
that are beneficially owned by clients of Dodge & Cox, an investment
advisor, which clients may include investment companies registered under
the Investment Company Act and/or employee benefit plans, pension funds,
endowment funds or other institutional
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<PAGE> 8
clients. Dodge & Cox has sole voting power for 7,255,500 shares, sole
dispositive power for 7,920,050 shares and shared voting power for 76,100
shares.
(5) This information has been derived from a Schedule 13D filed on September
20, 1999 with the Securities and Exchange Commission. Represents shares
that are beneficially held by Iridian Asset Management LLC, LC Capital
Management, LLC, CL Investors, Inc., COLE Partners LLC; Iridian Partners
Fund, L.P.; Iridian Private Business Value Equity Fund, L.P.; David L.
Cohen and Harold J. Levy. Iridian Asset Management, LC Capital Management
LLC, CL Investors, Inc., David L. Cohen and Harold J. Levy each has shared
voting and dispositive power for 6,887,190 shares, each of whom
beneficially owns all such shares. Cole Partners LLC has shared voting and
dispositive power for 90,500 shares, which it beneficially owns. Iridian
Partners Fund, L.P. has shared voting and dispositive power for 63,600
shares, which it beneficially owns. Iridian Private Business Value Equity
Fund, L.P. has shared voting and dispositive power for 26,900 shares, which
it beneficially owns.
(6) This information has been derived from a Schedule 13G filed on February 11,
2000 with the Securities and Exchange Commission. Represents 5,378,960
shares beneficially owned by Capital Group International, Inc. ("CGI"),
which disclaims beneficial ownership of such shares. CGI is a parent
holding company of several investment management companies and several
investment advisers (the "CGI Subs"). The CGI Subs have sole voting power
with respect to 4,576,860 shares of Common Stock and sole dispositive power
with respect to 5,378,960 shares of Common Stock.
(7) Includes 9,667 shares of Common Stock issuable upon the exercise of options
held by Mr. Adams, which options are exercisable within 60 days of the
Record Date.
(8) Includes: (i) 36,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Armstrong, which options are exercisable within 60 days
of the Record Date; and (ii) 4,367 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Armstrong's resignation or other
termination from the Board.
(9) Includes: (i) 33,999 shares of Common Stock issuable upon the exercise of
options held by Mr. Chandler, which options are exercisable within 60 days
of the Record Date; and (ii) 3,628 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Chandler's resignation or other
termination from the Board. Mr. Chandler currently serves as a Director,
but is not standing for re-election at the Annual Meeting.
(10) Includes 11,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Holmes, which options are exercisable within 60 days of
the Record Date. Mr. Holmes currently serves as a Director, but is not
standing for re-election at the Annual Meeting.
(11) Includes: (i) 36,666 shares of Common Stock issuable upon the exercise of
options held by Mr. Hoover, which options are exercisable within 60 days of
the Record Date; and (ii) 2,494 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Hoover's resignation or other
termination from the Board.
(12) Includes: (i) 25,999 shares of Common Stock issuable upon the exercise of
options held by Mr. Kerr, which options are exercisable within 60 days of
the Record Date; and (ii) 2,673 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Kerr's resignation or other
termination from the Board.
(13) Includes 77,667 shares of Common Stock issuable upon the exercise of
options held by Mr. La Blanc, which options are exercisable within 60 days
of the Record Date.
(14) Includes: (i) 36,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Lee, which options are exercisable within 60 days of
the Record Date; and (ii) 2,072 Common Stock equivalents, which will be
settled in shares of Common Stock upon Mr. Lee's resignation or other
termination from the Board.
(15) Includes: (i) 77,667 shares of Common Stock issuable upon the exercise of
options held by Mr. Steadman, which options are exercisable within 60 days
of the Record Date; and (ii) 898 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.
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<PAGE> 9
(16) Includes: 21,685 shares of Common Stock issuable upon the exercise of
options held by Mr. Davis, which options are exercisable within 60 days of
the Record Date. Mr. Davis ceased to be an executive officer of the Company
on December 31, 1998.
(17) Includes 18,940 shares of Common Stock issuable upon the exercise of
options held by Mr. Kocol, which options are exercisable within 60 days of
the Record Date.
(18) Includes 369,920 shares of Common Stock issuable upon the exercise of
options held by Mr. Perez, which options are exercisable within 60 days of
the Record Date. Mr. Perez ceased to be an executive officer of the Company
on January 31, 2000, and ceased to be an employee of the Company on March
31, 2000.
(19) Includes 171,265 shares of Common Stock issuable upon the exercise of
options held by Mr. Reiczyk, which options are exercisable within 60 days
of the Record Date. Mr. Reiczyk ceased to be an executive officer and
employee of the Company effective March 22, 2000.
(20) Includes 39,906 shares of Common Stock issuable upon the exercise of
options held by Mr. Taafe, which options are exercisable within 60 days of
the Record Date. Mr. Taafe ceased to be an executive officer and employee
of the Company effective December 31, 1999.
(21) Includes 789,630 shares of Common Stock issuable upon the exercise of
options held by Mr. Weiss, which options are exercisable within 60 days of
the Record Date.
(22) Includes: (i) 1,269,934 shares of Common Stock issuable upon exercise of
options within 60 days of the Record Date held by 10 current Directors and
10 current non-Director executive officers; and (ii) 17,688 shares of
Common Stock to be issued upon the settlement of Common Stock equivalents
held by six current Directors and one current non-Director executive
officer.
(23) This percent of class is determined by dividing: (i) the number of shares
reported in the ownership table held by such 20 persons; by (ii) the number
of shares outstanding as of March 24, 2000 plus the options which are
exercisable within 60 days of the Record Date and the Common Stock
equivalents held by such 20 persons.
MEMBERS OF THE BOARD OF DIRECTORS
JAMES R. ADAMS; AGE 60; RETIRED CHAIRMAN, TEXAS INSTRUMENTS INC.
Mr. Adams has been a Director since 1999. He is retired. From July 1996 to
April 1998, he served as Chairman of Texas Instruments Inc., a semiconductor
company and designer and supplier of digital signal processing and analog
technologies. From August 1995 to June 1996, he was a private investor. Prior to
that time, from 1992 to August 1995, he served as Group President, SBC
Communications Inc., a communications company, and from 1988 to 1992, he served
as President and Chief Executive Officer of Southwestern Bell Telephone Co. Mr.
Adams serves as a director of Texas Instruments, Inc.; Prodigy Communications
Corp. and Inet Technologies, Inc.
WILLIAM L. ARMSTRONG; AGE 63; CHAIRMAN, CHERRY CREEK MORTGAGE COMPANY
Mr. Armstrong has been a Director since 1991. He has served as Chairman of
Cherry Creek Mortgage Co., a mortgage company, since 1991; Chairman of El Paso
Mortgage Co. since 1993; Chairman of Centennial State Mortgage Co. since 1994;
and Chairman of Transland Financial Services, Inc. since 1996. He was Chairman
of Frontier Real Estate from 1994 to 1999. Mr. Armstrong served as a United
States Senator for the State of Colorado from 1979 to 1991. Mr. Armstrong serves
as a director of Provident Companies, Inc., Helmerich & Payne, Inc., and
Oppenheimer Funds to the extent they are based in Denver, Colorado.
J. HAROLD CHANDLER; AGE 50; CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
UNUM PROVIDENT CORP.
Mr. Chandler has been a Director since 1997, although he is not standing
for re-election at the Annual Meeting. In June 1999, Mr. Chandler became
President and Chief Operating Officer of Unum Provident
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<PAGE> 10
Corp., a holding company of insurance subsidiaries. In November 1999, he became
the Chairman, President and Chief Executive Officer of Unum Provident Corp.
Prior to that and since 1996, Mr. Chandler was Chairman, President and Chief
Executive Officer of Provident Companies, Inc., a holding company of insurance
subsidiaries. From 1993 to 1996, Mr. Chandler was President and Chief Executive
Officer of Provident Companies, Inc. From 1991 to 1993, Mr. Chandler served as
President of the Mid-Atlantic Banking group of NationsBank Corp. Mr. Chandler
serves as a director of Unum Provident Corp., Herman Miller, Inc. and AmSouth
Bancorporation.
MAURICE F. HOLMES; AGE 56; PROFESSOR, PRACTICE OF ENGINEERING SYSTEMS AND
MANAGEMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Mr. Holmes has been a Director since 1998, although he is not standing for
re-election at the Annual Meeting. Since January 1, 1999, Mr. Holmes has served
as The Professor of the Practice of Engineering Systems and Management at the
Massachusetts Institute of Technology, a private university. From 1996 to 1998,
Mr. Holmes served as a Corporate Vice President and the Chief Engineer of Xerox
Corp., a document management company. From 1992 to 1995, Mr. Holmes served as
Corporate Vice President and President of the Office Document Systems Division
of Xerox Corp. Mr. Holmes joined Xerox Corp. in 1972 and served in various
capacities between 1972 and 1992.
WILLIAM R. HOOVER; AGE 70; CHAIRMAN OF THE EXECUTIVE COMMITTEE, COMPUTER
SCIENCES CORP.
Mr. Hoover has been a Director since 1995. He has served as Chairman of the
Executive Committee of the Board of Directors of Computer Sciences Corp., a
provider of information technology services, since 1997. From 1972 to 1997, Mr.
Hoover served as Chairman of the Board of Computer Sciences Corp. From 1972 to
1995, Mr. Hoover also served as Chief Executive Officer and President of
Computer Sciences Corp. Mr. Hoover serves as a director of Computer Sciences
Corp., Merrill Lynch & Co., Inc. and Rofin-Sinar Technologies, Inc.
WILLIAM T. KERR; AGE 58; CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MEREDITH CORP.
Mr. Kerr has been a Director since 1998. He has served as Chairman and
Chief Executive Officer of Meredith Corp., a media and marketing company, since
January 1998. From January 1997 to December 1997, Mr. Kerr served as President
and Chief Executive Officer of Meredith Corp., and from May 1994 to December
1996, 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 of Meredith Corp. Mr. Kerr serves as a director of
Meredith Corp., Principal Mutual Life Insurance Company and Maytag Corp.
ROBERT E. LA BLANC; AGE 66; 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 serves as a director of Chartered Semiconductor Manufacturing, Ltd.,
Salient 3 Communications, Inc., Titan Corp., Tribune Company, and a family of
Prudential Mutual Funds.
ROBERT E. LEE; AGE 64; PRESIDENT, GLACIER PROPERTIES, INC.
Mr. Lee has been a Director since 1989. Since 1986, he has served as
President of Glacier Properties, Inc., a private investment firm. Since 1996, he
has served as the Executive Director Emeritus of The Denver Foundation, a
community foundation, and was the Foundation's Executive Director from 1989 to
1996. Mr. Lee retired as Chairman of First Interstate Bank of Denver in 1989.
Mr. Lee serves as a director of Meredith Corp., Source Capital Corp., ING North
American Insurance Holdings, Inc., and Financial Investors Trust.
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RICHARD C. STEADMAN; AGE 67; PRIVATE INVESTOR
Mr. Steadman has been a Director since 1970 and has served as Lead
Independent Director since January 2000. Mr. Steadman previously served as
Chairman of the Board of National Convenience Stores, Inc., a retail chain,
until his retirement in 1995. Mr. Steadman has been a private investor since
1981.
DAVID E. WEISS; AGE 56; 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. On January 28, 2000, Mr. Weiss recommended that the Board of
Directors ask him to resign as Director, Chairman of the Board, President and
Chief Executive Officer. The Board accepted Mr. Weiss' proposal and asked him to
resign from all such positions upon the election of a successor to the positions
or at such earlier date as the Board deems appropriate.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 11 meetings during fiscal 1999. Each Director
who is standing for re-election attended at least 75 percent of the meetings of
the Board and the committees of the Board on which he served during fiscal 1999.
During fiscal 1999, the Board of Directors had three standing committees: an
Audit Committee, a Governance and Nominating Committee, and a Human Resources
and Compensation Committee. In January 2000, a special Chief Executive Officer
("CEO") Search Committee was formed and Mr. Steadman was elected Lead
Independent Director with the principal responsibilities of coordinating the
activities of the independent directors and providing continuity between
management and the Board during the CEO search.
AUDIT COMMITTEE
The Audit Committee consists of Directors Steadman (Chair), Adams, Hoover,
Kerr and La Blanc. Harrison Shull was a member of the Audit Committee until May
20, 1999, the day he ceased to be a Director of the Company. None of the current
members of the Audit Committee is, or has ever been, an employee of the Company.
The Audit Committee held five meetings during fiscal 1999. The principal
functions of the Audit Committee are to review the arrangements for the
independent audit, as well as the results of the independent audit engagement;
to review audit plans and audit findings of the Company's internal auditors; to
review internal control matters; to review the appropriateness of significant
accounting policies utilized by the Company; and to monitor the Company's
financial reporting activities.
GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee consists of Directors Armstrong
(Chair), Hoover and Lee. Stephen J. Keane was a member of the Governance and
Nominating Committee until May 20, 1999, the day he ceased to be a Director of
the Company. The Governance and Nominating Committee makes recommendations to
the Board of Directors regarding individuals for nomination as Director. None of
the current members of the Governance and Nominating Committee is, or ever has
been, an employee of the Company. The Governance and Nominating Committee met
once during fiscal 1999. The principal function of the Governance and Nominating
Committee is to identify and propose potential candidates for election to the
Board. The Governance and Nominating Committee develops its own nominations and
receives suggestions for nominees submitted by stockholders. The Committee also
considers issues relating to corporate governance, including assessing the
Board's performance, studying the size, composition, organization and structure
of the Board, and the membership of the committees of the Board.
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The Governance and Nominating Committee will consider nominees recommended
by stockholders for possible inclusion on the Company's slate of nominees. Such
recommendations should be directed to the Chair of the Governance and Nominating
Committee at the Company's principal executive offices in Louisville, Colorado.
The Governance and Nominating Committee may determine, in its sole discretion,
whether to include any stockholder nominee in the Board of Directors'
recommended slate of Director candidates.
Under the Company's Bylaws, nominations for Directors may be made from the
floor at an annual meeting 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 Annual Meeting
at which Directors are to be elected. In the event that less than 70 days'
notice or prior public disclosure of the date of an annual meeting is 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 Annual Meeting was mailed or such public
disclosure was made. The 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 1934 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 an annual
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") consists of Directors Lee (Chair), Armstrong, Chandler and Holmes.
Mr. Keane was a member of the Human Resources and Compensation Committee until
May 20, 1999, the day he ceased to be a Director of the Company. None of the
current members of the Compensation Committee is, or ever has been, an employee
of the Company. The Compensation Committee held eight meetings during fiscal
1999. The principal functions of the Compensation Committee are: to evaluate the
performance of executive management; to review compensation policies for the
officers and other employees; to review succession planning; to administer and
determine awards under the Company's stock and stock option, bonus and other
incentive programs; and to monitor the Company's compliance with its internal
diversity program and federal, state and local equal employment opportunity laws
and regulations.
CEO SEARCH COMMITTEE
The CEO Search Committee consists of Directors La Blanc (Chair), Adams and
Lee. The CEO Search Committee was formed in January 2000 and thus no meetings
were held during 1999. The role of the CEO Search Committee is to identify and
present for consideration by the Board of Directors one or more candidates to
fill the role(s) of Chairman of the Board, President and/or Chief Executive
Officer.
DIRECTOR COMPENSATION
CASH COMPENSATION AND BENEFITS
The Company pays each Director who is not an employee of the Company a
standard annual retainer of $27,000; provided, however, that the Lead
Independent Director is paid an additional retainer of $5,000 per month. The
chair of each committee is paid an additional annual retainer of $5,000. All
non-employee Directors are paid an additional fee of $1,000 for each meeting of
the Board attended and each committee meeting attended. Directors are also
reimbursed for their travel expenses incurred on the Company's business and
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. No such special requests
were made during the fiscal year ended December 31, 1999, and, therefore, no
such payments were made. Non-employee Directors may elect to defer receipt of
all or a
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portion of their cash compensation. Non-employee Directors may also receive
limited reimbursement for certain medical and dental coverage.
STOCK IN LIEU OF FEES
To align the non-employee 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. The Board has adopted stock ownership guidelines
for Directors, including a minimum ownership threshold of 2,500 shares of Common
Stock or Common Stock equivalents. A non-employee Director who has not achieved
the ownership threshold will receive a minimum of 50 percent of his or her
annual retainer in the form of Common Stock or Common Stock equivalents until
such time as he or she has achieved the minimum stock ownership goal.
STOCK OPTIONS
The Company has a Stock Option Plan for Non-employee Directors (the
"Director Plan"). Under the Director Plan, the Company has granted non-employee
Directors non-qualified stock options to purchase shares of Common Stock, at an
exercise price equal to 100 percent of the fair market value of the Common Stock
on the date of grant, on a predetermined schedule. All options expire 10 years
from the date of grant, unless earlier terminated pursuant to the provisions of
the Director Plan. From time to time, the Director Plan has been amended, so
that the actual grant amounts and timing of grants is dependent upon when a
Director was first elected to the Board. In June 1998, StorageTek declared a
two-for-one split of its Common Stock. Outstanding options at that time were
adjusted for the split. Following the stock split, the Board of Directors
determined that the number of shares subject to each option to be granted in the
future under the Director Plan should not be adjusted for the split; however,
any outstanding grants made prior to June 1998 were automatically adjusted for
the split.
Under the Director Plan, as currently in effect, each non-employee 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 individual
remains a Director of the Company.
All non-employee Directors elected prior to May 21, 1997 have been granted
an additional option to purchase 36,000 shares of the Company's Common Stock on
the third anniversary of their first election or appointment to the Board (the
"Additional Option"). 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 individual remains a Director of the Company.
In lieu of the Additional Option for 36,000 shares, each Director elected
after May 22, 1998, receives an annual stock option to purchase 4,000 shares of
the Company's Common Stock (the "Annual Option") on his or her first election or
appointment to the Board and each year thereafter through his or her tenth
anniversary of service. The Annual Option becomes exercisable in three equal
installments on the first, second and third anniversaries of the date of grant,
provided that the individual remains a Director of the Company.
On each Director's eleventh anniversary and on each anniversary of service
thereafter, regardless of the date of initial appointment to the Board, the
Director receives an Annual Option of 5,000 shares.
Because Messrs. Chandler and Kerr were elected between May 21, 1997 and May
22, 1998, their grants of stock options differ from the Director Plan currently
in effect. Upon their respective appointments to the Board, Messrs. Chandler and
Kerr each received an option to purchase 25,000 shares. 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
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anniversary dates following the date of grant, provided that the individual
remains a Director of the Company. On May 20, 1999, (a) Mr. Chandler, who was
first elected to the Board on May 22, 1997, received an additional option to
purchase 12,000 shares; and (b) Mr. Kerr, who was first elected to the Board on
May 21, 1998, received an additional option to purchase 8,000 shares. The
12,000-share option awarded to Mr. Chandler and the 8,000-share option awarded
to Mr. Kerr each become exercisable over a period of three years, in equal
installments. After 1999 through such time as he remains a Director, Mr. Kerr
will receive an annual option to purchase 4,000 shares, until his eleventh
anniversary, at which time he will receive an annual option to purchase 5,000
shares.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, eight Directors are to be elected to serve until the
next Annual Meeting or until their respective successors are elected and
qualified. The Board of Directors' nominees all currently serve as Directors.
Messrs. Chandler and Holmes are not standing for re-election. The eight nominees
of the Board of Directors are set forth below. Unless contrary instructions are
given, it is intended that a furnished proxy will be voted in favor of each of
the eight nominees listed below. A vote to "WITHHOLD FROM" any Director will be
counted for purposes of determining the Votes Present, but will have no other
effect on the outcome of the vote on the election of Directors.
If, at or prior to the time of the Annual Meeting, one or more of the
nominees has become unavailable to serve, any shares represented by a proxy in
the accompanying form will be voted for the remaining nominees and for any
substitute nominee or nominees designated by the Board of Directors. The Board
of Directors knows of no reason why any nominees for Director will be
unavailable or unable to serve.
On January 28, 2000, Mr. Weiss recommended that the Board of Directors ask
him to resign as Director, Chairman of the Board, President and Chief Executive
Officer. The Board accepted Mr. Weiss' proposal and asked him to resign from all
such positions upon the election of a successor to the positions or at such
earlier date as the Board deems appropriate.
NOMINEES
The following individuals have been selected by the Board of Directors as
the Company's nominees to serve as the Company's Board of Directors, until their
successors are properly nominated and elected:
JAMES R. ADAMS; WILLIAM L. ARMSTRONG; WILLIAM R. HOOVER; WILLIAM T.
