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 Sec. 240.14a-11(c) or Sec. 240.14a-12
Quantum
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Quantum
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
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14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
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QUANTUM [LOGO]
QUANTUM CORPORATION
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 22, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Quantum
Corporation (the "Company" or "Quantum"), a Delaware corporation, will be held
on Tuesday, July 22, 1997 at 3:00 p.m., local time, at Quantum Corporation's
corporate headquarters, 500 McCarthy Boulevard, Milpitas, California 95035, for
the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
2. To approve and ratify an amendment to the Company's Employee Stock
Purchase Plan for the purpose of increasing the number of shares reserved
for issuance thereunder by 5,800,000 shares;
3. To approve and ratify an amendment to the 1993 Long-Term Incentive
Plan for the purpose of adding stock option grant limitations in order to
comply with Section 162(m) of the Internal Revenue Code of 1986, as
amended;
4. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 1998; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 3, 1997 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to vote,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously returned a Proxy.
Sincerely,
/s/ Richard L. Clemmer
----------------------
Richard L. Clemmer
Executive Vice President Finance,
Chief Financial Officer
Milpitas, California
June 17, 1997
QUANTUM CORPORATION
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PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Quantum Corporation (the
"Company" or "Quantum") for use at the Annual Meeting of Stockholders to be held
Tuesday, July 22, 1997 at 3:00 p.m., or at any adjournment thereof (the "Annual
Meeting" or "Meeting"), for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Company's headquarters located at 500 McCarthy Boulevard,
Milpitas, California 95035. The Company's telephone number is (408) 894-4000.
These proxy solicitation materials were mailed on or about June 17, 1997 to
all stockholders entitled to vote at the Meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on June 3, 1997 (the
"Record Date") are entitled to notice of and to vote at the Meeting. At the
Record Date, 131,722,960 shares of the Company's Common Stock, $0.01 par value,
were issued and outstanding. The closing price of the Company's Common Stock on
the Record Date, as reported by Nasdaq was $19.125 per share, as adjusted for
the stock split described herein.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company or its
transfer agent a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Meeting and voting in person.
VOTING AND SOLICITATION
On all matters other than the election of directors, each share has one
vote. See "ELECTION OF DIRECTORS--Required Vote."
The cost of soliciting proxies will be borne by the Company. The Company
has retained the services of Corporate Investor Communications, Inc. (the
"Solicitor") to aid in the solicitation of proxies. The Company estimates that
it will pay the Solicitor a fee not to exceed $6,000 for its services and will
reimburse the Solicitor for certain out-of-pocket expenses. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, telegram, telefax or otherwise.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting must be received by
the Company no later than March 24, 1998 in order that they may be considered
for possible inclusion in the proxy statement and form of proxy relating to that
meeting.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "ABSTAIN" from a matter are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled to
vote at the Annual Meeting (the "Votes Cast") with respect to such matter.
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While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
While abstentions will be counted for purposes of determining both the
presence or absence of a quorum for the transaction of business and the total
number of Votes Cast with respect to a particular matter other than the election
of directors, broker non-votes with respect to proposals set forth in this Proxy
Statement will be counted only for purposes of determining the presence or
absence of a quorum and will not be considered Votes Cast. Accordingly, broker
non-votes will not affect the determination as to whether the requisite majority
of Votes Cast has been obtained with respect to a particular matter.
PRESENTATION OF STOCK INFORMATION
On April 28, 1997 a majority of the stockholders approved an amendment to
the Company's Certificate of Incorporation increasing the authorized shares of
Common Stock from 150,000,000 to 500,000,000. On May 13, 1997 the Company
declared a two-for-one stock split to be effected as a stock dividend of one
share of Common Stock for every one share of Common Stock outstanding. The stock
dividend was paid on or about June 9, 1997 to stockholders of record on May 27,
1997. The share and per share amounts reported in this 1997 Proxy Statement are
adjusted to reflect the two-for-one stock split.
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PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A Board of six directors is to be elected at the Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
management's six nominees named below. In the event that any management nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner in accordance with cumulative
voting as will ensure the election of as many of the nominees listed below as
possible. In such event, the specific nominees for whom such votes will be
cumulated will be determined by the proxy holders. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and qualified. Each of the
nominees set forth below is presently a director of the Company.
The name of and certain information regarding each nominee is set forth
below.
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ---------------------- ----- -------------------------------------------------- ----------
Stephen M. Berkley ....53 Chairman of the Board of Quantum Corporation 1987
David A. Brown .........52 Director of Quantum; management consultant for 1988
various high technology companies
Michael A. Brown .......38 President and Chief Executive Officer of 1995
Quantum Corporation
Robert J. Casale .......58 Group President, Brokerage Information Services 1993
Group of Automatic Data Processing, Inc.
Edward M. Esber, Jr. ..45 President and Chief Executive Officer of 1988
Solopoint, Inc.