KERR; ROBERT E. LA BLANC; ROBERT E. LEE; RICHARD C. STEADMAN; AND DAVID
E. WEISS.
For biographical information regarding each of these nominees, see "Members
of the Board of Directors."
VOTE REQUIRED
The eight persons who receive the highest number of "FOR" votes will be
elected as the Company's Directors. Directors are elected by a plurality of the
Votes Cast. See "PROCEDURAL MATTERS" above. Proxies received by the Company will
be voted "FOR" all of the above listed nominees, unless specifically directed
otherwise.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NAMED NOMINEES AS DIRECTORS OF THE COMPANY.
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PROPOSAL 2
AMENDMENT TO THE
1995 EQUITY PARTICIPATION PLAN TO INCREASE
THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
The Board of Directors has approved, subject to stockholder approval, an
amendment to Section 4.1 of the Company's 1995 Equity Participation Plan, as
amended (the "Equity Plan"), to reserve an additional 10,000,000 shares of
Common Stock for issuance thereunder. The Board of Directors recommends that the
stockholders approve, effective as of the date hereof, the following amendment
to Section 4.1 of the Equity Plan:
The first sentence of Section 4.1 shall be deleted in its entirety and
replaced, in lieu thereof, with the following:
"Twenty Three Million Five Hundred Fifty Thousand (23,550,000) shares
of Common Stock are authorized for issuance under the 1995 Plan in
accordance with the provisions of the 1995 Plan and subject to such
restriction or other provisions as the Committee may from time to time deem
necessary or appropriate."
The Equity Plan permits the Company to offer various types of stock-based
incentive programs to the Company's employees, non-employee Directors and
consultants (the "Participants"). In May 1995, the stockholders approved the
Equity Plan and the reservation of 4,400,000 shares for issuance thereunder.
Subsequently, stockholders approved share authorization increases of 4,400,000
shares in 1997 and 4,750,000 shares in 1999.
As of March 24, 2000, 1,646,139 shares had been issued under the Plan;
11,322,730 shares were subject to outstanding stock options or Common Stock
equivalents; and 581,131 shares were reserved and available for future grant
under the Equity Plan.
REASON FOR THE AMENDMENT
The Board believes that the Equity Plan is an important factor in
attracting, retaining, motivating and rewarding dedicated and skilled employees,
consultants and non-employee Directors. The Board further believes that the
proposed increase in the shares reserved for issuance under the Equity Plan is
critical to attracting a new Chief Executive Officer and/or President and
providing a necessary compensation tool to retain key employees and attract
qualified new employees. A number of new key management employees have been, or
are anticipated to be, hired in fiscal year 2000. The Company believes that it
is critical that it has a sufficient number of shares to attract and retain new
executive officers and key management employees.
In order to more closely link the interests of the Participants with those
of the stockholders, the Board of Directors, on March 9, 2000, adopted
resolutions amending two provisions of the Equity Plan: (i) to eliminate the
Board's or any Board Committee's power pursuant to Section 3.1(ix) of the Equity
Plan to reduce the exercise price of any Stock Option or Stock Appreciation
Right ("SAR") if the Fair Market Value of the Common Stock has declined since
the date such option was granted; and (ii) to amend Section 8.1 of the Equity
Plan to eliminate the Board's or any Board Committee's authority to grant
non-qualified stock options with exercise prices below Fair Market Value.
Because these amendments reduced the Committee's authority with regard to the
Equity Plan, neither amendment required stockholder approval. The Board believes
that the two provisions, prior to their amendment, could have potentially
rewarded Participants, without ensuring that a concomitant benefit would accrue
to stockholders, in situations in which the value of the Company's Common Stock
has not increased. The Committee has never used its authority under the Equity
Plan to reduce the exercise price of any stock option or SAR or to grant
non-qualified options with exercise prices below Fair Market Value.
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SUMMARY OF THE EQUITY PLAN
A general description of the basic features of the Equity Plan is outlined
below. This description is qualified in its entirety by reference to the full
text of the Equity Plan, a copy of which is available for free by calling the
Company's Investor Relations Department at (800) 785-2217.
Purpose. The purpose of the Equity Plan is to direct the attention and
efforts of Participants to the achievement of the performance objectives of the
Company and to align the interests of Participants and stockholders. The Equity
Plan is designed to retain, reward and motivate the Participants by providing an
opportunity for equity investment in the Company.
Types of Awards. Under the Equity Plan, the following types of equity
awards (collectively, "Equity Awards") can be made:
- Incentive Stock Options: stock options to purchase Common Stock to
employees who satisfy the requirements of Section 422 of the Internal
Revenue Code of 1986, as it may be amended (the "Code");
- Non-qualified Stock Options: stock options to purchase Common Stock that
do not satisfy the requirements of the Code relating to incentive stock
options. (Incentive Stock Options and Non-Qualified Options are referred
to collectively as "Stock Options");
- Restricted Stock: awards of Common Stock that are subject to certain
vesting conditions or restrictions on transferability that lapse after
specified employment periods or the attainment of performance objectives
established by the Board or the Human Resources and Compensation
Committee of the Board;
- Stock Appreciation Rights in connection with shares of Common Stock
subject to any Stock Option;
- Common Stock and Common Stock equivalents under the Company's Management
by Objective ("MBO") bonus plan ("MBO Payments");
- Common Stock that is not subject to restrictions on transferability;
- Common Stock equivalents that are subject to restrictions on
transferability that generally lapse upon termination of service; and
- Other types of stock-based incentive compensation awards established from
time to time by the Board in accordance with the provisions of the Equity
Plan.
Administration. The Equity Plan may be administered by the Board or a
committee of the Board. Currently, the Human Resources and Compensation
Committee of the Board (the "Committee") administers the Equity Plan. The Equity
Plan vests broad powers in the Committee to administer and interpret the Equity
Plan, including the authority to select the Participants from employees,
Directors and consultants; determine the extent of MBO Payments; determine the
amount of the grants to the Participants; prescribe terms and conditions not
otherwise specified by the Equity Plan for each grant or award under the Equity
Plan; and amend or modify such terms and conditions, including accelerating
vesting and waiving forfeiture restrictions. However, such action may not
adversely affect the rights or obligations of any Participant's outstanding
awards without the Participant's consent.
Eligibility. The Committee may grant Equity Awards to: employees, including
officers; non-employee Directors; and consultants of the Company and any of its
subsidiaries ("Participants"). The determination to grant awards and the
selection of actual Participants in the Equity Plan are discretionary.
Therefore, it is not possible to determine the number of individuals who will
actually receive awards and become Participants in the Plan. As of the Record
Date, the Company had approximately 8,000 employees, consultants and non-
employee Directors eligible to receive Equity Awards.
Amendment and Termination. The Equity Plan may be amended or discontinued
by the Board at any time, unless stockholder approval is required or desirable
under applicable law or regulation, including federal
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and state corporate laws, securities laws, tax laws and rules of the New York
Stock Exchange. However, such action may not adversely affect the rights or
obligations of any Participant under outstanding awards without the
Participant's consent.
Term of Plan. The Equity Plan will expire by its terms on March 7, 2005,
unless terminated by the Board before that date. Equity Awards outstanding on
the date of the expiration or termination of the Equity Plan will continue to
remain outstanding in accordance with their respective terms.
Stock Subject to the Plan. Under the Equity Plan, shares of Common Stock
may be issued in connection with Stock Options, Restricted Stock Awards, SARs,
MBO Payments or other awards of Common Stock or Common Stock equivalents. As of
the Record Date, there were 13,550,000 shares authorized for issuance under the
Equity Plan, of which 1,646,139 had been issued and 11,322,730 were subject to
outstanding stock options or Common Stock equivalents and 581,131 shares were
reserved for future grant under the Equity Plan. If Proposal 2 is approved by
the stockholders, there will be a total of 23,550,000 shares authorized for
issuance under the Equity Plan.
The maximum number of shares of Common Stock reserved for issuance under
the Equity Plan may be increased by approval of the Board and (if required) the
stockholders of the Company. Equity Awards that are granted will reduce the
maximum number of shares available for issuance under the Equity Plan. Equity
Awards that terminate unexercised or are forfeited will generally become
available for future grants under the Equity Plan.
Adjustments upon Changes in Capitalization. In the event any change, such
as a stock split or dividend, is made in the Company's capitalization, which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, the number of shares
reserved for issuance under the Equity Plan and the exercise price of each
outstanding Stock Option and SAR will be adjusted. In the event of a proposed
dissolution or liquidation of the Company, all outstanding, unexercised Stock
Options and SARs will terminate immediately prior to the consummation of such
proposed action and Common Stock equivalents will convert into shares of Common
Stock. The Committee may accelerate the exercisability of Stock Options or SARs
in such event and may set a fixed date on which all outstanding awards under the
Equity Plan will terminate.
Reorganization of Company. In the event the Company is merged or
consolidated with another corporation, or if all or substantially all of the
assets are acquired by any other corporation or business entity, each
outstanding Stock Option, SAR and Common Stock equivalent may be assumed or
substituted by the successor corporation. The Committee may, in lieu of such
assumption or substitution of Stock Options and SARs, accelerate the exercise
dates and provide for a 30-day exercise period after which they shall terminate,
and make Common Stock equivalents convertible into shares of Common Stock.
Tender Offers and Acquisitions. If any person or entity (other than the
Company or an entity affiliated with the Company) makes a tender offer or
exchange offer for all or any part of the Common Stock or other capital shares
of the Company and purchases part of the Common Stock or other capital shares
tendered to it, and the Board opposes or does not affirmatively recommend
acceptance of the tender offer or exchange offer, then: (i) all Stock Options
with respect to which no SARs have been granted, and all Stock Options with
respect to which SARs have been granted that have been outstanding for at least
six months, shall become immediately exercisable; (ii) all restrictions with
respect to outstanding Restricted Stock Awards will immediately lapse; and (iii)
all Common Stock equivalents will convert into shares of Common Stock as of the
date determined by the Committee.
Fair Market Value. The fair market value of a share of Common Stock is
determined by the Committee and is equal to the price of a share of Common Stock
as published in The Wall Street Journal as the closing price for the last
trading day prior to the date of grant. The price published in The Wall Street
Journal as the closing price on the New York Stock Exchange for March 24, 2000,
the Record Date, was $14.5625 per share.
Stock Options. The Committee may grant either Incentive Stock Options or
Non-Qualified Options to Participants, except that only employees may be granted
Incentive Stock Options. The Committee may grant both an Incentive Stock Option
and a Non-Qualified Option to a Participant, in tandem or on different dates.
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Incentive Stock Options are subject to limitations under the Internal Revenue
Code restricting the aggregate dollar value exercisable during a calendar year
by a Participant. The terms and conditions of Stock Options set forth in the
Equity Plan are described generally below.
(1) Exercise Price. The exercise price for an Incentive Stock Option
will not be less than 100 percent of the fair market value of the Common
Stock on the date of grant. Incentive Stock Options granted to a
Participant who owns stock having 10 percent or more of the combined voting
power of all classes of stock of the Company or of any parent or subsidiary
must have an exercise price equal to at least 110 percent of the fair
market value of the Common Stock on the date of grant. The exercise price
for a Non-Qualified Stock Option may be determined by the Committee, but in
no event will the exercise price be less than 100 percent of the fair
market value of the Common Stock on the date of grant.
(2) Term and Exercisability. The term of Stock Options will be fixed
by the Committee, but will not exceed 10 years from the date of grant. A
Stock Option may be exercisable immediately, or may become exercisable in
installments during its term, as may be determined by the Committee, except
that no Stock Option with respect to which SARs have been granted may be
exercised during the six-month period immediately following the date of
grant.
(3) Manner of Exercise and Purchase. A Stock Option may be exercised
by delivering a notice of exercise to the Secretary of the Company, at the
Company's principal office in Louisville, Colorado, and paying the full
amount of the exercise price. The exercise price may be paid: (i) in cash
or by check; (ii) in shares of Common Stock having an aggregate fair market
value on the date of exercise equal to the payment required; (iii) by
delivering irrevocable instructions to a broker to deliver to the Company
the appropriate amount of proceeds of the sale or loan of shares
exercisable (a "cashless exercise"); (iv) by delivering irrevocable
instructions to a broker or other third party acceptable to the Company to
hold the shares being exercised as collateral for a loan to the Participant
in an amount equal to the payment required; (v) by reducing an amount of
any Company liability owed to the Participant; (vi) any combination of the
foregoing methods of payment; or (vii) in such other form of consideration
and method of payment to the extent permitted by applicable laws, rules and
regulations and the Stock Option agreement.
(4) Tax Withholding. Upon exercising a Stock Option, a Participant
must also pay the Company any amount the Company is required to collect for
tax withholding or other purposes. The Committee may, in its sole
discretion, grant the Participant the right to elect to pay all or a
portion of any required tax withholding by transferring to the Company, or
by having the Company withhold shares issuable upon exercise of the Stock
Option, a number of shares of Common Stock having a value equal to the
amount of required withholding.
(5) Incentive Stock Option Value Limitation. The aggregate fair market
value (determined on the date of grant) of shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first time
by a Participant in any calendar year (under the Equity Plan or other plans
of the Company, its parent or subsidiaries) may not exceed $100,000.
(6) Notice of Sale of Incentive Stock Option Stock. In the event that
any Participant makes a disqualifying disposition of any Common Stock
acquired upon exercise of an Incentive Stock Option (see "Federal Income
Tax Consequences" below), the Participant must send written notice to the
Company indicating the date of such disposition, the number of shares
disposed of, the amount of proceeds received from the disposition, and any
other information relating to the disposition that the Company may
reasonably request, and must make appropriate arrangements with the Company
for any required tax or other withholding.
(7) Stockholder Rights. A Participant does not have any rights of a
stockholder with respect to any shares of Common Stock covered by a Stock
Option until the Participant has exercised the Stock Option, paid the full
amount of the exercise price, and become the record holder of the shares.
(8) Effect of Termination on Stock Options. The Committee may specify
the effect of the termination of service on Stock Options in the option
agreement between the Company and the
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<PAGE> 19
Participant. Generally, Stock Options granted under the Equity Plan will
terminate according to the following guidelines: (i) Incentive Stock
Options remain exercisable for 90 days following the Participant's
termination date, but the Incentive Stock Option agreement may provide that
the option will convert into a Non-Qualified Option on the ninety-first day
following the termination date; (ii) if termination is due to death or if
the Participant dies within three months following his or her termination,
and the Participant was an employee for six years or more, Stock Options
may be exercised, to the extent vested, through the expiration date; (iii)
if a Participant becomes disabled while employed by the Company, and the
Participant was an employee for six years or more, Stock Options may be
exercised, to the extent vested, through the expiration date; (iv) if
termination is due to a reduction in force, the Stock Option may be
exercised, to the extent vested, for six months following the termination
date; (v) if a Participant retires and was employed for six years or more,
the Stock Option may be exercised, to the extent vested, through the
expiration date; (vi) if a Participant is terminated for "cause" or if the
Participant is in material breach of any legal obligations to the Company,
the Stock Options will terminate on the date of termination of employment;
(vii) if a Participant's service terminates for any reason other than
listed in items (ii) through (vi), the Stock Option may be exercised, to
the extent vested, for a period of 90 days after such termination. For
purposes of the Equity Plan, "cause" is defined as performance or conduct
problems resulting in discharge of service from the Company. In no event
will the post-termination exercise period extend beyond the original
expiration date of the Stock Option.
In addition, with respect to all Stock Option and SARs granted on or
after March 4, 1998, if, within six months of termination of service to the
Company, a Participant engages in an activity in competition with the
Company, or harmful or contrary to the interest of the Company, including,
without limitation, accepting employment with a competitor: (i) Stock
Options or SARs still held by the Participant will immediately cease to be
exercisable and will be canceled; and (ii) the Participant must sell back
to the Company at the exercise price paid for any shares of Common Stock
still held that were acquired after termination of service and return any
cash received upon exercise of an SAR. If the Participant terminates from
the Company for any reason except death, disability or retirement, then the
Participant must return to the Company any gains realized upon the sale of
shares of Common Stock acquired through the exercise of Stock Options or
the exercise of any SARs within the six months prior to termination from
the Company. The Company may hold shares of Common Stock issued upon
exercise of Stock Options after termination of employment in escrow for a
period of up to six months after the date of termination.
(9) Transferability. Except as may otherwise be specified by the
Committee, no right or interest of any Participant in a Stock Option
granted under the Equity Plan is assignable or transferable during the
lifetime of the Participant, either voluntarily or involuntarily. In the
event of a Participant's death, his or her rights and interests in any
Stock Option will be transferable by testamentary will or the laws of
descent and distribution, and exercise of any such Stock Option may be
made, until such Stock Option terminates, by the Participant's legal
representatives, heirs and legatees. If permitted by applicable laws, the
Committee may permit the transfer of Stock Options either generally or
under specified circumstances.
Restricted Stock. The Committee may grant Restricted Stock Awards in shares
of Common Stock to Participants and require the Participant to pay an amount
equal to the par value of the shares of Common Stock that are the subject of the
Restricted Stock Award. Restricted Stock Awards are subject to forfeiture
restrictions, as follows: (i) for the period of time set by the Committee; or
(ii) until performance goals established by the Committee at the time of grant
are satisfied. During this period, the Participant may not assign or transfer
the shares, either voluntarily or involuntarily. The Committee may require that
a legend be placed on the stock certificates representing the shares of
restricted stock and may require that the stock certificates be held in escrow.
A recipient of a Restricted Stock Award will have all the rights of a holder of
shares of Common Stock with respect to the shares subject to the award upon
becoming the holder of record. These rights are subject to restrictions on
transferability and the right of the Company to hold the shares in escrow. All
rights as a holder of shares of Common Stock will cease upon a forfeiture of the
shares.
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<PAGE> 20
Stock Appreciation Rights. An SAR is the right to receive a payment from
the Company equal to the difference between the fair market value of one or more
shares of Common Stock subject to a Stock Option and the exercise price of such
shares under the terms of the Stock Option. The Committee may grant an SAR to a
Participant in connection with all or any portion of the shares of Common Stock
subject to a Stock Option. An SAR with respect to an Incentive Stock Option must
be granted at the time of the Stock Option grant. An SAR with respect to a
Non-Qualified Option may be granted either at the time the option is granted or
at a later time during the term of the option. An SAR will have a term equal to
the initial term or remaining term, as the case may be, of the related Stock
Option. Upon exercising an SAR, a Participant will receive from the Company the
amount equal to the excess of the fair market value of the shares of Common
Stock as to which the SAR is exercised over the exercise price for the related
Stock Option, and the related Stock Option will terminate with respect to such
shares. Conversely, upon exercising a Stock Option, the related SAR will
terminate with respect to the shares purchased.
MBO Plan Awards. Under the Company's MBO plan, Participants selected by the
Committee may receive incentive compensation payments upon the attainment of
pre-established performance goals. The Committee may elect to pay all or a
portion of the MBO Payment in cash, shares of Common Stock or Common Stock
equivalents.
Director Stock and Common Stock Equivalents. Under the Equity Plan,
non-employee Directors may elect to receive all or a portion of their annual
retainer and meeting fees in shares of Common Stock or Common Stock equivalents.
The number of shares of Common Stock or Common Stock equivalents will be
determined by dividing (i) the dollar amount of the portion of the retainer and
meeting fees for the fiscal period that is to be paid in shares of Common Stock
or Common Stock equivalents by (ii) the fair market value of one share of Common
Stock as of the last day of such fiscal period, rounded up to the next full
number of shares. The annual retainer period begins on the date of the Annual
Meeting of Stockholders of the Company and will end on the day immediately
preceding the next Annual Meeting. As of the Record Date, six Directors had
elected to receive all or a portion of their compensation in the form of shares
of Common Stock or Common Stock equivalents.
Other Common Stock Awards. The Board, in its sole discretion, may establish
other incentive compensation arrangements under the Equity Plan pursuant to
which Participants may acquire shares of Common Stock or Common Stock
Equivalents.
Federal Income Tax Consequences. The following description of federal
income tax consequences is based upon current statutes, regulations and
interpretations. The description does not include foreign, state or local income
tax consequences.
(1) Incentive Stock Options. The Participant and the Company do not
incur any federal income tax as a result of the grant of an Incentive Stock
Option under the Equity Plan. The exercise of an Incentive Stock Option
will not result in any federal income tax consequences to the Company or
the Participant, except that an amount generally measured as the excess of
the fair market value of the shares acquired upon exercise of the Incentive
Stock Option, determined at the time of exercise, over the amount paid for
the stock by the Participant, will be an adjustment item for alternative
minimum tax purposes.
In the event of a disposition of stock acquired upon the exercise of
an Incentive Stock Option, the federal income tax consequences depend upon
how long the Participant has held the shares. If the Participant does not
dispose of the shares for a period of two years following the date of
grant, or for a period of one year following the date of exercise, then the
Participant will recognize a long-term capital gain or loss. The amount of
the long-term capital gain or loss will be equal to the difference between
(i) the amount realized on the disposition of the shares and (ii) the
exercise price at which shares were acquired. The Company is not entitled
to any compensation expense deduction under these circumstances.
If the Participant does not satisfy both of the foregoing
holding-period requirements, the Participant will be required to report as
ordinary income, in the year of disposition, an amount generally measured
as
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<PAGE> 21
the excess of (i) the fair market value of the shares at the time of
exercise of the Incentive Stock Option or, if lesser, the amount realized
on the disposition of such shares, over (ii) the exercise price for the
shares. Under these circumstances, the Company will be entitled to a
compensation expense deduction in an amount equal to the amount of income
that is reported by the Participant. The remainder of the gain recognized
on the disposition, if any, will be treated as capital gain to the
Participant.
(2) Non-Qualified Options. A Participant who receives a Non-Qualified
Option will not recognize any taxable income at the time of grant. Upon
exercise of the Non-Qualified Option, a Participant will recognize ordinary
income generally measured as the difference between (i) the fair market
value of the shares at the time of exercise of the Non-Qualified Option and
(ii) the exercise price for the shares. In the case of Participants who are
employees of the Company, any ordinary income so recognized will be
considered wages subject to applicable tax withholding.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Qualified Option for any
amounts included by a Participant as ordinary income.
(3) Stock Appreciation Rights. A Participant who receives an SAR will
not recognize any taxable income at the time of the grant. Upon the
exercise of an SAR, the Participant will realize compensation income at
that time and in the amount of the sum of cash and the fair market value of
any shares of Common Stock received by the Participant. In general, the
Company will be entitled to a compensation expense deduction for any
amounts included by a Participant as ordinary income in connection with an
SAR. Upon the sale of any shares of Common Stock acquired upon exercise of
an SAR, a Participant will realize a capital gain or loss based upon the
difference between the amount realized by the Participant upon such sale
and the amount previously included in the Participant's ordinary income
upon exercise of the SAR, which gain or loss will be short term or long
term depending on the holding period, and the Company will receive no
further deduction.
(4) Restricted Stock Awards. Upon receipt of a Restricted Stock Award,
a Participant may file an election under Section 83(b) of the Code within
30 days after receipt to include as ordinary income in the year of receipt
an amount equal to the fair market value of the shares received on the date
of receipt (determined as if the shares were not subject to any risk of
forfeiture), less any consideration paid for the shares. If the Section
83(b) election is made, any income recognized by a Participant who is also
an employee of the Company will be considered wages subject to applicable
tax withholding. In addition, the Participant will not recognize any
additional income when the restrictions on shares issued in connection with
the Restricted Stock Award lapse. At the time any such shares are sold or
disposed of, a Participant may realize long-term or short-term capital gain
or loss based upon the difference between the amount realized by the
Participant upon such sale or disposition and the amount previously
included in the Participant's ordinary income in connection with the
Restricted Stock Award and any consideration for the shares, which gain or
loss will be short term or long term depending upon the time lapsed between
receipt of the Restricted Stock Award and sale or disposition.
A Participant who does not make the Section 83(b) election at the time
a Restricted Stock Award is received will recognize ordinary income on the
date of the lapse of the restrictions in an amount equal to the fair market
value of the shares on that date, less any consideration paid for the
shares. At the time of a subsequent sale or disposition of any shares of
Common Stock issued in connection with a Restricted Stock Award as to which
of the restrictions have lapsed, a Participant will realize long-term or
short-term capital gain or loss based upon the difference between the
amount realized by the Participant upon such sale and the amount previously
included in the Participant's ordinary income in connection with the
Restricted Stock Award, which gain or loss will be short term or long term
depending upon the length of time between the date the restriction lapsed
and the date of sale or disposition.
Subject to the deduction limitation under Section 162(m) with respect
to compensation paid to certain Named Executive Officers, the Company will
be entitled to a compensation expense deduction for any amounts included by
a Participant as ordinary income as the result of a receipt of a Restricted
Stock Award.
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<PAGE> 22
(5) MBO Payments. A Participant who receives an MBO Payment under the
Equity Plan in the form of shares of Common Stock or cash will generally
recognize ordinary income at that time in an amount equal to the then fair
market value of the shares. Any income recognized by a Participant who is
also an employee of the Company will be considered wages subject to
applicable tax withholding. In general, the Company will be entitled to a
compensation expense deduction for any amounts included by the Participant
as ordinary income. Upon the sale of any shares of Common Stock acquired as
an MBO Payment under the Equity Plan, a Participant may realize a gain or
loss based upon the difference between the amounts realized by the
Participant upon such sale, and the amount previously included in the
Participant's ordinary income in connection with the shares, which gain or
loss will be short term or long term depending on how long the Participant
has held the shares, and the Company will receive no further deduction. A
Participant who receives an MBO Payment in the form of a Common Stock
Equivalent will be taxed as discussed below.
(6) Common Stock Equivalents. A Participant who receives Common Stock
equivalents will recognize compensation income at the time shares of Common
Stock credited to the Participant's account are distributed to the
Participant, in an amount equal to the then fair market value of the
distributed shares. In the case of a Participant who is also an employee of
the Company, such income will be treated as wages for tax withholding
purposes. At the time of a subsequent sale of the shares, the Participant
will recognize a long-term or short-term capital gain or loss based upon
the difference between the amount realized by the Participant upon such
sale, and the amount previously included in the Participant's ordinary
income in connection with the shares, which gain or loss will be short term
or long term depending upon the length of time between the date the shares
were distributed to the Participant and the date of sale. Subject to the
deduction limitation under Section 162(m) with respect to compensation paid
to certain Named Executive Officers, the Company will be entitled to a
compensation expense deduction for any amounts included by a Participant as
ordinary income as the result of a receipt of shares at the time the
Participant is taxed.
Section 162(m) Limits. In order for compensation in excess of $1,000,000
realized by any of the Named Executive Officers to be deductible by the Company,
IRS regulations require, among other things, that an option plan state the
maximum number of shares subject to options and SARs that can be granted during
a fiscal year to any one individual. The Equity Plan currently has a limit of
1,000,000 shares subject to Stock Options and SARs that can be granted to any
one individual per fiscal year of the Company. If Proposal 3 of this Proxy
Statement is adopted, the limit on Stock Options and SARs that may be granted in
any one fiscal year to any single individual will be increased from 1,000,000
shares to 2,000,000 shares (the "Individual Limit") except that a newly-hired
employee of the Company (a "New Hire") may be granted, in the fiscal year in
which he or she became a New Hire, Stock Options and Stock Appreciation Rights
to purchase shares at up to twice the Individual Limit.
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<PAGE> 23
PARTICIPATION IN THE EQUITY PLAN
Future grants of Stock Options, Restricted Stock Awards, SARs, MBO Payments
and other Common Stock awards and Common Stock equivalents under the Equity Plan
to employees, Directors and consultants are subject to the discretion of the
Committee, except for the election by certain non-employee Directors to receive
Common Stock or Common Stock equivalents in lieu of all or a portion of their
annual cash retainer and the election by certain officers to receive a portion
of their bonuses under the MBO plan. The following table contains information
with respect to the grant of awards under the Equity Plan to the Named Executive
Officers, to non-employee Directors, to all current Executive Officers as a
group and to all other employees as a group during fiscal 1999.
AMENDED PLAN BENEFITS
1995 EQUITY PARTICIPATION PLAN AWARDS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
NUMBER OF
NAME OF INDIVIDUAL AND POSITION OR IDENTITY OF GROUP DOLLAR VALUE(1) SHARES(2)
- ---------------------------------------------------- --------------- ---------
<S> <C> <C>
David E. Weiss.............................................. $ 8,066,162 278,343
Chairman of the Board, President and CEO
Donald B. Davis(3).......................................... 0 0
Corporate Vice President, Americas Field Operations
Robert S. Kocol............................................. 3,997,799 139,016
Corporate Vice President and Chief Financial Officer
Victor M. Perez(4).......................................... 7,960,467 275,182
Executive Vice President and Chief Operating Officer
Jean Reiczyk(5)............................................. 3,786,811 145,577
Corporate Vice President, Solutions Business Group
Bruce S. Taafe(6)........................................... 2,991,228 124,111
Vice President, International Field Operations
All current executive officers as a group (11 persons)...... 37,756,274 1,569,329
All current non-employee Directors as a group (9
persons)(7)............................................... 246,194 11,805
All other employees as a group (1,717 persons).............. 148,310,935 6,656,558
</TABLE>
- ---------------
(1) Represents aggregate exercise price of Stock Options, the fair market value
of restricted stock on the date of grant less the purchase price, and the
fair market value of the Common Stock and Common Stock equivalents on the
date of distribution.
(2) Represents the number of stock options and shares of Common Stock,
restricted stock and Common Stock equivalents.
(3) Mr. Davis ceased to be an executive officer of the Company on December 31,
1998; he ceased to be an employee of the Company on December 31, 1999.
(4) Mr. Perez ceased to be an executive officer of the Company on January 31,
2000; he ceased to be an employee on March 31, 2000.
(5) Mr. Reiczyk ceased to be an executive officer and employee of the Company on
March 22, 2000.
(6) Mr. Taafe ceased to be an executive officer and employee of the Company on
December 31, 1999.
(7) Two current non-employee Directors did not receive awards under the Equity
Plan during 1999. In addition to awards to the current non-employee
Directors as a group, 832 Common Stock Equivalents were granted in lieu of
fees to a non-employee Director prior to his retirement in May 1999.
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<PAGE> 24
VOTE REQUIRED
Approval of Proposal 2 to adopt a resolution to increase the number of
shares of Common Stock reserved under the Equity Plan by 10,000,000 shares
requires the affirmative vote of a majority of the Votes Cast. Proxies received
by the Company will be voted "FOR" this proposal unless a contrary vote is
specified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
ADOPT A RESOLUTION TO INCREASE BY 10,000,000 SHARES THE NUMBER OF SHARES OF
COMMON STOCK RESERVED PURSUANT TO THE 1995 PLAN.
PROPOSAL 3
AMENDMENT TO THE 1995 EQUITY PARTICIPATION PLAN
TO INCREASE THE LIMIT ON STOCK OPTIONS THAT MAY BE
GRANTED IN ANY ONE FISCAL YEAR TO ANY SINGLE INDIVIDUAL
The Board of Directors has approved, subject to stockholder approval, an
amendment to Section 5.2(a) of the Equity Plan to delete Section 5.2(a) in its
entirety and replace it, in lieu thereof, with the following:
"(a) (i) Except as set forth in Section 5.2(a)(ii) hereof, no
Participant shall be granted, in any fiscal year of the Company, Stock
Options and Stock Appreciation Rights to purchase more than 2,000,000
shares (the "Individual Limit").
(ii) No individual who is a newly-hired employee of the Company (a
"New Hire") shall be granted, in the fiscal year (the "Initial Fiscal
Year") in which he or she became a New Hire, Stock Options and Stock
Appreciation Rights to purchase shares more than twice the Individual
Limit."
Currently, Section 5.2(a) states that, "No Participant shall be granted, in
any fiscal year of the Company, Stock Options and Stock Appreciation Rights to
purchase more than 1,000,000 shares." The amended Section 5.2(a)(i) of the
Equity Plan would increase the Individual Limit for any Participant (except for
a New Hire) from no more than 1,000,000 shares in any fiscal year to no more
than 2,000,000 shares in any fiscal year. The new Section 5.2(a)(ii) of the
Equity Plan would permit the Company to grant to a New Hire, in his or her
Initial Fiscal Year, Stock Options and SARs to purchase up to twice the
Individual Limit. For a summary of the Equity Plan, see Proposal 2 above, which
summary is qualified in its entirety by reference to the full text of the Equity
Plan, a copy of which is available for free by calling the Company's Investor
Relations Department at (800) 785-2217. For a review of Participants who
received awards under the Equity Plan in fiscal year 1999, see the table in
Proposal 2, 1995 Equity Participation Plan Awards in 1999.
REASON FOR THE AMENDMENT
The Equity Plan currently has a limit of 1,000,000 Common Stock Options and
SARs that can be awarded to any one Participant during a fiscal year of the
Company. The amendment would increase this limitation to 2,000,000 shares in any
fiscal year and, with respect to a New Hire, twice the Individual Limit during
such New Hire's Initial Fiscal Year with the Company. The Board believes the
current limitation will significantly restrict its ability to attract a new
Chief Executive Officer and/or President and other key management, to provide
such key management with competitive compensation packages, and to retain such
key management.
A number of new key management employees have been, or are anticipated to
be, hired in fiscal year 2000. The Company believes that it is critical that the
Individual Limit be raised in order to attract and retain new executive officers
and key management employees in order for the Company to complete its
previously-disclosed restructuring.
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<PAGE> 25
VOTE REQUIRED
In order for Proposal 3 to be adopted, a majority of the Votes Cast needs
to be voted in favor of the Proposal. Proxies received by the Company will be
voted "FOR" this proposal unless a contrary vote is specified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 3 TO
APPROVE A RESOLUTION TO INCREASE THE NUMBER OF SHARES WHICH CAN BE AWARDED IN
ANY FISCAL YEAR TO ANY SINGLE PARTICIPANT UNDER THE 1995 EQUITY PARTICIPATION
PLAN AS DESCRIBED ABOVE.
PROPOSAL 4
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") served as
the Company's independent accountants for the fiscal year ended December 31,
1999, and has been engaged by the Audit Committee to serve as independent
accountants for the fiscal year ending December 29, 2000.
The Board of Directors requests that stockholders ratify the engagement of
PricewaterhouseCoopers for fiscal year 2000. A representative of
PricewaterhouseCoopers is expected to be present at the Annual Meeting and
available to respond to appropriate questions, and although
PricewaterhouseCoopers 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 PricewaterhouseCoopers is defeated, the adverse vote
will be considered as a recommendation to the Board of Directors to select other
independent auditors for fiscal year 2001. 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 2000 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.
VOTE REQUIRED
Approval of the ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants requires the affirmative vote of a
majority of the Votes Cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 4, THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
PROPOSAL 5
STOCKHOLDERS' PROPOSAL
Occasionally, StorageTek receives suggestions from its stockholders. Some
are received as formal stockholder proposals. All are given careful attention by
the Company and, in the past, management has adopted a number of suggestions
made.
The Company has received a stockholders' proposal for inclusion in this
Proxy Stock. The authors and proponents of the following stockholder resolution
are Dr. Seymour Licht, P.E., and Mrs. Elaine Licht, as tenants-in-common and Dr.
Seymour Licht, P.E., as senior partner of See More Light Investments, Inc.
(collectively, the "Proponents"), P.O. Box 4383, Scottsdale, Arizona 85261. The
Proponents have requested the Company to include the following proposal in its
Proxy Statement for the Annual Meeting of Stockholders. Dr. Seymour Licht, P.E.,
and Mrs. Elaine Licht, as tenants-in-common, own 826 shares of the Company's
Common Stock. Dr. Seymour Licht, P.E., as senior partner of See More Light
Investments, Inc.,
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<PAGE> 26
owns 43,000 shares of the Company's Common Stock. The stockholders' proposal is
quoted verbatim in italics, below.
MANAGEMENT OF THE COMPANY DISAGREES STRONGLY WITH THE ADOPTION OF THE
RESOLUTION PROPOSED BELOW AND ASKS STOCKHOLDERS TO READ THROUGH MANAGEMENT'S
RESPONSE, WHICH FOLLOWS THE STOCKHOLDERS' PROPOSAL.
PROPONENTS' PROPOSAL
This stockholder's proposal requests/recommends that the Boards of
Directors take the necessary steps, such as to modify the Corporate-by-laws
and/or its "Certificate of Incorporation" so as to implement the following
action relating to any new "Option Agreement" between StorageTek and its
officers/directors to become effective at the 2001 annual stockholder meeting.
This proposal will not affect any existing option award already held by any
officer/director.
It is the desire of the Stockholders of StorageTek that the officers and
directors of StorageTek, ("Management") are to be restricted from the selling of
any StorageTek stock that they receive as a result of their exercising of
options that they have received for a period of five (5) years from the date of
exercise/ purchase of the stock. Exceptions to this requirement are the
following:
1) If funds are required by management to pay any taxes due as a
result of their exercising of the options and do not have the cash to pay
the taxes due then a sufficient number of shares of StorageTek stock can be
sold at the market price to cover any federal, state and local income taxes
due within 30 days of the purchase.
2) If the officer or director terminates his association with
StorageTek then he can sell his stock after one (1) year from the date of
his or her resignation or five (5) years after acquired whichever comes
first.
SUPPORTING STATEMENT
During the past eighteen (18) months stockholder value of StorageTek has
declined significantly while most of the high technology companies have been
making historical new highs. Specifically EMC which is a direct competitor of
StorageTek stock price during this period increased 400% while StorageTek's
stock price decreased 59% for the same period.
The purpose of providing stock options to management is to provide them
with an incentive to improve stockholder value. In the past when stock options
were exercised most of the officers/directors would immediately sell their
stock. This defeated the very purpose of granting options to the
officers/directors of StorageTek. The only way that this incentive can work is
to prohibit management selling their stock that they obtain when they exercise
their options. This would then put all of the officers and directors into the
same boat with all of the stockholder the only difference would be that the
officers and directors would also be at risk of losing their own money along
with the stockholders if the price of StorageTek's stock were to decline.
If this proposal is approved, it would provide an incentive for management
to acknowledge that they have a responsibility to StorageTek's stockholders to
improve stockholder value and not to treat their management position as just
another job.
If the present board members do not have faith and confidence in StorageTek
to own StorageTek stock thereby putting their own money at risk along with all
of the other stockholders, they have no business serving either on the board or
as an officer of the company.
MANAGEMENT'S RESPONSE
Management of StorageTek believes that the Proponents' proposal is contrary
to the best interests of all stockholders and therefore opposes this proposal.
The Company believes that options are an integral part of the total compensation
package that the Company offers its officers and Directors. It is necessary to
include stock options in such compensation packages in order to be competitive
with other companies in the computer storage market and with other companies in
the geographic locations in which the Company operates.
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<PAGE> 27
Management believes that the future results of the Company are dependent, in
part, upon its ability to attract and retain high-quality officers and
Directors.
Because stock options are of value only if the fair market value of Common
Stock is higher than the option's exercise price (also referred to as
"in-the-money" options), stock options succeed in aligning the interest of
officers and Directors of the Company with those of the stockholders. If an
individual officer's or Director's options are in-the-money and such officer or
Director exercises the options and soon thereafter sells the shares of Common
Stock acquired, another of the fundamental purposes of stock
options -- competitive compensation -- has been met.
The officers and Directors should be entitled to benefit from the increase
in the value of the Common Stock, just as any stockholder may at any time choose
to sell shares of Common Stock. An individual officer or Director may have a
number of reasons for selling his or her shares of Common Stock at a particular
time. First, the executive officers and Directors are subject to the Company's
rules regarding insider trading, which, in general, prevents the executive
officers and Directors from trading in the Common Stock, except during windows
of only several weeks in duration during the year, generally after the public
announcement of financial results on a quarterly basis. Second, the executive
officers and Directors are subject to the rules under Section 16 of the 1934 Act
relating to so-called short-swing profits. The proposed five-year sale
restriction also fails to take into account or provide any exception for estate
planning or court orders in personal bankruptcy or divorce proceedings.
With respect to the prohibition against sales by former officers or
Directors of the Company, this portion of the proposal appears to be largely
punitive in nature. Once an individual is no longer an officer or Director of
the Company, he or she can no longer have an effect on the performance of the
Common Stock and whether or not such person continues to hold Common Stock has
only the most tenuous relationship to subsequent events at the Company.
MANAGEMENT'S RECOMMENDATION AND VOTE REQUIRED
Approval of the Stockholder Proposal set forth above requires the
affirmative vote of the majority of the Votes Cast. Proxies received by the
Company will be voted "AGAINST" the Stockholders' Proposal unless a contrary
vote is specified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL 5,
THE STOCKHOLDERS' PROPOSAL DESCRIBED ABOVE.