Steven C. Wheelwright ..53 Professor of Management and Senior Associate Dean 1989
at the Graduate School of Business Administration,
Harvard University
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Mr. Stephen M. Berkley joined the Company in October 1981, as Vice
President, Marketing. In November 1983, he became the founding President and
Chief Executive Officer of Plus Development Corporation, previously a wholly
owned subsidiary of the Company. From May 1987 to March 1992, he served as
Chairman of the Board and Chief Executive Officer of Quantum. From April 1992 to
July 1993 and since August 1995, he has served as Chairman of the Board of
Quantum. Mr. Berkley served as Chairman of the Board and Chief Executive Officer
of Coactive Computer Corporation, a computer networking company, from February
1993 to June 1993 and from June 1993 to July 1994 he served as Chairman of the
Board of Coactive Computer Corporation. Mr. Berkley has served as a consultant
to various high technology firms since May 1992. Mr. Berkley is also a member of
the Board of Directors of Edify Corporation.
Mr. David A. Brown, a founder of the Company, has been with the Company
since its inception in February 1980. Initially, Mr. Brown served as Vice
President of Engineering of the Company. In 1983, he co-founded Plus Development
Corporation and became its Executive Vice President of Operations. He returned
to Quantum in September 1986 to lead the engineering organization and direct
Quantum's effort in the 3 1/2-inch disk drive market. From May 1987 to April
1990, Mr. Brown served as President of the Company and from April 1990 to
February 1992, he served as its Vice Chairman of the Board of Directors and
Chief Operating Officer. Mr. Brown served as Chief Executive Officer of
Visioneer Communications,
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a communications company, from June 1993 to December 1993. Mr. Brown has also
been a management consultant and Board member for various high technology
companies since February 1992.
Mr. Michael A. Brown was named President and Chief Executive Officer of
Quantum Corporation in September 1995. From August 1993 to September 1995 he was
President of the Company's Desktop and Portable Storage Group. He served as
Executive Vice President of the Company from February 1992 to August 1993 and as
Vice President of Marketing from June 1990 to February 1992.
Mr. Robert J. Casale has served as Group President of the Brokerage
Information Services Group of Automatic Data Processing, Inc., an information
services company, since February 1988. Mr. Casale also served as a Director of
Automatic Data Processing, Inc. From 1986 to February 1988, he was a Managing
Director with Kidder Peabody and Company, Inc. He is a former member of the
Board of Directors of Compression Laboratories and Tricord Systems.
Mr. Edward M. Esber, Jr. has served as President, Chief Executive Officer
and Director of Solopoint, Inc., a personal communications management products
company, since October 1995. He served as Chairman, President and Chief
Executive Officer of Creative Insights, Inc., a computer toys company from March
1994 to June 1995. From May 1993 to May 1994, he was President and Chief
Operating Officer of Creative Labs, Inc., a multimedia company. From February
1991 to May 1993, he was President of the Esber Group, a consulting firm. Mr.
Esber is also a member of the Board of Directors of Borealis Corporation.
Mr. Steven C. Wheelwright has served as a professor of management at the
Graduate School of Business Administration, Harvard University since August
1988. Mr. Wheelwright served in the same position from August 1985 to August
1986. From August 1986 to August 1988, Mr. Wheelwright served as a professor at
Stanford University. Mr. Wheelwright is also a member of the Board of Directors
of T.J. International Corporation and Heartport, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four (4) meetings
during the fiscal year ended March 31, 1997. During the fiscal year ended March
31, 1997, no director attended fewer than 75% of the meetings of the Board of
Directors or the meetings of committees, if any, upon which such director
served.
The Audit Committee of the Board of Directors, which was formed in March
1983, currently consists of Mr. Esber, Chairman of the Committee, Mr.
Wheelwright and Mr. Casale. The Audit Committee, which generally meets prior to
quarterly earnings releases, recommends engagement of the Company's independent
auditors and is primarily responsible for approving the services performed by
the Company's independent auditors and for reviewing and evaluating the
Company's accounting principles and its systems of internal accounting controls.
The Audit Committee held a total of four (4) meetings during the fiscal year
ended March 31, 1997.
The Compensation Committee, which was formed in November 1988, is currently
composed of Mr. Wheelwright, Chairman of the Committee, Mr. Esber and Mr.
Casale. The Compensation Committee, which generally meets in conjunction with
Board meetings and as deemed necessary by the Board of Directors, reviews and
approves the Company's executive compensation policy and makes recommendations
concerning the Company's employee benefit policies. The Compensation Committee
held a total of six (6) meetings during the fiscal year ended March 31, 1997.
The Board of Directors does not have a Nominating Committee nor any
committee performing such function.