24
<PAGE> 28
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 1999
salary plus bonus) who were serving as such at December 31, 1999, the Company's
fiscal year-end; and one individual whose service as an executive officer
terminated during fiscal 1999 and who would have been listed as one of the four
most highly compensated executive officers had he been serving as an executive
officer at the end of the fiscal year (collectively, the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
--------------------------------------- RESTRICTED
OTHER ANNUAL STOCK SECURITIES ALL OTHER
SALARY BONUS COMPENSATION AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(3) OPTIONS ($)(4)
- --------------------------- ---- ------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David E. Weiss............. 1999 750,000 -0- 8,636(5) -0- 278,343 193,927
Chairman of the Board, 1998 722,923 -0- -- -0- 114,860 50,772
President and Chief 1997 616,769 992,000 119,000 -0- -0- 71,186
Executive Officer
Donald B. Davis(6)......... 1999 275,000 137,500 54,356(7) -0- -0- 31,095
Corporate Vice President, 1998 284,827 -0- 93,817(7) -0- 15,468 21,568
Americas Field Operations 1997 259,077 283,617 161,777(7) -0- 20,000 30,056
Robert S. Kocol............ 1999 302,361 -0- -- 2,500 136,516 14,661
Corporate Vice President 1998 182,768 -0- -- -0- 3,682 1,168
and Chief Financial
Officer 1997 193,300 100,866 -- -0- -0- 670
Victor M. Perez(8)......... 1999 458,921 -0- 124,572(9) -0- 275,182 59,172
Executive Vice President 1998 388,556 -0- 20,069(9) -0- 47,256 38,954
and Chief Operating
Officer 1997 274,462 378,000 51,877(9) -0- 40,000 34,036
Jean Reiczyk(10)........... 1999 322,351 -0- 6,288(11) 2,500 143,077 18,124
Corporate Vice President 1998 282,219 -0- -- -0- 12,188 10,332
and General Manager, 1997 74,667 69,333 38,039(11) 3,038 36,000 409
Solutions Business Group
Bruce S. Taafe(12)......... 1999 308,439 75,000 267,020(13) -0- 124,111 10,286
Vice President, 1998 267,092 146,323 106,616(13) -0- 11,954 2,452
International Field 1997 255,510 228,100 8,400(13) -0- 27,000 68,520
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.
(2) Perquisite amounts are not reported if total perquisites for the Named
Executive Officer were not more than the lesser of: (i) $50,000; or (ii) 10
percent of the Named Executive Officer's annual salary and bonus. In
addition to perquisites and personal benefits, Other Annual Compensation
also includes, when applicable, amounts reimbursed during the fiscal year
for the payment of taxes.
(3) As of December 31, 1999, the aggregate number of restricted shares held by
Named Executive Officers and their fair market values were as follows: Mr.
Weiss: 6,420 shares valued at $118,051; Mr. Kocol: 3,528 shares valued at
$64,748; Mr. Perez: 7,464 shares valued at $137,248; Mr. Reiczyk: 2,500
shares valued at $45,845; and Mr. Taafe: 2,386 shares valued at $43,874.
The fair market value was calculated by multiplying the number of
restricted shares held by the Named Executive Officer by the closing price
of the Company's Common Stock of $18.438 per share as reported in The Wall
Street Journal at fiscal
25
<PAGE> 29
year-end and subtracting the purchase price. The Named 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 Named Executive
Officer and the shares may not be disposed of until the repurchase right
lapses.
(4) Amounts shown for 1999 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: $149,908; Mr. Davis: $10,435;
Mr. Kocol: $3,375; Mr. Perez: $9,845; Mr. Reiczyk: $6,689; and Mr. Taafe:
$7,366; (ii) the amount representing preferential interest (that portion of
interest that is at above market rates under rules of the Securities and
Exchange Commission) earned on deferred compensation, as follows: Mr.
Weiss: $21,532; Mr. Davis: $12,410; Mr. Kocol: $2,471, Mr. Perez: $35,559;
and Mr. Reiczyk: $1,949; and (iii) contributions made by the Company during
fiscal 1999 to the 401(k) plan, as follows: Mr. Weiss: $3,231; Mr. Davis:
$1,904; Mr. Kocol: $4,800; Mr. Perez: $1,880; and Mr. Reiczyk: $2,579; and
(iv) contributions by the Company to the deferred compensation plan, as
follows: Mr. Weiss: $19,256; Mr. Davis: $6,346; Mr. Kocol: $4,015; Mr.
Perez: $11,887; and Mr. Reiczyk: $6,906.
(5) Other Annual Compensation for Mr. Weiss is comprised of amounts reimbursed
during the fiscal year for the payment of taxes.
(6) Mr. Davis ceased serving as an executive officer of the Company on December
31, 1998, and ceased being an employee of the Company on December 31, 1999.
(7) Other Annual Compensation in 1999 for Mr. Davis includes relocation
payments of $23,871. In 1997 and 1998, the amounts shown include the
forgiveness of loan balances, as follows: $75,000 in 1998 and $84,687 in
1997.
(8) Mr. Perez ceased serving as an executive officer of the Company on January
31, 2000, and ceased being an employee of the Company on March 31, 2000.
(9) Other Annual Compensation for Mr. Perez is comprised of tax equalization
payments and amounts reimbursed during the fiscal year for the payment of
taxes.
(10) Mr. Reiczyk ceased serving as an executive officer and employee of the
Company on March 22, 2000.
(11) Other Annual Compensation for Mr. Reiczyk in 1999 is comprised of amounts
reimbursed for taxes. The 1997 amount includes relocation payments of
$34,902.
(12) Mr. Taafe ceased to be an executive officer and employee of the Company on
December 31, 1999.
(13) Other Annual Compensation for Mr. Taafe in 1999 includes a housing
allowance of $49,500. The 1998 amount includes a housing allowance of
$47,906 and relocation payments of $42,842. The 1997 amount represents
payments for taxes.
26
<PAGE> 30
STOCK OPTION GRANTS TABLE
The following table sets forth information regarding stock options granted
to the Named Executive Officers during the fiscal year ended December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED FISCAL 1999 ($/SH) DATE VALUE(1)
- ---- ---------- -------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
David E. Weiss....................... 89,840(2) 1.12% $37.063 02/05/09 $1,579,910
38,503(3) 0.48% 37.063 02/05/09 677,107
105,000(2) 1.31% 22.063 07/28/09 1,099,198
45,000(3) 0.56% 22.063 07/28/09 471,085
Donald B. Davis(4)................... -0- 0.00% -- -- --
Robert S. Kocol...................... 35,729(2) 0.45% 37.063 02/05/09 628,324
14,887(5) 0.19% 37.063 02/05/09 261,800
8,932(3) 0.11% 37.063 02/05/09 157,077
53,878(2) 0.67% 22.063 07/28/09 564,025
23,090(3) 0.29% 22.063 07/28/09 241,719
Victor M. Perez(6)................... 75,567(2) 0.94% 37.063 02/05/09 1,328,908
31,487(5) 0.39% 37.063 02/05/09 553,725
18,892(3) 0.24% 37.063 02/05/09 332,231
104,465(2) 1.30% 22.063 07/28/09 1,093,597
44,771(3) 0.56% 22.063 07/28/09 468,688
Jean Reiczyk(7)...................... 21,201(2) 0.26% 37.063 02/05/09 372,837
9,702(5) 0.12% 37.063 02/05/09 170,618
4,928(3) 0.06% 37.063 02/05/09 86,663
75,072(2) 0.94% 22.063 07/28/09 785,895
32,174(3) 0.40% 22.063 07/28/09 336,815
Bruce S. Taafe(8).................... 11,806(2) 0.15% 37.063 02/05/09 207,618
5,059(3) 0.06% 37.063 02/05/09 88,967
75,072(2) 0.94% 22.063 07/28/09 785,895
32,174(3) 0.40% 22.063 07/28/09 336,815
</TABLE>
- ---------------
(1) Grant date value is calculated using a modified Black-Scholes pricing model.
The assumptions used in the pricing model are as follows: Expected Life of
Option, 4.20 years; Volatility, 51.44 percent; Annual Rate of Quarterly
Dividends, 0.0 percent; Risk-Free Rate, 5.83 percent. THE MODIFIED
BLACK-SCHOLES MODEL IS ONE OF THE SECURITIES AND EXCHANGE COMMISSION'S
ACCEPTABLE METHODS OF CALCULATING GRANT DATE VALUE AND DOES 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) These Non-Qualified Stock Options were granted under the 1995 Equity
Participation Plan at an exercise price equal to 100 percent of fair market
value on the date of grant. These 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. These 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 an involuntary termination other than for cause, the vesting
period of all outstanding options will accelerate
27
<PAGE> 31
and all outstanding options will immediately vest. In the event of a
recapitalization, stock dividend, 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 kinds
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. These 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) These performance-based Non-Qualified Stock Options were granted under the
1995 Equity Participation Plan at an exercise price equal to 100 percent of
fair market value on the date of grant. These performance-based options
generally become exercisable on the sixth anniversary of the date of grant,
unless accelerated to the first three anniversary dates based on the Company
achieving performance goals, and expire 10 years from the date of grant.
These 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 an
involuntary termination other than for cause, the vesting period of all
outstanding options will accelerate and all unvested options will
immediately vest. In the event of a recapitalization, stock dividend,
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. These options are
not transferable, except upon disability, or by testamentary will upon death
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.
(4) Mr. Davis ceased to be an executive officer of the Company on December 31,
1998, and ceased to be an employee of the Company on December 31, 1999.
(5) These performance-based Non-Qualified Stock Options were granted under the
1995 Equity Participation Plan at an exercise price equal to 100 percent of
fair market value on the date of grant. These performance-based options
generally become exercisable on the sixth anniversary of the date of grant,
unless accelerated to the first three anniversary dates based on the
individual achieving certain employee performance goals, and expire 10 years
from the date of grant. These 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 an involuntary termination other than for cause, the options
will immediately vest. In the event of a recapitalization, stock dividend,
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 kinds 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. These options
are not transferable, except upon disability, or upon death or pursuant to
the laws of descent and distribution or by testamentary will, if permitted
by applicable law, the Committee may permit transfers to a limited class of
persons.
(6) Mr. Perez ceased to be an executive officer of the Company on January 31,
2000, and an employee of the Company on March 31, 2000. Under the terms of
his separation agreement, all stock options were immediately vested upon
termination. Mr. Perez will remain a consultant to the Company through
September 30, 2000, after which he will have 90 days to exercise any
outstanding options.
(7) Mr. Reiczyk ceased to be an executive officer and employee of the Company on
March 22, 2000. Under the terms of his employment agreement, all stock
options were immediately vested upon termination. Mr. Reiczyk's options will
expire 90 after his termination date.
(8) Mr. Taafe ceased to be an executive officer on December 31, 1999, but is
continuing service to the Company as a consultant. The options awarded to
Mr. Taafe will continue to vest while Mr. Taafe is a consultant.
28
<PAGE> 32
STOCK OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information regarding stock options
exercised by Named Executive Officers during the fiscal year ended December 31,
1999, and options held by them at fiscal year-end 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT 12/31/99 AT 12/31/99($)(2)
UPON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David E. Weiss........... -0- -0- 732,883 510,314 $1,378,979 $190,366
Donald B. Davis(3)....... 5,550 $ 13,528 21,685 -0- 4,508 -0-
Robert S. Kocol.......... -0- -0- 6,221 140,747 15,640 5,230
Victor M. Perez(4)....... -0- -0- 41,137 328,783 26,433 16,389
Jean Reiczyk(5).......... 20,000 251,240 12,844 158,421 -0- -0-
Bruce S. Taafe(6)........ 6,037 95,886 33,182 113,918 3,458 8,390
</TABLE>
- ---------------
(1) All of the option exercises by the Named Executive Officers during 1999 were
cashless exercises. The value realized is calculated by (i) subtracting the
exercise price per share from the sale price per share of the stock, and
(ii) multiplying by the number of shares exercised.
(2) Value is calculated by (i) subtracting the exercise price per share from the
fiscal year-end market value of $18.438 per share and (ii) multiplying by
the number of shares subject to the option. Options that have an exercise
price per share equal to or greater than the fiscal year-end market value
per share are not included in the value calculation.
(3) Mr. Davis ceased to be an executive officer of StorageTek on December 31,
1998 and an employee on December 31, 1999.
(4) Mr. Perez ceased to be an executive officer of the Company on January 31,
2000 and ceased to be an employee of the Company on March 31, 2000. He will
serve as a consultant to the Company through September 30, 2000.
(5) Mr. Reiczyk ceased to be an executive officer and employee of the Company on
March 22, 2000.
(6) Mr. Taafe ceased to be an executive officer on December 31, 1999, but is
continuing service to the Company as a consultant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
None of the current members of the Compensation Committee is, or has ever
been, an employee of the Company. No executive officer of the Company served as:
(i) a member of a compensation committee of another entity; (ii) a director of
another entity, one of whose executive officers served as a member of the
Company's Compensation Committee; or (iii) a member of the compensation
committee of another entity, one of whose executive officers served as a
director of the Company.
29
<PAGE> 33
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
The following discussion relates to employment contracts, termination of
employment contracts and change-in-control arrangements that the Company has
entered into with any of its Named Executive Officers and certain of its
executive officers.
EMPLOYMENT AGREEMENT WITH DAVID E. WEISS
The Company and David Weiss, its Chairman of the Board, President and Chief
Executive Officer entered into an employment agreement (the "Weiss Agreement")
in May 1999. Pursuant to the terms of the Weiss Agreement, Mr. Weiss receives an
annual base salary and participates in the Company's MBO program. For the
one-year period commencing May 1999, Mr. Weiss' base salary has been fixed at
$750,000, and the target MBO bonus potential is 95 percent of base salary. Mr.
Weiss also participates in the Company's equity participation plan, profit
sharing and thrift plan, deferred compensation plan and the executive officer
life and medical insurance programs, and receives an automobile allowance and
limited reimbursement for financial services.
The Weiss Agreement provides for severance benefits in the event of
involuntary termination without Cause (as defined below) and upon a Change in
Control of the Company (as defined below). In certain circumstances, in order to
maximize the benefits to Mr. Weiss, Mr. Weiss' severance and other benefits may
be reduced in order to avoid the excise tax imposed pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended. Following an involuntary
termination without Cause or a termination upon a Change in Control, Mr. Weiss
is entitled to receive, among other things: (i) a lump sum severance payment
equal to the sum of: (a) two times base salary for the fiscal year in effect
(three times, if upon a Change in Control); plus (b) two times target bonus
potential, whether or not such bonus would have been otherwise payable (three
times, if upon a Change in Control); (ii) a lump sum payment to cover the
estimated cost of medical benefits and payment for life and disability insurance
benefits for two years after termination; and (iii) accelerated vesting of any
stock options and the lapse of any Company-imposed restrictions upon restricted
stock granted after May 19, 1999, along with an extension of the term of all
stock options granted by the Company to one year after the termination date.
In order to receive any severance payments, Mr. Weiss must first execute
and deliver to the Company a settlement and release agreement.
Upon a voluntary termination by Mr. Weiss or if the Company terminates Mr.
Weiss for Cause, Mr. Weiss will receive compensation only through the date of
termination.
Under the Weiss Agreement, the term "Cause" means: (i) the failure by Mr.
Weiss to perform his duties and responsibilities; (ii) the willful breach by Mr.
Weiss of any written agreements between Mr. Weiss and the Company; (iii) the
gross negligence or dishonesty by Mr. Weiss in the performance of his duties;
(iv) a willful violation by Mr. Weiss of any of the Company's Corporate Policies
and Practices; (v) conduct or activities by Mr. Weiss that materially conflict
with the interest of or injure the Company, or materially interfere with the
duties owed to the Company; (vi) refusal by Mr. Weiss to comply with or material
neglect by Mr. Weiss of instructions received from the Board; and (vii)
conviction of Mr. Weiss for a felony or crime.
Under the Weiss Agreement, the term "involuntary termination" means (i)
termination of Mr. Weiss' employment by the Company for reasons other than
Cause; (ii) death or disability, (iii) termination of Mr. Weiss' employment
during the 24-month period following a Change in Control for reasons other than
Cause; (iv) the failure of the Company to obtain assumption of the Weiss
Agreement by any successor to the Company; (v) without Mr. Weiss' consent, his
relocation to a location more than 50 miles from the Company's principal offices
in Louisville, Colorado; (vi) a reduction in salary and target bonus without the
consent of Mr. Weiss; or (vii) a significant reduction of duties, authority or
responsibilities of Mr. Weiss without his consent.
Under the Weiss Agreement, the term "Change of Control" means the
occurrence of any of the following events: (i) the acquisition by any "person"
or "group" (as such terms are used in Sections 13(d) and 14(d) of
30
<PAGE> 34
the 1934 Act) of 25 percent or more of the total voting power represented by the
Company's then-outstanding voting securities, other than the Company or a person
or group who, directly or indirectly controls, is controlled by, or is under
common control with, the Company, of the beneficial ownership of securities of
the Company representing 25 percent or more of the total voting power of the
Company; (ii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50 percent of the total
voting power of the Company or such surviving entity outstanding immediately
after such merger or consolidation; or (iii) the approval by the stockholders of
the Company of a plan of complete liquidation of the Company, or the sale or
disposition by the Company of all or substantially all the Company's assets.
Upon the payment of any severance to Mr. Weiss, the Weiss Agreement
provides that, for a period of two years following termination, Mr. Weiss shall
not, directly or indirectly: (i) engage in any activity in competition with the
Company or harmful or contrary to the interests of the Company; (ii) induce or
attempt to influence or encourage any employee of the Company to leave the
Company or provide the names of Company employees; or (iii) participate in a
hostile takeover of the Company.
On January 28, 2000, Mr. Weiss recommended that the Board of Directors ask
him to resign as Director, Chairman of the Board, President and Chief Executive
Officer. The Board accepted Mr. Weiss' proposal and asked him to resign from all
such positions upon the election of a successor to the positions or at such
earlier date as the Board deems appropriate.
EMPLOYMENT AGREEMENT WITH NAMED EXECUTIVE OFFICERS
The Company has entered into an employment agreement (the "NEO Agreement")
with Robert Kocol, Victor Perez and Jean Reiczyk and certain other executive
officers, which provides for annual base compensation and participation in the
Company's MBO bonus plan. (See "Separation Agreement with Victor M. Perez,"
"Separation Agreement with Jean Reiczyk" and "Retention Agreement with Robert S.
Kocol" (collectively referred to as the "Individual Agreements.")) Each one of
the Individual Agreements was negotiated individually with the Named Executive
Officer involved and each was based upon the particular facts and circumstances
regarding each such Named Executive Officer. The level of MBO bonus plan
potential varies from executive officer to executive officer, depending upon
such executive officer's level of responsibility. Each Named Executive Officer
may also participate in the Company's equity participation plan, profit sharing
and thrift plan, deferred compensation plan and the executive officer life and
medical insurance programs, and receives an automobile allowance and limited
reimbursement for financial advice.
The NEO Agreement provides for severance payments in the event of a
termination after a Change in Control or an involuntary termination without
Cause. The terms "Change in Control" and "Cause" are defined in the NEO
Agreements in the same manner as those terms are defined in the Weiss Agreement.
Upon a termination after a Change in Control or an involuntary termination
without Cause, the Named Executive Officer is entitled to receive severance
payments in the amount of: (i) a lump sum severance payment in an amount equal
to such executive officer's annual base salary (or, in the event of an
involuntary termination after a Change of Control, two times such executive
officer's annual base salary); (ii) such executive officer's target bonus,
whether or not such bonus would have been otherwise payable (or, in the event of
an involuntary termination after a Change of Control, two times such executive
officer's target bonus); and (iii) the immediate vesting of all stock options
and lifting of all Company-imposed restrictions on restricted stock granted.
Upon a voluntary termination by the Named Executive Officer or if the
Company terminates the Named Executive Officer for Cause, such executive officer
will receive compensation only through the date of termination.
Upon the payment of any severance to a Named Executive Officer, the NEO
Agreement provides that such executive officer shall not, directly or
indirectly: (i) for a period of 12 months following termination, engage in any
activity in competition with the Company or harmful or contrary to the interests
of the
31
<PAGE> 35
Company; or (ii) for a period of 24 months following termination, induce or
attempt to influence or encourage any employee of the Company to leave the
Company or provide the names of Company employees. In addition, the payment of
any severance is tied to the executive officer executing and delivering to the
Company a settlement and release agreement.
SEPARATION AGREEMENT WITH VICTOR M. PEREZ
On January 22, 2000, the Company entered into a separation agreement (the
"Perez Agreement") with Victor Perez, the Company's then-current Executive Vice
President and Chief Operating Officer ("COO"). Under the terms of the Perez
Agreement, Mr. Perez' duties as COO ended on January 31, 2000, although Mr.
Perez retained the title of Executive Vice President and COO. Mr. Perez'
employment with StorageTek ended on March 31, 2000.
Under the terms of the Perez Agreement, upon his execution and delivery to
the Company of a settlement and release agreement, Mr. Perez will receive: (i) a
separation payment equal to $1,207,500 (one and a half times his 2000 annual
salary plus one and a half times his 2000 targeted bonus); (ii) continued tax
equalization payments, which allow Mr. Perez' personal income tax liabilities to
be equal to what they would have been had Mr. Perez lived in Puerto Rico; (iii)
immediate vesting of all stock options and the lifting of all Company-imposed
restrictions on restricted stock and an extension on the term of exercise of
stock options to 90 days after the end of Mr. Perez' consulting arrangement with
the Company described below; (iv) family medical insurance for up to 18 months
and limited reimbursement for tax preparation assistance and job placement
services; and (v) in the event that a Change in Control (as defined in the NEO
Agreement) occurs on or before December 31, 2000, an additional severance
payment equal to one-half times his 2000 annual salary plus one-half times his
2000 targeted bonus.
Under the terms of the Perez Agreement, Mr. Perez is prohibited, directly
or indirectly, from: (i) soliciting or encouraging any then-current Company
employee to apply for employment with any entity with which he has a
relationship or provide the names of any persons employed by the Company to any
entity with which he has a relationship, for a period of two years following his
termination of employment; and (ii) competing with the Company or engaging in
any activity harmful or contrary to the best interest of the Company, for a
period of 18 months following his termination of employment.
The Company and Mr. Perez have entered into a Consulting Agreement
commencing on March 31, 2000 and terminating on September 30, 2000 (the
"Consulting Agreement"). For his consulting services, Mr. Perez will be paid a
consulting fee of $50,000 per quarter plus out-of-pocket expenses and tax
equalization payments. Mr. Perez will be working on a special project for the
Board of Directors. In the event that Mr. Perez successfully completes this
project or the Company determines that the project should be discontinued, Mr.
Perez will receive an incentive bonus of $50,000.
TERMINATION AGREEMENT WITH DONALD B. DAVIS
In January 1999, the Company entered into a termination agreement (the
"Davis Agreement") with Donald Davis, who had been the Company's Corporate Vice
President U.S./Canada, Sales and Services through his resignation as an
executive officer of the Company on December 31, 1998, but continued employment
with the Company through December 31, 1999. Under the Davis Agreement, Mr. Davis
received a lump sum severance payment of $412,500 (one year base salary plus
target bonus) on his employment termination date.
RETENTION AGREEMENT WITH ROBERT S. KOCOL
On January 27, 2000, the Company entered into a Retention Agreement (the
"Retention Agreement") with Robert Kocol, its Corporate Vice President and Chief
Financial Officer ("CFO"). Pursuant to the Retention Agreement, Mr. Kocol has
agreed to remain an employee of the Company at least through July 31, 2000. Mr.
Kocol's duties and responsibilities at the Company may be changed substantially
if a successor CFO is elected prior to July 31, 2000, in which case Mr. Kocol
may be asked to support the new CFO during any transition period. Mr. Kocol
shall continue to serve as CFO, unless a successor is duly appointed prior to
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<PAGE> 36
July 31, 2000. The Company is not currently searching for a new CFO and Mr.
Kocol may choose to continue to serve as CFO after July 31, 2000.
Contingent upon Mr. Kocol's continued employment with the Company through
July 31, 2000 and his execution and delivery of a settlement and release
agreement, Mr. Kocol shall receive: (i) an amount equal to one and one-half
times his then current annual salary; (ii) an amount equal to one and one-half
times his then-current target bonus; and (iii) monthly payment of COBRA amounts
due for up to 18 months for medical and dental coverage for his family
comparable to those to which Mr. Kocol is eligible on July 31, 2000. In
addition, all outstanding, unvested stock options held by Mr. Kocol will vest
and all Company-imposed restrictions on Mr. Kocol's restricted stock grants will
be lifted. If a "Change in Control," as defined in the NEO Agreement between Mr.
Kocol and the Company, were to occur after Mr. Kocol's employment is terminated,
but prior to December 31, 2000, Mr. Kocol would receive an additional severance
payment equal to one-half times Mr. Kocol's salary and bonus, as they were in
effect on July 31, 2000.
Upon the payment of any severance to Mr. Kocol, the Retention Agreement
provides that (i) for a period of two years after July 31, 2000, Mr. Kocol shall
not, directly or indirectly, engage in any activity for or on behalf of certain
competitors of the Company or that is harmful or contrary to the interests of
the Company; and (ii) for a period of 18 months after July 31, 2000, Mr. Kocol
shall not, directly or indirectly, induce or attempt to influence or encourage
any employee of the Company to leave the Company.
SEPARATION AGREEMENT WITH JEAN REICZYK
On March 22, 2000, the Company entered into a separation agreement with
Jean Reiczyk, the Company's then-current Corporate Vice President and General
Manager, Solutions Business Group. Consistent with the terms of the NEO
Agreement between Mr. Reiczyk and the Company, Mr. Reiczyk will receive: (i) a
separation payment equal to $456,750 (one year's base salary plus his targeted
bonus); and (ii) immediate vesting of all stock options and the lifting of all
Company-imposed restrictions on restricted stock granted to Mr. Reiczyk. Mr.
Reiczyk is prohibited from competing with the Company or engaging in any
activity harmful or contrary to the best interest of the Company for a period of
12 months following his termination of employment.
CONSULTING AGREEMENT WITH BRUCE S. TAAFE
In December 1999, StorageTek entered into a Consulting Agreement (the
"Taafe Agreement") with Bruce Taafe, the Company's then-current Vice President,
International Field Sales. Mr. Taafe voluntarily terminated his employment with
the Company on December 31, 1999. Under the terms of the Taafe Agreement, Mr.
Taafe will receive $20,000 per quarter, for up to 300 hours of consulting
services in a 12-month period. Any additional hours will be paid at the rate of
$275 per hour for projects mutually agreed upon between StorageTek and Taafe.
During the term of the Taafe Agreement, Mr. Taafe's stock options and restricted
stock will continue to vest.
The Taafe Agreement can be terminated at any time by the Company for Cause
(defined below), in which case Mr. Taafe will receive payments only for services
provided through the termination date. Upon a Change of Control (defined below),
Mr. Taafe will receive any remaining amounts due for services provided and all
outstanding unvested stock options will immediately vest and the restrictions on
all outstanding restricted stock will immediately be lifted.
For purposes of the Taafe Agreement, "Change of Control" is defined as (i)
a reorganization, merger, liquidation or consolidation; (ii) a sale of the
assets of StorageTek; or (iii) an acquisition of more than 40 percent of the
voting securities of StorageTek or an event whereby individuals who constitute
50 percent of more of the Board of Directors cease to constitute a majority of
the Board of Directors after the event. "Cause" is defined as (i) willful breach
to perform duties and responsibilities; (ii) willful breach of the Consulting
Agreement; (iii) gross negligence or dishonesty in the performance of duties;
(iv) engaging in conduct or activities that materially conflict with the
interest of or injure StorageTek or materially interfere with Mr. Taafe's duties
owed to StorageTek; or (v) conviction for a felony.
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<PAGE> 37
SEPARATION AGREEMENT WITH JAMES D. BARTLETT
On December 31, 1999, the Company entered into a separation agreement (the
"Bartlett Agreement") with James Bartlett, the Company's then-serving Corporate
Vice President and Chief Marketing Officer. As part of the Bartlett Agreement,
Mr. Bartlett received a separation payment of $335,000 (one year's salary plus
one year's target bonus potential). All of his stock options were immediately
vested and the Company-imposed restrictions on his restricted stock immediately
lapsed. In addition, consistent with the terms of the NEO Agreement between Mr.
Bartlett and the Company, the Company forgave the principal and accrued interest
on a $500,000 loan to Mr. Bartlett and he received tax gross-up payments for
imputed interest accrued through December 31, 1999.
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 1999 by its
Directors, Officers (as defined in the rules under Section 16 of the Exchange
Act) and greater than 10 percent stockholders. Based upon the Company's review
of the reporting forms received by it, and written representations that it
received 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 percent stockholders were complied with in a
timely manner for 1999.
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 officer compensation (except that of the Company's
Chief Executive Officer (the "CEO")) is determined by the Human Resources and
Compensation Committee of the Board of Directors (the "Compensation Committee"),
which consists entirely of non-employee Directors, as of the date hereof. The
current members of the Compensation Committee are Directors Lee (Chair),
Armstrong, Chandler and Holmes, none of whom is, or ever has been, an employee
of the Company. The compensation for the CEO is based upon a recommendation to
the Board of Directors by the Compensation Committee and is voted upon by the
Board of Directors.
I. EXECUTIVE OFFICER COMPENSATION
A. Guiding Principles for Executive Officer Compensation
The Compensation Committee has developed three basic principles that guide
it in setting compensation for the Company's executive officers. These
principles are:
(i) Pay for achievement of results, measured by both the Company's
performance and the individual executive officer's performance;
(ii) Pay the Company's executive officers competitively to ensure that
the Company will be able to attract and retain high-quality executive
officers; and
(iii) Use a variety of equity-based incentives to align the
compensation of the executive officers with the performance of the
Company's Common Stock.
B. Total Compensation
Compensation for the Company's executive officers consists of four
elements: (i) a base salary; (ii) an annual performance bonus, if certain
financial and people management criteria set by in advance by the
34
<PAGE> 38
Compensation Committee are met; (iii) stock options and other equity-based
incentives, such as restricted stock awards and Common Stock equivalents
(collectively, "Options"); and (iv) various other benefits. The Compensation
Committee believes that there should be an at-risk portion of each executive
officer's compensation (the annual performance bonus and the Options), along
with the traditional fixed portion of each executive officer's compensation
(base salary and various other benefits). The Compensation Committee
periodically assesses the mix of at-risk and fixed compensation to ensure that
the Company is offering to its executive officers compensation that is
competitive within the industry to permit the Company to attract and retain
high-quality executive officers.
(i) Base Salary
The base 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 for 1998
were below the competitive market median. As a result, for 1999, the
Compensation Committee increased the base compensation of certain executive
officers. The Compensation Committee believes that, during 1999, the Named
Executive Officers were paid at approximately the competitive market
median.
(ii) Annual Performance Bonus
The Compensation Committee has adopted a Management by Objectives
(MBO) bonus program that provides each executive officer an opportunity to
earn a bonus based upon Company financial and other objective goals. Each
executive officer's bonus potential under the MBO program is stated as a
percentage of his or her base salary. In 1999, the MBO bonus program
included four levels of corporate performance (minimum, target, stretch and
ultra-stretch) measuring three performance criteria. For executive officers
of the Company, these performance measures for the 1999 MBO bonus program
were: diluted earnings per share; revenue growth; and management and
employee development. Under the 1999 MBO bonus program, the diluted
earnings per share measurement served as the threshold criterion for any
payments under the 1999 MBO program. Because the established diluted
earnings per share goal was not achieved in 1998 or 1999, no MBO bonuses
were paid to any executive officer in 1998 or 1999 (other than sign-on
bonuses, promotion-based bonuses and guaranteed bonuses to certain
newly-hired executive officers). Without the 1998 or the 1999 MBO bonus
payout, the total cash compensation paid to the Company's executive
officers in 1998 and 1999 was significantly less than the total cash
compensation levels of competitors included in the salary surveys reviewed
by the Company. The Compensation Committee believes that this result is
appropriate and is consistent with its "pay for achievement of results"
principle.
(iii) Options
The Compensation Committee believes that Options serve to link
directly the compensation earned by the executive officers with the amount
of appreciation realized by the Company's stockholders and that unvested
Options serve as a retention tool. The Compensation Committee has used a
variety of types of Options and various vesting periods that are structured
to encourage the Company's executive officers to continue in the employ of
the Company and motivate performance that will meet or exceed the
expectations of the Company's stockholders. In determining the size of any
Option award, the Compensation Committee considers: (a) the value of the
Option, using a modified Black-Scholes model; (b) the position held by the
executive officer; and (c) the executive officer's base cash compensation.
The Compensation Committee considers Option grants for executive
officers annually, as well as in connection with promotions or for
retention purposes. In 1999, the Compensation Committee granted executive
officers Options in February, the time when the Compensation Committee
typically has granted options to executive officers, and also in July,
primarily for retention purposes. For most executive officers, 70 percent
of the Options granted vests over three years, in equal annual increments,
and 30 percent of the Options vest after six years, unless certain
performance criteria are met to accelerate the vesting of the Options to
the first three years.
35
<PAGE> 39
Based upon the attainment of individual performance goals, the
Compensation Committee accelerated the vesting of 6,000 Options granted to
Mr. Perez, 5,000 Options granted to Mr. Reiczyk, and 3,000 Options granted
to Mr. Taafe, each of whom were Named Executive Officers during 1999. The
Compensation Committee also accelerated the vesting of Options and
restricted stock in the aggregate of 16,999 shares to certain other current
executive officers during 1999 based upon each such officer meeting his or
her individual performance goals. The Committee did not accelerate the
vesting of Options in which the vesting depended upon the Company meeting
certain financial performance goals.
(iv) Other Benefits
The executive officers participate in the various medical, dental,
life, disability, employee stock purchase and other benefit programs that
are generally made available to all salaried employees of the Company. The
executive officers also receive additional Company-paid benefits
(collectively, the "Benefits") not made available to all salaried employees
including: (a) reimbursement for certain out-of-pocket expenses associated
with medical program coverage, up to a maximum of $5,000 per year; (b) an
individually-owned universal life insurance policy in an amount equal to
three times such executive officer's base salary (as compared to two times
base salary, as is the case for other salaried employees); (c) an auto
allowance and financial planning services; (d) the opportunity to
participate in a deferred compensation plan; (e) in certain circumstances,
the opportunity to have the Company pay, on a tax grossed-up basis, for
certain spousal travel to an annual sales performance program; and (f) in
certain instances, reimbursement for dues related to airline and golf club
memberships.
II. CEO COMPENSATION
A. Basic Principles and Components of the CEO's Compensation
David E. Weiss has served as Chairman, President and CEO of the Company
since May 1996. The Company entered into an employment agreement with Mr. Weiss
in May 1999 to take the place of the three year employment agreement he entered
into with the Company in May 1996. The Compensation Committee adheres to the
same basic compensation principles and uses the same four types of compensation
for the CEO as it does for the compensation of all executive officers. The
Compensation Committee then recommends the compensation for the CEO to the full
Board for approval.
(i) Base Compensation
The Compensation Committee recommended to the full Board of Directors
Mr. Weiss' compensation package, which was approved by the Board. For 1999,
Mr. Weiss' base salary was set at $750,000, an increase of approximately 7
percent, based upon the Compensation Committee's view that Mr. Weiss' base
salary was below-market for experienced CEOs of like-sized companies. The
Compensation Committee reviewed the same salary surveys described above
with regard to executive officers when evaluating salary adjustments for
Mr. Weiss.
(ii) Annual Performance Bonus
The Compensation Committee did not award Mr. Weiss an MBO bonus for
1999, as the Company's diluted earnings per share were below the threshold
for payout, consistent with the Company's payment for achievement of
results principle. Mr. Weiss' target MBO bonus was equal to 95 percent of
his base salary.
(iii) Stock Options and Other Equity-Based Compensation
Similarly, the Compensation Committee did not approve the acceleration
of the vesting of 50,000 Options granted to Mr. Weiss in May 1996, in
connection with his promotion to CEO.
During 1999, Mr. Weiss was granted non-qualified stock options to
purchase 194,840 shares of Common Stock that vest in equal increments over
three years and options to purchase 83,503 shares of Common Stock that vest
according to performance-based criteria. The Compensation Committee
considered the same factors as described above for all executive officers
in determining the number of
36
<PAGE> 40
Options granted to Mr. Weiss. Based on the Company's financial performance
in fiscal 1999, during 1999 the Compensation Committee did not accelerate
the vesting of any Options granted to Mr. Weiss.
(iv) Other Benefits
Mr. Weiss participated in the Benefits that were made available to the
other Named Executive Officers, except that his medical reimbursement
limitation was set at $15,000.
III. STOCK OWNERSHIP GUIDELINES
In January 1998, the Compensation Committee implemented guidelines for
minimum stock ownership for the CEO and the executive officers. The guidelines
are expressed in terms of a set number of shares of Common Stock, including
Common Stock equivalents and vested restricted stock, but excluding any
unexercised Options. The Company's CEO and executive 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 executive officer. The Compensation
Committee believes that these guidelines will further align the interests of the
CEO and the executive officers with those of the stockholders. All of the
Company's executive officers who have been executive officers for in excess of
such three-year period and the CEO have met the stock ownership guidelines.
IV. TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
In setting executive officer and CEO 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 $1,000,000 in any taxable year for the CEO or any of the
executive officers, unless such compensation is performance-based. The
Compensation Committee's policy is to qualify, to the extent reasonable, the
CEO's and 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 executive officers necessary for the Company's success. Consequently,
the Compensation Committee recognizes that the loss of a tax deduction could be
necessary in certain circumstances. The Company's MBO bonus plan and its Options
are designed to qualify as performance-based plans within the meaning of Section
162(m) so as to preserve deductibility by the Company of compensation paid under
such plans.
THE HUMAN RESOURCES AND
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Robert E. Lee, Chair
William L. Armstrong
J. Harold Chandler
Maurice F. Holmes
37
<PAGE> 41
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.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock during the five years ended December 31, 1999, with the
cumulative total return on the S&P 500 Index and the S&P Computer Hardware
Index. The comparison assumes $100 was invested on December 31, 1994, 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.
DATA POINTS
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Storage Technology Corporation 100 82 164 214 246 127
S&P 500 Index 100 138 169 226 290 351
S&P Computer Hardware Index 100 133 178 261 457 659
</TABLE>
38
<PAGE> 42
OTHER MATTERS
The Company has received notice from a stockholder that the stockholder
intends to raise certain issues ("Certain Stockholder Issues") at the Annual
Meeting relating to the determination, election and continued service of the
members of the Company's Board of Directors, their compensation and the
Company's conversion to a non-profit corporation under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended. It is the intention of the proxy
holders named in the enclosed proxy card to use their discretionary voting
authority to vote against the proposed Certain Stockholder Issues if they
properly come before the Annual Meeting for consideration. In addition, with
regard to any other business matters that properly come before the Annual
Meeting for consideration, the proxy holders intend to use their discretionary
voting authority in accordance with their judgment.
Under the Company's Bylaws, in order for a matter to be deemed properly
presented by a stockholder, other than matters presented for possible inclusion
in the proxy statement, 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 first
anniversary of the date on which notice of the prior year's Annual Meeting was
mailed to stockholders (the "Advance Notice Period"). 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 Annual 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 Annual Meeting may refuse to acknowledge
any matter not made in compliance with the foregoing procedure.
With respect to the 2000 Annual Meeting, the Advance Notice Period
commenced January 8, 2000 and ended on February 7, 2000. The only notice
received from a stockholder during the Advance Notice Period was the notice
described above regarding Certain Stockholder Issues.
STOCKHOLDER PROPOSALS FOR
THE COMPANY'S 2001 ANNUAL MEETING
Any proposal that a stockholder may desire to present at the Company's
Annual Meeting of Stockholders in 2001 and that such stockholder wishes to have
included in the Company's proxy statement relating to such meeting must be
received in writing by the Secretary of the Company on or before December 12,
2000 in order to be considered for possible inclusion in the Company's proxy
materials.
If a stockholder wishes to present a proposal at the Company's Annual
Meeting in the year 2001 and the proposal is not intended to be included in the
Company's Proxy Statement relating to that meeting, the stockholder must give
advance notice to the Company on or after January 11, 2001, but on or prior to
February 10, 2001, which is the Advance Notice Period for such meeting, as
described above. If a stockholder gives notice of such a proposal outside of the
Advance Notice Period, the stockholder will not be permitted to present the
proposal to the stockholders for a vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jeffrey M. Dumas
Jeffrey M. Dumas
Secretary
April 11, 2000
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<PAGE> 43
STORAGE TECHNOLOGY CORPORATION
1995 EQUITY PARTICIPATION PLAN
(As amended through March 9, 2000)
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. Effective as provided in Section 22, the Company
hereby establishes a plan of long-term stock-based compensation incentives for
selected employees, directors and consultants of the Company and its affiliated
corporations. The plan shall be known as the Storage Technology Corporation 1995
Equity Participation Plan (the "1995 Plan").
1.2 PURPOSE. The purpose of the 1995 Plan is to provide employees,
directors and consultants selected for participation in the 1995 Plan with added
incentives to continue in the service of the Company and its affiliates and to
create in such employees, directors and consultants a more direct interest in
the future success of the operations of the Company and its affiliated
corporations by relating incentive compensation to the achievement of long-term
corporate economic objectives. The 1995 Plan is also designed to attract key
employees, directors and consultants and to retain and motivate participating
employees, directors and consultants by providing an opportunity for equity
investment in the Company.
1.3 NO EFFECT ON 1987 PLAN OPTIONS. Options granted pursuant to the
Storage Technology Corporation 1987 Equity Participation Plan (the "1987 Plan")
shall be governed by the terms and provisions of the option agreements covering
such grants and by the provisions of the 1987 Plan.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set forth
below:
(a) "Affiliated Corporation" means any corporation that is
either a parent corporation with respect to the Company or a subsidiary
corporation with respect to the Company (within the meaning of Sections 424(e)
and (f), respectively, of the Internal Revenue Code).
(b) "Board" means the Board of Directors of the Company.
<PAGE> 44
(c) "Cause" means performance or conduct problems resulting in
discharge, as determined by the Company or Affiliated Company, which
determination will be conclusive.
(d) "Committee" means a committee designated by the Board to
administer the Plan or, if no committee is so designated, the Board.
(e) "Common Stock" means the Company's $.10 par value voting
common stock.
(f) "Common Stock Equivalent" means a right to receive Common
Stock in the future that may be granted to a Participant pursuant to Sections
12, 13 or 15 in lieu of a current issuance of Common Stock, subject to certain
conditions and limitations imposed in accordance with such Sections.
(g) "Consultant" means a natural person who performs services
for the Company, or any Affiliated Corporation, or any division thereof in
exchange for consideration, but who is not an Employee.
(h) "Director" means a member of the Board.
(i) "Effective Date" means the effective date of the 1995
Plan, as set forth in Section 22 hereof.
(j) "Eligible Employees" means those Employees upon whose
judgment, initiative and efforts the Company or the Affiliated Corporations are,
or are expected to become, largely dependent for the successful conduct of their
business.
(k) "Employee" means a natural person who is deemed an
employee (including, without limitation, an officer or director who is also an
employee) of the Company, or any Affiliated Corporation, in accordance with the
rules contained in Section 3401(c) of the Internal Revenue Code and the
regulations thereunder.
(l) "Fair Market Value" means with respect to Common Stock, as
of any date, the closing price of a share of Common Stock on the New York Stock
Exchange as reported by The Wall Street Journal for the last trading day prior
to that date. If no such prices are reported, then Fair Market Value shall mean
the average of the high and low sale prices for the Common Stock (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.
(m) "Incentive Stock Option" means the right to purchase
Common Stock granted to an Employee pursuant to Sections 6 and 7, which
constitutes an incentive stock
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<PAGE> 45
option within the meaning of Section 422 of the Internal Revenue Code, and which
may or may not be issued with related Stock Appreciation Rights.
(n) "Internal Revenue Code" means the Internal Revenue Code of
1986, as it may be amended from time to time.
(o) "Long-Term Employee" means a person who, as of the date he
or she ceases to be an Employee of the Company or any Affiliated Corporation,
has been an Employee of the Company or any Affiliated Corporation for six years
or more, with no break in such employment of longer than one year.
(p) "MBO Payment" means a payment to a Participant pursuant to
the Company's MBO Plan, which payment may be made either in shares of Common
Stock, Common Stock Equivalents or in cash, or partly in Common Stock, partly in
Common Stock Equivalents and partly in cash, as determined in accordance with
the provisions of Section 13.
(q) "MBO Equity Plan" means the Company's Management By
Objective Plan, as established by the Board or the Committee from time to time,
pursuant to which MBO Payments are made from time to time in the manner and
under the conditions established by the Board or the Committee.
(r) "Non-Qualified Option" means a right to purchase Common
Stock granted to a Participant pursuant to Sections 6 and 8, which does not
qualify as an Incentive Stock Option or which is designated as a Non-Qualified
Option, and which may or may not be issued with related Stock Appreciation
Rights.
(s) "Outside Director" means a Director who is not an
Employee.
(t) "Participant" means an Eligible Employee, Director or
Consultant designated by the Committee from time to time during the term of the
1995 Plan to receive one or more of the stock-based compensation incentives
provided under the 1995 Plan.
(u) "Reduction in Force" means any termination of employment
that, in the sole judgment of the Company, is (i) made at the request of the
Company or an Affiliated Corporation and is due to the elimination of the
Employee's position, or (ii) a reduction in the number of persons employed by
the Company, either overall or in the Employee's function, department, division
or other relevant workplace unit.
(v) "Restricted Stock Award" means an award of Common Stock
granted to a Participant pursuant to Section 10 that is subject to certain
restrictions imposed in accordance with the provisions of such Section.
-3-
<PAGE> 46
(w) "Retire" means any termination of employment that is
deemed to be a "Retirement" by a resolution of the Board of Directors, or any
termination of employment made at the request of the Employee if, as of the date
of such termination, such Employee (a) is age 62 or older and (b) has, at the
time of such termination, been employed by the Company or any Affiliated
Corporation for six years or more, with no break in such employment of longer
than one year.
(x) "Retired" means the status of any former Employee after he
or she Retires.
(y) "Stock Appreciation Right" means a right granted to a
Participant pursuant to Section 9 to receive a payment from the Company equal to
the difference between the Fair Market Value of one or more shares of Common
Stock subject to a Non-Qualified Option or an Incentive Stock Option and the
exercise price of such shares under the terms of such Stock Option.
(z) "Stock Option" means an Incentive Stock Option or a
Non-Qualified Option.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
the masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
SECTION 3
PLAN ADMINISTRATION
3.1 ADMINISTRATION GENERALLY. The 1995 Plan shall be administered by
the Board or Committee. In accordance with the provisions of the 1995 Plan, the
Committee, in its sole discretion:
(i) shall select the Participants from Eligible
Employees, Directors and Consultants;
(ii) shall determine the number of shares of Common
Stock to be subject to Incentive Stock Options, Non-Qualified Options, Stock
Appreciation Rights, Restricted Stock Awards and other Common Stock or Common
Stock Equivalent awards granted pursuant to the 1995 Plan;
(iii) shall determine the number of shares of Common
Stock or Common Stock Equivalents to be issued as MBO Payments;
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(iv) shall determine the time at which such options,
rights, awards and payments are to be granted;
(v) shall fix the exercise price, period and the
manner in which a Stock Option becomes exercisable;
(vi) shall establish the duration and nature of
Restricted Stock Award restrictions;
(vii) shall determine the Fair Market Value of the
Common Stock, in accordance with Section 2.1(l) of the 1995 Plan;
(viii) shall determine whether and under what
circumstances, if any, a Stock Option or Stock Appreciation Right may be settled
in cash or Common Stock Equivalents instead of Common Stock;
(ix) [Intentionally Deleted]
(x) may modify or amend the terms and conditions of
any Stock Option, Stock Appreciation Right, Restricted Stock Award or other
Common Stock award, subject to Section 19 of the Plan (including, but not
limited to, accelerating vesting or waiving forfeiture restrictions);
(xi) may institute an option exchange program;
(xii) may authorize any person to execute on behalf of
the Company any instrument required to effect the grant of a Stock Option, Stock
Appreciation Right, Restricted Stock Award or other Common Stock or Common Stock
Equivalent award previously granted by the Committee; and
(xiii) shall establish such other terms and
requirements of the various compensation incentives under the 1995 Plan as the
Committee may deem necessary or desirable and consistent with the terms of the
1995 Plan.
The Committee shall determine the form or forms of the agreements with
Participants, which shall evidence the particular provisions, terms, conditions,
rights and duties of the Company and the Participants with respect to Incentive
Stock Options, Non-Qualified Options, Stock Appreciation Rights, Common Stock
Equivalent and Restricted Stock Awards granted pursuant to the 1995 Plan, which
provisions need not be identical except as may be provided herein. The Committee
may from time to time adopt such rules and regulations for carrying out the
purposes of the 1995 Plan as it may deem proper and in the best interests of the
Company. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the 1995 Plan or in any agreement entered into
hereunder in the manner and
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to the extent it shall deem expedient to carry the 1995 Plan into effect, and it
shall be the sole and final judge of such expediency. No member of the Committee
shall be liable for any action or determination made in good faith. The
determinations, interpretations and other actions of the Committee pursuant to
the provisions of the 1995 Plan shall be binding and conclusive for all purposes
and on all persons, subject only to the review and control of the Board on all
Plan matters except selection of Participants.
3.2 MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3, the
1995 Plan may be administered by different bodies with respect to Directors who
are Employees, Outside Directors, officers (within the meaning of Rule 16a-1(f))
who are not Directors, and Employees who are neither Directors nor officers.
3.3 ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS. With respect
to grants of Stock Options, Stock Appreciation Rights, Restricted Stock Awards
or other Common Stock or Common Stock Equivalent awards under the 1995 Plan to
Employees who are also officers or Directors, the 1995 Plan shall be
administered by:
(a) the Board, if the Board may administer the 1995 Plan and
still have transactions under the 1995 Plan qualify for exemption under Rule
16b-3, or
(b) a Committee designated by the Board to administer the 1995
Plan, which Committee shall be constituted (i) in such a manner as to permit
awards granted under the 1995 Plan to qualify for exemption under Rule 16b-3 and
(ii) in such a manner as to satisfy applicable laws.
3.4 ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With respect to
grants of Stock Options, Stock Appreciation Rights, Restricted Stock Awards or
other Common Stock or Common Stock Equivalent awards to Employees who are
neither Directors nor officers, the 1995 Plan shall be administered by:
(a) the Board or
(b) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy applicable laws.
3.5 COMMITTEE COMPOSITION. Once a Committee has been appointed pursuant
to Section 3.3 or 3.4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) or remove all members of the Committee
and thereafter directly administer the Plan, all to the extent permitted by
applicable laws and, in the case of a Committee appointed under
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Section 3.3, to the extent permitted by Rule 16b-3 as it applies to transactions
intended to qualify thereunder as exempt transactions.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Thirteen Million Five Hundred Fifty Thousand
(13,550,000) shares of Common Stock are authorized for issuance under the 1995
Plan in accordance with the provisions of the 1995 Plan and subject to such
restrictions or other provisions as the Committee may from time to time deem
necessary. This authorization may be increased from time to time by approval of
the Board and the stockholders of the Company. Shares of Common Stock that are
issued upon exercise of Incentive Stock Options, Non-Qualified Options, or Stock
Appreciation Rights or pursuant to MBO Payments, shares of Common Stock that are
issued as Restricted Stock Awards, shares of Common Stock that are issued in
connection with Common Stock Equivalents, and shares of Common Stock that are
issued pursuant to a plan adopted pursuant to Section 15, shall be applied to
reduce the number of shares of Common Stock remaining available for future
issuance under the 1995 Plan.
4.2 UNUSED AND FORFEITED STOCK. Any shares of Common Stock that are
subject to an Incentive Stock Option or a Non-Qualified Option that expires or
for any reason is terminated unexercised, and with respect to which no related
Stock Appreciation Right has been exercised, any shares of Common Stock that are
subject to Common Stock Equivalents or to a Restricted Stock Award and that are
forfeited (the "Forfeited Restricted Stock"), and any shares of Common Stock
that for any other reason are not issued to a Participant (not including shares
withheld pursuant to Section 20.2) or are forfeited (if forfeited, the "Other
Forfeited Stock"), shall automatically become available for use under the 1995
Plan; provided, however, that (i) no shares of Forfeited Restricted Stock or
Other Forfeited Stock may be subject to Incentive Stock Options and (ii) such
shares shall not be returned to the 1995 Plan if prohibited by Rule 16b-3.
4.3 CAPITAL ADJUSTMENTS.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Stock Option, Stock Appreciation Right and Common Stock
Equivalent ("Rights"), and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Stock Options, Stock
Appreciation Rights or Common Stock Equivalents have yet been granted or that
have been returned to the Plan upon cancellation or expiration of a Stock
Option, Stock Appreciation Right or Common Stock Equivalents (the "Shares
Available for Future Grant"), as well as the price per share
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of Common Stock covered by each outstanding Stock Option or Stock Appreciation
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued and outstanding shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued and
outstanding shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such proportionate adjustment shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into or exercisable for shares of
stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number of Shares Available for Future Grant or the
number or price of shares of Common Stock subject to outstanding Stock Options
or Stock Appreciation Rights.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that a Stock Option or
Stock Appreciation Right has not been previously exercised, it will terminate
immediately prior to the consummation of such proposed action. The Committee
may, in the exercise of its sole discretion in such instances, declare that any
Stock Option or Stock Appreciation Right shall terminate as of a date fixed by
the Committee and give each Participant the right to exercise his or her Stock
Option or Stock Appreciation Right in whole or in part, including with respect
to shares as to which the Stock Option or Stock Appreciation Right would not
otherwise be exercisable. Unless determined otherwise by the Committee, Common
Stock Equivalents shall convert into shares of Common Stock immediately prior to
the consummation of any such dissolution or liquidation.
(c) Merger or Asset Sale. In the event of a merger or consolidation
of the Company with or into another corporation, or the sale of all or
substantially all of the assets of the Company, each outstanding Stock Option,
Stock Appreciation Right and Common Stock Equivalent may be assumed or an
equivalent Stock Option, Stock Appreciation Right or Common Stock Equivalent may
be substituted by the successor corporation or a parent or subsidiary of the
successor corporation. The Committee may, in lieu of such assumption or
substitution of Stock Options and Stock Appreciation Rights, provide for
Optionees to have the right to exercise his or her Stock Option or Stock
Appreciation Right in whole or in part, including with respect to shares as to
which it would not otherwise be exercisable. If the Committee makes a Common
Stock Equivalent convertible into shares of Common Stock or makes a Stock Option
or Stock Appreciation Right exercisable in lieu of assumption or substitution in
the event of a merger, consolidation or sale of assets, the Committee shall
notify the Participants and, in the case of a Stock Option or Stock Appreciation
Right, shall notify the Optionee that the Stock Option or Stock Appreciation
Right shall be fully exercisable for a period of thirty (30) days from the date
of such notice, and the Stock Option or Stock Appreciation Right shall terminate
upon the expiration of such period. For the
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purposes of this paragraph, the Stock Option, Stock Appreciation Right or Common
Stock Equivalent shall be considered assumed if, following the merger,
consolidation or sale of assets, the Stock Option, Stock Appreciation Right or
Common Stock Equivalent confers the right to purchase or receive, for each share
of Common Stock subject to the Stock Option, Stock Appreciation Right or Common
Stock Equivalent immediately prior to the merger, consolidation or sale of
assets, the consideration (whether stock, cash or other securities or property)
received in the merger, consolidation or sale of assets by holders of Common
Stock for each share held on the effective date of the transaction (and, if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares); provided, however, that
if such consideration received in the merger, consolidation or sale of assets
was not solely common stock of the successor corporation or its parent, the
Committee may, with the consent of the successor corporation, provide for the
consideration to be received upon conversion of a Common Stock Equivalent or
upon the exercise of the Stock Option or Stock Appreciation Right, for each
share of Common Stock subject to the Stock Option, Stock Appreciation Right or
Common Stock Equivalent 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 in the merger, consolidation or sale of assets.
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SECTION 5
PARTICIPATION
5.1 ELIGIBILITY. Participants in the 1995 Plan shall be those Eligible
Employees, Directors and Consultants who, in the judgment of the Committee, are
performing, or during the term of their service to the Company are expected to
perform, vital services in the management, operation and development of the
Company or an Affiliated Corporation, and significantly contribute or are
expected to significantly contribute to the achievement of long-term corporate
economic objectives. Participants who are Employees may be granted from time to
time one or more Incentive Stock Options (with or without Stock Appreciation
Rights), and Participants (whether or not they are Employees) may be granted one
or more Non-Qualified Options (with or without Stock Appreciation Rights), one
or more Restricted Stock Awards, one or more MBO Payments in Common Stock
Equivalents or in shares of Common Stock, Common Stock equivalents pursuant to
Section 12, and one or more other Common Stock or Common Stock Equivalent awards
pursuant to Section 15; provided, however, that the grant of each such option,
right, award or payment shall be separately approved by the Committee, and
receipt of one such option, right, award or payment shall not result in
automatic receipt of any other option, right, award or payment. Upon
determination by the Committee that a Stock Option, Stock Appreciation Right,
Restricted Stock Award, MBO Payment or other Common Stock or Common Stock
Equivalent award is to be granted to a Participant, written notice shall be
given to such person, specifying the terms, conditions, rights and duties
related thereto. Each Participant shall, if required by the Committee, enter
into an agreement with the Company, in such form as the Committee shall
determine and as is consistent with the provisions of the 1995 Plan, specifying
such terms, conditions, rights and duties. Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, MBO Payments and other Common Stock or Common
Stock Equivalent awards shall be deemed to be granted as of the date specified
in the grant resolution of the Committee, which date shall be the date of any
related agreement with the Participant. In the event of any inconsistency
between the provisions of the 1995 Plan and any such agreement entered into
hereunder, the provisions of the 1995 Plan shall govern.
5.2 LIMITATIONS. The following limitations shall apply to grants of
Stock Options and Stock Appreciation Rights to Participants:
(a) No Participant shall be granted, in any fiscal year of the
Company, Stock Options and Stock Appreciation Rights to purchase more than
1,000,000 shares.
(b) The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 4.3.
(c) If a Stock Option or Stock Appreciation Right is canceled in
the same fiscal year of the Company in which it was granted (other than in
connection with a
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transaction described in Section 4.3), the canceled Stock Option or Stock
Appreciation Right shall be counted against the limit set forth in Section
5.2(a).
(d) Incentive Stock Options may not be granted to Outside Directors
or to Consultants.
5.3 RULE 16B-3. Stock Options, Stock Appreciation Rights, Restricted
Stock Awards, MBO Payments and other Common Stock or Common Stock Equivalent
awards granted to Participants who are subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), must comply with the
applicable provisions of Rule 16b-3 and shall contain such additional conditions
or restrictions as may be required thereunder to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to 1995 Plan
transactions.
SECTION 6
STOCK OPTIONS
6.1 GRANT OF STOCK OPTIONS. Coincident with or following designation
for participation in the 1995 Plan, a Participant may be granted one or more
Stock Options. The Committee in its sole discretion may designate whether a
Stock Option granted to an Employee is to be considered an Incentive Stock
Option or a Non-Qualified Option. The Committee may grant both an Incentive
Stock Option and a Non-Qualified Option to the same Employee at the same time or
at different times. Incentive Stock Options and Non-Qualified Options, whether
granted at the same or different times, shall be deemed to have been awarded in
separate grants, shall be clearly identified, and in no event will the exercise
of one Stock Option affect the right to exercise any other Stock Option or
affect the number of shares of Common Stock for which any other Stock Option may
be exercised. All Stock Options granted to Participants who are not Employees
shall be Non-Qualified Options.
6.2 MANNER OF STOCK OPTION EXERCISE. A Stock Option may be exercised by
a Participant in whole or in part from time to time, subject to the conditions
contained herein, (i) by delivery of written notice of exercise to the Company
at its principal office in Louisville, Colorado (Attention: Corporate
Secretary), in person or through mail, facsimile or electronic mail, or by
delivery of notice of exercise in such other method as has been approved by the
Committee, and (ii) by paying in full, with the written notice of exercise or at
such other time as the Committee may establish, the total exercise price under
the Stock Option for the shares being purchased. Such notice shall be in a form
satisfactory to the Committee and shall specify the particular Stock Option (or
portion thereof) that is being exercised and the number of shares with respect
to which the Stock Option is being exercised. The exercise of the Stock Option
shall be deemed effective upon receipt of such notice by the Corporate Secretary
and payment to the Company. As soon as practicable after
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the effective exercise of the Stock Option, and upon satisfaction of all
applicable withholding requirements pursuant to Section 20, the Participant
shall be recorded on the stock transfer books of the Company as the owner of the
shares purchased and the Company shall deliver to the Participant one or more
duly issued and executed stock certificates evidencing such ownership.
6.3 PAYMENT OF STOCK OPTION EXERCISE PRICE. At the time of the exercise
of a Stock Option, payment of the total Stock Option exercise price for the
shares to be purchased shall be made in the manner specified in the option
agreement relating to such Stock Option, which may include any or all of the
following methods of payment:
(i) in cash or by check;
(ii) by transfer from the Participant to the Company of
shares of Common Stock (other than shares of Common Stock that the Committee
determines by rule may not be used to exercise Stock Options) with a then
current aggregate Fair Market Value equal to the total Stock Option exercise
price;
(iii) delivery to the Company of (A) a properly
executed exercise notice, (B) irrevocable instructions to a broker to sell a
sufficient number of the shares being exercised to cover the exercise price and
to promptly deliver to the Company the amount of sale proceeds required to pay
the exercise price and any required tax withholding relating to the exercise,
and (C) such other documentation as the Committee and the broker shall require
to effect a same-day exercise and sale;
(iv) delivery to the Company of (A) a properly executed
exercise notice, (B) irrevocable instructions to a broker or other third party
acceptable to the Company to hold the shares being exercised as collateral for a
loan to the Optionee of an amount sufficient to cover the exercise price and to
promptly deliver to the Company the amount of loan proceeds required to pay the
exercise price and any required tax withholding relating to the exercise and (C)
such other documentation as the Committee and the broker or other third party
shall require to effect the transaction;
(v) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) any combination of the foregoing methods of
payment; or
(vii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by applicable laws, rules and
regulations and by the agreement relating to the Stock Option being exercised.
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In the event that the option agreement does not specify the acceptable methods
of payment of the exercise price, payment may be made by any of the methods
specified in clauses (i) through (iii), inclusive, of this Section 6.3, or any
combination of such methods of payment.
6.4 STOCKHOLDER PRIVILEGES. No Participant shall have any rights as a
stockholder with respect to any shares of Common Stock covered by a Stock Option
until the Participant becomes the holder of record of such Common Stock, and no
adjustments shall be made for dividends or other distributions or other rights
as to which there is a record date preceding the date such Participant becomes
the holder of record of such Common Stock.
SECTION 7
INCENTIVE STOCK OPTIONS
7.1 INCENTIVE STOCK OPTION EXERCISE PRICE. The per share price to be
paid by a Participant at the time an Incentive Stock Option is exercised shall
be determined by the Committee at the time an Incentive Stock Option is granted
(or deemed to have been granted under applicable tax rules), but in no event
shall such exercise price be less than:
(a) one hundred percent of the Fair Market Value, on the date the
Incentive Stock Option is granted (or deemed to have been granted under
applicable tax rules), of one share of the stock to which such Stock Option
relates; or
(b) one hundred and ten percent of the Fair Market Value, on the
date the Incentive Stock Option is granted (or deemed to have been granted under
applicable tax rules), of one share of the stock to which such Stock Option
relates if, at the time the Incentive Stock Option is granted, the Participant
owns, directly or indirectly (as determined pursuant to Section 424(d) of the
Internal Revenue Code), ten percent or more of the total combined voting power
of all classes of stock of the Company or of any Affiliated Corporation (such a
Participant is referred to as a "10% Holder").
7.2 NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to an Incentive Stock Option shall be designated by the Committee at the
time the Committee decides to grant an Incentive Stock Option.
7.3 AGGREGATE LIMITATION OF STOCK EXERCISABLE UNDER OPTIONS. To the
extent the aggregate Fair Market Value, determined as of the time an Incentive
Stock Option is granted, of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an Option Holder
in any calendar year under the 1995 Plan or otherwise, granted by the Company
and Affiliated Corporations, exceeds $100,000, such excess shall be treated as a
Non-Qualified Option.
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7.4 DURATION OF INCENTIVE STOCK OPTIONS. The period during which an
Incentive Stock Option may be exercised shall be fixed by the Committee, but in
no event shall such period be more than ten years from the date the Stock Option
is granted, or, in the case of Participants who are 10% Holders as described in
Section 7.1(b), five years from the date the Stock Option is granted. No
Incentive Stock Option with respect to which Stock Appreciation Rights have been
granted may be exercised during the six-month period following the date on which
such Stock Option was granted. Upon the expiration of such exercise period, the
Incentive Stock Option, to the extent not then exercised, shall terminate.
Except as otherwise provided in Section 11, all Incentive Stock Options granted
to a Participant hereunder shall terminate and may no longer be exercised if the
Participant ceases to be an Employee.
7.5 RESTRICTIONS ON EXERCISE OF INCENTIVE STOCK OPTIONS. Incentive
Stock Options may be granted subject to such restrictions as to the timing of
exercise of all or various portions thereof as the Committee may determine at
the time it grants Incentive Stock Options to Participants.
7.6 DISPOSITION OF STOCK ACQUIRED PURSUANT TO THE EXERCISE OF INCENTIVE
STOCK OPTIONS -- WITHHOLDING. In the event that a Participant makes a
disposition (as defined in Section 424(c) of the Internal Revenue Code) of any
Common Stock acquired pursuant to the exercise of an Incentive Stock Option
prior to the expiration of two years from the date on which the Incentive Stock
Option was granted or prior to the expiration of one year from the date on which
the Stock Option was exercised, the Participant shall send written notice to the
Company at its principal office in Louisville, Colorado (Attention: Corporate
Secretary) of the date of such disposition, the number of shares disposed of,
the amount of proceeds received from such disposition and any other information
relating to such disposition as the Company may reasonably request. The
Participant shall, in the event of such a disposition, make appropriate
arrangements with the Company to provide for the amount of additional
withholding required by federal, state and local income and other tax laws.
SECTION 8
NON-QUALIFIED OPTIONS
8.1 OPTION EXERCISE PRICE. The per share price to be paid by the
Participant at the time a Non-Qualified Option is exercised shall be determined
by the Committee at the time the Stock Option is granted or amended, but in no
event shall such exercise price per share be less than one hundred percent of
the Fair Market Value of one share of Common Stock on the date the Stock Option
is granted or amended.
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8.2 NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to a Non-Qualified Option shall be designated by the Committee at the
time the Committee decides to grant a Non-Qualified Option.
8.3 DURATION OF NON-QUALIFIED OPTIONS; RESTRICTIONS ON EXERCISE. The
period during which a Non-Qualified Option may be exercised, and the installment
restrictions on option exercise during such period, if any, shall be fixed by
the Committee, but in no event shall such period be more than ten years from the
date the Stock Option is granted, and no Non-Qualified Option with respect to
which Stock Appreciation Rights have been granted may be exercised during the
six-month period immediately following the date on which such Stock Option was
granted. Upon the expiration of such exercise period, the Non-Qualified Option,
to the extent not then exercised, shall terminate. Except as otherwise provided
in Section 11, all Non-Qualified Options granted to a Participant hereunder
shall terminate and may no longer be exercised if the Participant ceases to be
an Employee, Director or Consultant.
SECTION 9
STOCK APPRECIATION RIGHTS
9.1 GRANT OF RIGHTS. A Stock Appreciation Right may be granted to a
Participant in conjunction with any Incentive Stock Option or Non-Qualified
Option granted to such Participant, as determined by the Committee, (i) at the
time of the grant of such Stock Option in the case of an Incentive Stock Option
or (ii) at the time of grant, or at any subsequent time during the term of the
Stock Option, in the case of a Non-Qualified Option. Once granted, the term of a
Stock Appreciation Right shall be equal to the term of its related Stock Option.
Upon exercise of a Stock Appreciation Right by a Participant for a share of
Common Stock, the related Stock Option shall be terminated with respect to such
share. Incentive Stock Options and Non-Qualified Options shall not be
exercisable with respect to shares of Common Stock for which Stock Appreciation
Rights have been exercised. Upon such Stock Appreciation Right exercise, the
Participant shall be entitled to receive the economic value of such Stock
Appreciation Right determined in the manner prescribed in Section 9.2.
9.2 EXERCISE OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights
shall be subject to such terms and conditions consistent with other provisions
of the 1995 Plan as may be determined from time to time by the Committee and
shall include the following:
(a) A Stock Appreciation Right shall be exercisable, in whole or in
part, at such time or times and only to the extent that the Stock Option to
which it relates shall be exercisable; provided, however, that, except as
otherwise provided in Section 11, no Stock Appreciation Right shall be
exercisable during the six-month period following the date of its
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grant. A Stock Appreciation Right shall be exercised by the giving of notice in
the same manner as the Stock Option to which it relates may be exercised.
(b) Upon the exercise of a Stock Appreciation Right, a Participant
shall be entitled to receive the economic value thereof, which shall be equal to
(i) the excess of the then Fair Market Value of one share of Common Stock over
the exercise price per share specified in the related Stock Option, multiplied
by (ii) the number of shares in respect of which the Stock Appreciation Right is
being exercised.
(c) The Committee shall, in the agreement relating to the Stock
Appreciation Right, either (i) specify the form in which payment of the economic
value of exercised Stock Appreciation Rights will be made to the Participant
upon exercise thereof (i.e., cash, Common Stock, or a specified combination
thereof) or (ii) grant the Participant the right to elect to receive cash in
full or partial payment of such economic value, at the Participant's discretion.
If the agreement relating to the Stock Appreciation Right does not so specify,
then the Participant shall have the right to elect cash or Common Stock, Common
Stock Equivalents or any combination thereof. If the Participant is not an
"officer" or "director" of the Company, as those terms are defined in the rules
under Section 16 of the Exchange Act, at the time of grant or exercise of the
Stock Appreciation Right, then the Committee may retain the right to either
consent to or disapprove of Participant's elected method of payment.
9.3 STOCKHOLDER PRIVILEGES. No Participant shall have any rights as a
stockholder with respect to any shares of Common Stock covered by a Stock
Appreciation Right until the Participant becomes the holder of record of such
Common Stock, and no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the
date such Participant becomes the holder of record of such Common Stock.
SECTION 10
RESTRICTED STOCK AWARDS
10.1 AWARDS GRANTED BY COMMITTEE. Coincident with or following
designation for participation in the 1995 Plan, a Participant may be granted one
or more Restricted Stock Awards consisting of shares of Common Stock. The number
of shares granted as a Restricted Stock Award shall be determined by the
Committee. The Committee may, in its discretion, require the payment by the
Participant of cash in an amount equal to the par value of the Common Stock
subject to the Restricted Stock Award as a condition precedent to the issuance
of Common Stock to the Participant.
10.2 RESTRICTIONS. A Participant's right to retain a Restricted Stock
Award granted to him or her under Section 10.1 shall be subject to such
restrictions, including but not
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limited to the Participant's continuous status as an Employee, Director or
Consultant for a restriction period specified by the Committee, or the
attainment of specified performance goals and objectives, as may be established
by the Committee with respect to such award. The Committee may in its sole
discretion require different periods of employment, director service or
consulting service or different performance goals and objectives with respect to
different Participants, to different Restricted Stock Awards or to separate,
designated portions of the Common Stock shares constituting a Restricted Stock
Award. Subject to the provisions of Sections 11 and 14, if a Participant's
continuous status as an Employee, Director or Consultant terminates prior to the
end of such restriction period or the attainment of such goals and objectives as
may be specified by the Committee, the Restricted Stock Award shall be forfeited
and all shares of Common Stock related thereto shall be immediately returned to
the Company.
10.3 PRIVILEGES OF A STOCKHOLDER; TRANSFERABILITY. A Participant shall
have all voting, dividend, liquidation and other rights with respect to Common
Stock in accordance with its terms received by him or her as a Restricted Stock
Award under this Section 10 upon becoming the holder of record of such Common
Stock; provided, however, that the Participant's right to sell, encumber, or
otherwise transfer such Common Stock (and any other securities issued in respect
of such shares of Common Stock as a stock dividend, stock split or the like)
shall be subject to the limitations of Section 16.2 hereof.
10.4 ENFORCEMENT OF RESTRICTIONS. The Committee may in its sole
discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 10.2 and 10.3:
(a) Placing a legend on the stock certificates referring to the
restrictions;
(b) Requiring the Participant to keep the stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain in effect;
or
(c) Requiring that the stock certificates, duly endorsed, be held
in the custody of a third party while the restrictions remain in effect.
SECTION 11
EFFECT OF TERMINATION OF SERVICE ON STOCK OPTIONS,
STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK AWARDS
11.1 EFFECT OF TERMINATION OF SERVICE ON STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS. No Stock Option or Stock Appreciation Right may be
exercised unless, at the time of such exercise, the Participant is an Employee,
Director or Consultant, except as follows:
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(a) The Stock Option or Stock Appreciation Right may be exercised
within such period of time after termination of service as is specified in the
Stock Option or Stock Appreciation Right agreement or instrument, but (i) in no
event may such post-termination period extend beyond the original expiration
date of the Stock Option or Stock Appreciation Right and (ii) only to the extent
that the Participant was entitled to exercise it at the date of termination of
service. In the absence of a specified time in the Stock Option or Stock
Appreciation Right agreement or instrument, the Stock Option or Stock
Appreciation Right shall remain exercisable for the applicable period and to the
extent specified in Section 11.5 below following the Participant's termination
of service as an Employee, Director or Consultant. In the case of an Incentive
Stock Option, such period of time shall not exceed 90 days from the date of
termination of status as an Employee; provided, however, that the agreement may
specify a longer period, in which case Stock Option shall convert to a
Non-Qualified Option on the 91st day following termination of employment.
(b) If the Participant dies while serving as an Employee, Director
or Consultant, or within three months after the Participant ceases such service,
the Stock Option or Stock Appreciation Right may be exercised by the person to
whom it is transferred by will or the laws of descent and distribution within
such period of time after death as is specified in the Stock Option or Stock
Appreciation Right agreement or instrument, but in no event may such post-death
period extend beyond the original expiration date of the Stock Option or Stock
Appreciation Right. In the absence of a specified time in the Stock Option or
Stock Appreciation Right agreement or instrument, the Stock Option or Stock
Appreciation Right shall remain exercisable for the applicable period and to the
extent specified in Section 11.5 below.
(c) If the Participant becomes disabled (within the meaning of
Section 22(e)(3) of the Internal Revenue Code) while serving as an Employee,
Director or Consultant, the Stock Option or Stock Appreciation Right may be
exercised within such period of time after termination of service as is
specified in the Stock Option or Stock Appreciation Right agreement or
instrument, but in no event may such post-termination period extend beyond the
original expiration date of the Stock Option or Stock Appreciation Right. In the
absence of a specified time in the Stock Option or Stock Appreciation Right
agreement or instrument, the Stock Option or Stock Appreciation Right shall
remain exercisable for the applicable period and to the extent specified in
Section 11.5 below.
11.2 EFFECT OF TERMINATION OF SERVICE ON RESTRICTED STOCK AWARDS. In
the event of the death or disability (as defined in Section 11.1(c)) of a
Participant, all period of service and other restrictions applicable to
Restricted Stock Awards then held by such Participant shall lapse, and such
awards shall become fully vested and nonforfeitable. In the event of a
Participant's termination of service for any other reason, any Restricted Stock
Awards as to which the employment period or other restrictions have not been
satisfied shall be forfeited.
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11.3 MEANING OF EMPLOYMENT. For all purposes of the 1995 Plan and any
Stock Option or Stock Appreciation Right granted hereunder, "employment" shall
be defined in accordance with the provisions of Section 3401(c) of the Internal
Revenue Code and the regulations thereunder.
11.4 MEANING OF CONTINUOUS STATUS. Unless otherwise specified in the
Stock Option or Stock Appreciation Right agreement or instrument, so long as a
Participant is either an Employee or a Director or a Consultant, he or she shall
be considered to be in continuous status as an Employee, Director or Consultant,
even if the person is serving in one capacity when the award is granted and
subsequently changes to service in a different capacity, such as terminating
employment but continuing to serve as a Consultant.
11.5 DEFAULT PROVISIONS FOR TERMINATION OF SERVICE. In the event that
the Stock Option or Stock Appreciation Right agreement or instrument do not
specify the post-termination period of exercisability, the following provisions
shall apply:
(a) Subject to 11.5(f), if such termination is due to the death of
the Participant, or the Participant dies within three months after such
termination, or if such termination occurs after the Participant becomes
disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code),
the Stock Option or Stock Appreciation Right may be exercised by the Participant
(or, in the case of death, by the person to whom it is transferred by will of
the laws of descent and distribution): (i) for all Incentive Stock Option
grants, or for Non-Qualified Stock Option grants or Stock Appreciation Right
grants made before May 22, 1997, or for Non-Qualified Stock Option grants or
Stock Appreciation Right grants made on or after May 22, 1997, if, at the time
of the Participant's termination, such Participant was not a Long-Term Employee,
then within a period of one year after the date of death (but in no event longer
than the term of the Stock Option or Stock Appreciation Right); and (ii) for
grants made on or after May 22, 1997, if the Participant was a Long-Term
Employee at the time of the Participant's termination, the Non-Qualified Stock
Option or Stock Appreciation Right may be exercised, to the extent it is vested
as of the date of the Participant's termination, for the entire remaining term
of such Stock Option or Stock Appreciation Right.
(b) Subject to 11.5(f), if such termination occurs after the
Participant becomes disabled (within the meaning of Section 22(e)(3) of the
Internal Revenue Code), the Stock Option or Stock Appreciation Right may be
exercised: (i) for all Incentive Stock Option grants, or for Non-Qualified Stock
Option or Stock Appreciation Right grants made before May 22, 1997, or for
Non-Qualified Stock Option grants or Stock Appreciation Right grants made on or
after May 22, 1997, if, at the time of the Participant's termination, such
Participant was not a Long-Term Employee, then within a period of one year after
the date of such termination (but in no event longer than the term of the Stock
Option or Stock Appreciation Right); and (ii) for grants made on or after May
22, 1997, if the Participant is a Long-Term Employee, a Non-Qualified Stock
Option or Stock Appreciation Right may be
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exercised to the extent it is vested as of the date of the Participant's
termination for the entire remaining term of such Stock Option or Stock
Appreciation Right.
(c) Subject to 11.5(f), if such termination is due to a Reduction
in Force, then, for grants on or after May 22, 1997, the Stock Option or Stock
Appreciation Right shall be exercisable, to the extent vested at the time of
such termination, for a period of six months from the date of such termination.
(d) Subject to 11.5(f), if the Participant Retires, then, for
grants on or after May 22, 1997, the Stock Option or Stock Appreciation Right
shall be exercisable, to the extent vested at the time the Participant Retires,
for the entire remaining term of such Stock Option or Stock Appreciation Right.
(e) Subject to 11.5(f), if the Participant's employment is
terminated for any reason other than those reasons covered by subsections (a)
through (d) of this Section 11.5, then the Stock Option or Stock Appreciation
Right shall be exercisable, to the extent vested at the time of such
termination, for a period of ninety (90) days after the date of such
termination.
(f) Notwithstanding the provisions of Section 11.5(a) through (e)
above:
(i) With respect to all grants of Stock Options or Stock
Appreciation Rights occurring on or after May 22, 1997, no such grants shall be
exercisable after the date of termination of employment if either the
termination was for Cause, or if the former Employee, Consultant or Director is
then, in the sole judgment of the Company, in material breach of any
contractual, statutory, fiduciary or other legal obligation to the Company.
(ii) In addition to the provisions of paragraph (i) above,
unless otherwise provided in the Option or Stock Appreciation Right agreement,
with respect to all grants of Stock Options or Stock Appreciation Rights
occurring on or after March 4, 1998 (or earlier date if agreed to by the Company
and the participant): (x) if at any time within six months after termination of
the optionee's employment or service, the former Employee, Consultant or
Director is, in the sole judgment of the Company, engaging or has engaged in any
activity in competition with any activity of the Company, or harmful or contrary
to the interests of the Company, including, but not limited to: accepting
employment with or serving as a consultant or advisor to any employer that is in
competition with the Company or acting against the interests of the Company,
including employing or recruiting any Employee of the Company; or disclosing or
misusing any confidential, proprietary or material information concerning the
Company (such information includes, without limitation, information regarding
the Company's operations, its products, product designs, business plans,
strategic plans, marketing and distribution plans and arrangements, customers,
and financial statements, budgets and forecasts); or participating in any
hostile takeover attempt
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of the Company, then (I) any Options or Stock Appreciation Rights still held by
the optionee shall immediately cease to be exercisable and shall be canceled,
and (II) any shares issued upon exercise of Options or Stock Appreciation Rights
after the date of termination of employment or service shall be sold back to the
Company at the exercise price paid for such shares, and any cash received upon
exercise of a Stock Appreciation Right after termination of employment or
service shall be returned to the Company; (y) if the Employee, Consultant or
Director leaves the employment of the Company within six months of exercising
Stock Options or Stock Appreciation Rights for any reason except death,
disability or retirement, then any gain represented by the fair market value on
the date of exercise over the exercise price multiplied by the number of shares
such individual purchased ("option gain"), without regard to any subsequent
market price decrease or increase, shall be paid by such individual to the
Company; and (z) shares issued upon exercise of Options or Stock Appreciation
Rights after termination of employment or service shall be non-transferable
until six months after such termination and shall be held in escrow by the
Company until such time. The Compensation Committee, in its sole discretion,
may, with respect to a particular Option or Stock Appreciation Right, omit the
provisions of this paragraph (ii) or release the optionee from the operation of
such provisions if the Compensation Committee determines that such action is in
the best interests of the Company.
SECTION 12
DIRECTOR STOCK AND STOCK EQUIVALENTS
12.1 DIRECTOR STOCK AND STOCK EQUIVALENTS. Effective with the beginning
of the Company's fiscal year beginning December 28, 1996, each Outside Director
may receive all or a portion of his or her annual retainer and any meeting fees
(which shall include any additional annual retainer or fees paid to a committee
chair) in shares of Common Stock or, if elected by the Director, in Common Stock
Equivalents. An election pursuant to this Section 12 must be made in writing on
or before the first day of the beginning of the Outside Director's annual
retainer period and shall entitle the Outside Director to a number of shares of
Common Stock or Common Stock Equivalents determined by dividing (i) the dollar
amount of the portion of the retainer for the fiscal period that is to be paid
in shares of Common Stock or Common Stock Equivalents by (ii) the Fair Market
Value of one share of Common Stock as of the last day of each such fiscal
period, rounded up to the next full number of shares. In the event any person
becomes an Outside Director other than at the beginning of an annual retainer
period, such person may elect, within thirty (30) days of the date on which such
person becomes an Outside Director, to receive his or her retainer and any
meeting fees in shares of Common Stock or Common Stock Equivalents as described
above for the balance of such annual retainer period in accordance with the
formula set forth in the preceding sentence.
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For purposes of this Section 12, an annual retainer period shall begin
on the date of an Annual Meeting of the Stockholders of the Company and shall
end on the day immediately preceding the next following Annual Meeting.
12.2 STOCK EQUIVALENTS. The number of Common Stock Equivalents
determined under Section 12.1 for each Outside Director shall be credited to a
bookkeeping account established in the name of that Director subject to the
following terms and conditions:
(i) If the Company pays a cash dividend with respect to the Common
Stock at any time while Common Stock Equivalents are credited to an Outside
Director's account, there shall be credited to the Outside Director's account
additional Common Stock Equivalents equal to (a) the dollar amount of the cash
dividend the Director would have received had he or she been the actual owner of
the Common Stock to which the Common Stock Equivalents then credited to the
Director's account relate, divided by (b) the Fair Market Value of one share of
the Company's Common Stock on the dividend payment date. The Company will pay
the Director a cash payment in lieu of fractional stock equivalents on the date
of such dividend payment.
(ii) Upon the death or other termination of the Outside Director's
service on the Board, or, if authorized by the Committee, such other time or
times as specified by the Outside Director at the time of his or her annual
election(s), the Company shall deliver to the Outside Director (or his or her
designated beneficiary or estate) a number of shares of Common Stock equal to
the whole number of Common Stock Equivalents then credited to the Director's
account, together with a cash payment equal to the Fair Market Value of any
fractional Common Stock Equivalent.
(iii) The Company's obligation with respect to Common Stock
Equivalents shall not be funded or secured in any manner, nor shall an Outside
Director's right to receive Common Stock equivalents be assigned or
transferable, voluntarily or involuntarily, except as expressly provided herein.
(iv) An Outside Director shall not be entitled to any voting or
other stockholder rights as a result of the credit of Common Stock Equivalents
to the Director's account until certificates representing shares of Common Stock
are delivered to the Director (or his or her designated beneficiary or estate)
hereunder.
12.3 ELECTIONS. The Committee shall determine the form of Outside
Director's elections pursuant to this Section 12, which form shall evidence the
particular provisions, terms, conditions, rights and duties of the Company and
the Outside Directors with respect to Common Stock and Common Stock Equivalents
paid with respect to the Director's annual retainer and any meeting fees.
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SECTION 13
MBO PAYMENTS
13.1 PARTICIPANT ELECTION AS TO MBO PAYMENT. At such time as the
Committee determines that a Participant has or may become eligible for an MBO
Payment pursuant to the MBO Plan, the Committee may notify the Participant as to
whether or not the Participant will be required by the Committee to, or will be
given the right to elect to, accept all or a part of such MBO Payment in the
form of shares of Common Stock or Common Stock Equivalents. If the Committee
grants the Participant the right to elect whether to accept the MBO Payment in
Common Stock or Common Stock Equivalents, then the Participant shall have ten
(10) business days after the receipt of such notice from the Committee to make
such election. The Participant shall notify the Committee with respect to his or
her election on such form as may be provided for this purpose by the Committee,
setting forth thereon the dollar value of the portion of the MBO Payment which
he or she desires to receive in shares of Common Stock or Common Stock
Equivalents. If a Participant fails to make an election pursuant to this Section
with respect to the mode of payment of an MBO Payment, the entire MBO Payment
shall be made in cash.
13.2 DETERMINATION OF NUMBER OF SHARES. The number of shares of Common
Stock or Common Stock Equivalents that shall be issued or credited as an MBO
Payment shall be determined by dividing the dollar value of the portion of the
MBO Payment that is to be paid in shares of Common Stock or Common Stock
Equivalents (whether as elected above or as adjusted by the Committee pursuant
to Section 13.3) by the Fair Market Value of the Common Stock on the date the
shares are issued or credited with respect to such Payment. No fractional shares
of Common Stock or Common Stock Equivalent shall be issued or credited as a part
of an MBO Payment and the value of any such fractional share that would
otherwise be issued pursuant to the Participant's election shall be paid in
cash.
13.3 DECISION OF COMMITTEE. The Committee shall have the sole
discretion to either accept the Participant's election with respect to the
payment of an MBO Payment, in whole or in part, in shares of Common Stock or
Common Stock Equivalents or to determine that a lesser portion, or none, of the
MBO Payment will be made in shares of Common Stock or Common Stock Equivalents,
and the Committee's determination in this regard shall be final and binding on
the Participant.
SECTION 14
TENDER OFFERS AND ACQUISITIONS
If any person or entity (other than the Company or any person or entity
that is controlled by the Company) shall make a tender offer or exchange offer
for all or any part
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of the Common Stock or other capital shares of the Company and shall purchase
any part of the Common Stock or other capital shares tendered to it, and the
Board opposes or does not affirmatively recommend acceptance of such tender
offer or exchange offer, then:
(a) all Stock Options with respect to which no Stock Appreciation
Rights have been granted, and all Stock Options with respect to which Stock
Appreciation Rights have been issued (and all such related Stock Appreciation
Rights) that have been outstanding for at least six months, shall become
immediately exercisable in full during the remaining term thereof, whether or
not the Participants to whom such options and rights have been granted remain
Employees, Directors or Consultants of the Company; provided, however, that
Stock Appreciation Rights shall remain subject to the requirements of Section
9.2(a) with respect to the exercise thereof only within prescribed periods after
public release of Company financial information;
(b) all restrictions with respect to outstanding Restricted Stock
Awards shall immediately lapse; and
(c) all Common Stock Equivalents shall convert into shares of
Common Stock as of the date determined by the Committee.
SECTION 15
OTHER COMMON STOCK PROGRAMS
From time to time during the duration of the 1995 Plan, the Board may,
in its sole discretion, adopt one or more incentive compensation arrangements
for Eligible Employees, Directors or Consultants pursuant to which such Eligible
Employees, Directors or Consultants may acquire shares of Common Stock or Common
Stock Equivalents, whether by purchase, outright grant or otherwise. Any such
arrangements shall be subject to the general provisions of the 1995 Plan and all
shares of Common Stock or Common Stock Equivalents issued or credited pursuant
to such arrangements shall be issued under the 1995 Plan if so designated by the
Committee.
SECTION 16
RIGHTS OF PARTICIPANTS
16.1 EMPLOYMENT, DIRECTORSHIP OR CONSULTING RELATIONSHIP. Nothing
contained in the 1995 Plan or in any Stock Option, Stock Appreciation Right,
Restricted Stock Award or other Common Stock or Common Stock Equivalent award
granted under the 1995 Plan shall confer upon any Participant any right with
respect to the continuation of his or her
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employment, service as a director or consulting relationship with the Company or
any Affiliated Corporation, or interfere in any way with the right of the
Company or any Affiliated Corporation, subject to the terms of any separate
agreement to the contrary, at any time to terminate such service or to increase
or decrease the compensation of the Participant from the rate in existence at
the time of the grant of a Stock Option, Stock Appreciation Right, Restricted
Stock Award or other Common Stock or Common Stock Equivalent award. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of service shall be determined by the Committee at the
time.
16.2 NONTRANSFERABILITY. Except as otherwise approved by the Committee
and set forth in the agreement between the Company and the Participant, no right
or interest of any Participant in a Stock Option, a Stock Appreciation Right, a
Restricted Stock Award prior to the completion of the restriction period
applicable thereto, or other Common Stock or Common Stock Equivalent award
granted pursuant to the 1995 Plan shall be assignable or transferable during the
lifetime of the Participant, either voluntarily or involuntarily, or subjected
to any lien, directly or indirectly, by operation of law, or otherwise,
including execution, levy, garnishment, attachment, pledge or bankruptcy. If
permitted by applicable law (including Rule 16b-3, as amended from time to
time), the Committee may (but need not) permit the transfer of Stock Options,
Stock Appreciation Rights, Restricted Stock Awards and/or other Common Stock or
Common Stock Equivalent awards either generally, to a limited class of persons
or on a case-by-case basis. In the event of a Participant's death, a
Participant's rights and interest in Stock Options, Stock Appreciation Rights,
Restricted Stock Awards and other Common Stock or Common Stock Equivalent awards
shall be transferable by testamentary will or the laws of descent and
distribution, and payment of any amounts due under the 1995 Plan shall be made
to, and exercise of any Stock Options or Stock Appreciation Rights may be made
by, the Participant's legal representatives, heirs or legatees. If in the
opinion of the Committee a person entitled to payments or to exercise rights
with respect to the 1995 Plan is disabled from caring for his or her affairs
because of mental condition, physical condition, or age, payment due such person
may be made to, and such rights shall be exercised by, such person's guardian,
conservator or other legal personal representative upon furnishing the Committee
with evidence satisfactory to the Committee of such status.
SECTION 17
GENERAL RESTRICTIONS
17.1 INVESTMENT REPRESENTATIONS. The Company may require any person to
whom a Stock Option, Stock Appreciation Right, Restricted Stock Award, MBO
Payment or other Common Stock or Common Stock Equivalent award is granted, as a
condition of exercising such Stock Option or Stock Appreciation Right, or
receiving such Restricted Stock Award, MBO Payment or other Common Stock award
or Common Stock Equivalent award, to give
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written assurances in substance and form satisfactory to the Company and its
counsel to the effect that such person is acquiring the Common Stock subject to
the Stock Option, Stock Appreciation Right, Restricted Stock Award, MBO Payment
or Common Stock or Common Stock Equivalent award for his or her own account for
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems necessary
or appropriate in order to comply with federal and applicable state securities
laws.
17.2 COMPLIANCE WITH SECURITIES LAWS. Each Stock Option, Stock
Appreciation Right and Common Stock Equivalent shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the shares subject to such Stock
Option, Stock Appreciation Right or Common Stock Equivalent upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such Stock
Option, Stock Appreciation Right or Common Stock Equivalent may not be accepted
or exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration or
qualification.
17.3 CHANGES IN ACCOUNTING RULES. Notwithstanding any other provision
of the 1995 Plan to the contrary, if, during the term of the 1995 Plan, any
changes in the financial or tax accounting rules applicable to Stock Options,
Stock Appreciation Rights, Restricted Stock Awards, MBO Payments or other Common
Stock or Common Stock Equivalent awards shall occur that, in the sole judgment
of the Committee, may have a material adverse effect on the reported earnings,
assets or liabilities of the Company, the Committee shall have the right and
power to modify as necessary, or cancel, any then outstanding and unexercised
Stock Options or Stock Appreciation Rights, any then outstanding Restricted
Stock Awards as to which the applicable restriction has not been satisfied and
any other Common Stock awards or Common Stock Equivalent.
SECTION 18
OTHER BENEFITS
The amount of any compensation deemed to be received by an Employee,
Director or Consultant as a result of the exercise of a Stock Option, a Stock
Appreciation Right or the sale of shares received upon such exercise or the
vesting of any Restricted Stock Awards or the receipt of any other Common Stock
or Common Stock Equivalent award will not constitute "earnings" with respect to
which any other benefits provided by the Company or an Affiliated Corporation to
such person are determined, including without limitation benefits under any
pension, profit sharing, life insurance or salary continuation plan.
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SECTION 19
PLAN AMENDMENT, MODIFICATION AND TERMINATION
19.1 AMENDMENT OR TERMINATION. The Board, upon recommendation of the
Committee or at its own initiative, at any time may terminate and at any time
and from time to time and in any respect, may amend or modify the 1995 Plan. The
Company shall obtain stockholder approval of any amendment to the extent
necessary and desirable to comply with Applicable Laws. "Applicable Laws" means
the requirements relating to the administration of stock option plans under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where Stock
Options, Stock Appreciation Rights, Restricted Stock Awards or other Common
Stock or Common Stock Equivalent awards are, or will be, granted under the 1995
Plan.
19.2 EFFECT OF AMENDMENT. Any Stock Option, Stock Appreciation Right,
Restricted Stock Award or other Common Stock or Common Stock Equivalent award
granted to a Participant prior to the date the 1995 Plan is amended, modified or
terminated will remain in effect according to its terms unless otherwise agreed
upon by the Participant; provided, however, that this sentence shall not impair
the right of the Committee to take whatever action it deems appropriate under
Section 4.3, Section 14 or Section 17.3. The termination or any modification or
amendment of the 1995 Plan shall not, without the consent of a Participant,
affect his or her rights under a Stock Option, Stock Appreciation Right,
Restricted Stock Award or other Common Stock or Common Stock Equivalent award
previously granted to him or her. With the consent of the Participant affected,
the Committee may amend outstanding option agreements in a manner not
inconsistent with the 1995 Plan.
19.3 PRESERVATION OF INCENTIVE STOCK OPTIONS. The Board shall have the
right to amend or modify the terms and provisions of the 1995 Plan and of any
outstanding Incentive Stock Options granted under the 1995 Plan to the extent
necessary to qualify any or all such Stock Options for such favorable treatment
as may be afforded Incentive Stock Options under Section 422 of the Internal
Revenue Code.
SECTION 20
WITHHOLDING
20.1 WITHHOLDING REQUIREMENT. The Company's obligations to deliver
shares of Common Stock upon the exercise of any Stock Option or Stock
Appreciation Right granted
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under the 1995 Plan or upon any MBO Payment under the 1995 Plan or pursuant to
any other Common Stock or Common Stock Equivalent award, shall be subject to the
Participant's satisfaction of all applicable federal, state and local income and
other tax withholding requirements.
20.2 WITHHOLDING WITH COMMON STOCK. The Committee may, in its sole
discretion, allow Participants to pay all or any portion of any tax withholding
obligation that results from Stock Options, Stock Appreciation Rights, MBO
Payments, or any other Common Stock or Common Stock Equivalent award, by
electing to transfer to the Company, or to have the Company withhold from shares
otherwise issuable to the Participant, shares of Common Stock having a value
equal to the amount required to be withheld or such lesser amount as may be
elected by the Participant. Any such withholding election shall be subject to
such terms and conditions as the Committee may, from time to time, establish;
provided, that, in the case of a Participant who is an officer or director of
the Company within the meaning of Section 16 of the Exchange Act, then the
approval by the Committee of the grant of the award shall be deemed to include
approval by the Committee of the election by such Participant to utilize this
withholding provision, unless otherwise specified in the agreement relating to
the award.
SECTION 21
REQUIREMENTS OF LAW
21.1 REQUIREMENTS OF LAW. The issuance of stock and the payment of cash
pursuant to the 1995 Plan shall be subject to all applicable laws, rules and
regulations.
21.2 GOVERNING LAW. The 1995 Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Colorado.
SECTION 22
EFFECTIVE DATE OF THE 1995 PLAN
22.1 EFFECTIVE DATE. The 1995 Plan is effective as of March 8, 1995,
the date it was adopted by the Board of Directors of the Company, subject to the
approval of the stockholders of the Company prior to the one-year anniversary of
such date. Stock Options, Stock Appreciation Rights, Restricted Stock Awards and
other Common Stock awards may be granted prior to stockholder approval if made
subject to stockholder approval.
22.2 DURATION OF THE 1995 PLAN. The 1995 Plan shall terminate at
midnight on March 7, 2005, which is the day before the tenth anniversary of the
Effective Date, and may
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be terminated prior thereto by Board action; and no Stock Option, Stock
Appreciation Right, Restricted Stock Award or other Common Stock or Common Stock
Equivalent award shall be granted after such termination. Stock Options, Stock
Appreciation Rights, Restricted Stock Awards and other Common Stock and Common
Stock Equivalent awards outstanding at the time of the 1995 Plan termination may
continue to be exercised, or become free of restrictions, in accordance with
their terms.
-29-
<PAGE> 72
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
STORAGE TECHNOLOGY CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints David E. Weiss, Jeffrey M. Dumas and Robert S.
Kocol, 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 18, 2000, and any adjournment or postponement thereof, and, in
their discretion, upon such other matters that may properly come before the
meeting.
TO VOTE BY INTERNET OR BY TELEPHONE, PLEASE SEE THE REVERSE SIDE OF THIS CARD.
TO VOTE BY MAIL, PLEASE COMPLETE, SIGN AND DATE THIS CARD ON THE REVERSE SIDE
AND MAIL IT IN THE ENCLOSED ENVELOPE. THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED IN ACCORDANCE WITH INSTRUCTIONS GIVEN, OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR ALL OF THE MANAGEMENT'S NOMINEES FOR DIRECTOR, FOR
MANAGEMENT'S PROPOSALS 2, 3, AND 4, AND AGAINST THE STOCKHOLDERS' PROPOSAL.
(To Be Signed on Reverse Side)
<PAGE> 73
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED
IN PROPOSAL 1 AND "FOR" PROPOSALS 2, 3, AND 4, AND "AGAINST" PROPOSAL 5.
<TABLE>
<S> <C> <C>
1. Election of Directors FOR ALL NOMINEES WITHHOLD from all Nominees Nominees:
(except as indicated below) James R. Adams
[ ] [ ] William L. Armstrong
William R. Hoover
William T. Kerr
WITHHOLD AUTHORITY to vote for the nominees listed below: Robert E. La Blanc
Robert E. Lee
Ricard C. Steadman
- --------------------------------------------------------------------------------------- David E. Weiss
</TABLE>
2. Approval of an amendment to the 1995 Equity Participation Plan to reserve an
additional 10,000,000 shares of Common Stock for issuance thereunder.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of an amendment to the 1995 Equity Participation Plan to increase
the limit on Stock Options and Stock Appreciation Rights that may be granted
to a single individual in any one fiscal year to 2,000,000 shares (the
"Individual Limit") and to permit a newly hired employee of the Company to
be granted, within the fiscal year hired, Stock Options and Stock
Appreciation Rights to purchase up to twice the Individual Limit.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" STOCKHOLDER
PROPOSAL 5.
5. Approval of a stockholders' proposal that requests/recommends that the Board
of Directors take the necessary steps to place a five (5) year restriction
after the date of exercise on sales of shares underlying stock options by
officers and Directors of the Company, with certain exceptions set forth
therein.
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.
<PAGE> 74
VOTING INSTRUCTIONS
YOUR VOTE IS IMPORTANT
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Vote by Internet at the Internet address: http://www.voteproxy.com. Have
your control number available when you access the web page.
2. Vote by telephone at toll-free number: 1-800-PROXIES (1-800-776-9437). Have
your control number and proxy card available when you call.
3. Mark, sign and date the proxy card and return promptly in the enclosed
envelope.
Vote your Proxy over the Internet or telephone. It's fast and convenient, and
your vote is immediately confirmed and tabulated.
Option 1: Vote over the Internet
1. Read the accompanying Proxy Statement.
2. Have your 11-digit control number located on your voting ballot available.
3. Point your browser to http://www.voteproxy.com
4. Follow the instructions to cast your vote.
Option 2: Vote by telephone
1. Read the accompanying Proxy Statement.
2. Have your 11-digit control number located on your voting ballot available.
3. Using a touch-tone phone, call the toll-free number shown on the voting
ballot.
4. Follow the recorded instructions.
Option 3: Vote by mail
Read the Accompanying Proxy Statement. Complete, sign, date and return the
enclosed paper ballot in the envelope provided. Please do not return the
enclosed paper ballot if you are voting using the Internet or telephone.