DIRECTOR COMPENSATION
During the year ended March 31, 1997 each director who was not an employee
("Outside Director") received an annual retainer of $27,000 per year. Effective
August 1996, the Chairman of the Board received an annual retainer of $60,000
per year. Certain directors were paid an additional $4,000 per year for chairing
a committee of the Board. In addition, each Outside Director was paid $1,250 per
day for any Board meeting attended. Outside Directors serving on Board
committees receive $1,000 per meeting for
4
meetings held on days when there was no regularly scheduled Board meeting.
Outside Directors may also receive consulting fees for projects completed at the
request of management. Employee directors are not compensated for their service
on the Board of Directors or on committees of the Board.
Prior to the expiration of the 1986 Stock Option Plan in December 1996,
options were granted to Outside Directors under the 1986 Stock Option Plan only
in accordance with an automatic, non- discretionary grant mechanism. The 1986
Stock Option Plan provides that since May 1, 1991 (the "Effective Date"), each
of the Company's Outside Directors who were directors on the Effective Date
shall automatically be granted options to purchase 15,000 shares of Common Stock
on the date of each Annual Meeting of Stockholders, which options commence
vesting on April 1 of the year which is three years from the year of the grant
of such option and vest in installments cumulatively with respect to one-twelfth
( 1/12 ) of the shares subject thereto per month on the first day of each month
thereafter. Each Outside Director appointed or elected after the Effective Date
("Future Outside Director") shall receive a one-time option grant of 60,000
shares on the date of his or her appointment or election (the "Initial Option"),
15,000 shares of which shall vest on the first day of the month which is one (1)
year from the month in which the Initial Option was granted, and the balance of
which shall vest ratably on a monthly basis on the first day of each month over
the next succeeding 36-month period. Additionally, each Future Outside Director
shall be granted an option (the "Subsequent Option") to purchase 15,000 shares
on the date of each Annual Meeting of Stockholders which is held at least six
(6) months from the date of such Future Outside Director's appointment or
election, which Subsequent Option shall vest ratably on a monthly basis over a
12-month period commencing on the month immediately following the month in which
the preceding options, whether the Initial Option or a Subsequent Option,
becomes fully vested. All options granted to Outside Directors under the 1986
Stock Option Plan contain the following provisions: the term of the option is
ten (10) years; the option can be exercised only while the Outside Director
remains a director or within ninety (90) days after ceasing to be a director;
and the exercise price per share of Common Stock is 100% of the fair market
value on the date the option is granted. The provisions of the 1986 Stock Option
Plan governing options granted to Outside Directors may not be amended more than
once every six (6) months.
During fiscal 1997, the Company's Outside Directors, Mr. Brown, Mr. Casale,
Mr. Esber and Mr. Wheelwright each received an option to purchase 15,000 shares
of Common Stock and Mr. Berkley received an option to purchase 25,000 shares of
Common Stock at an exercise price of $7.50 per share, as adjusted to reflect the
two-for-one stock split.
Options may also be granted to Outside Directors under the Company's 1996
Board of Directors Stock Option Plan ("Director Plan"), which was approved by
the Company's stockholders at the 1996 Annual Meeting of Stockholders. The
Board, in its discretion, selects Outside Directors to whom options may be
granted, the time or times at which such options may be granted, the number of
shares subject to each grant and the period over which such options become
exercisable. All options granted to Outside Directors under the Director Plan
contain the following provisions: the exercise price per share of Common Stock
is 100% of the fair market value of the Company's Common Stock on the date the
option is granted; the term of the option may be no more than ten years from the
date of grant; and the option may be exercised only while the Outside Director
remains a director or within ninety days after the date he or she ceases to be a
director of the Company; upon a proposed liquidation or dissolution of the
Company, the options will terminate immediately prior to such action; and in the
event of a merger or sale of substantially all of the Company's assets, each
option may be assumed or an equivalent option substituted by the successor
corporation. The Board may at any time amend, alter, suspend or discontinue the
Director Plan, subject to stockholder approval in certain circumstances.
During fiscal 1997, there were no options granted to Outside Directors
under the Director Plan.
REQUIRED VOTE
The six nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence or absence of a quorum, but have no other legal effect under Delaware
law. Every stockholder voting for the election of directors may cumulate such
stockholder's
5
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the stockholder's
shares are entitled, or may distribute the stockholder's votes on the same
principle among as many candidates as the stockholder thinks fit, provided that
votes cannot be cast for more than six candidates. No stockholder shall be
entitled to cumulate votes, however, unless the candidates have been properly
placed in nomination according to the Company's Bylaws and notice of the
intention to cumulate votes is given to the Company and other stockholders at
least twenty (20) and no more than sixty (60) days prior to the Annual Meeting.
The Company may exercise discretionary authority to cumulate votes and to
allocate such votes among the Company's nominees in the event that additional
persons are nominated at the Annual Meeting for election of directors.
MANAGEMENT RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
6
PROPOSAL TWO
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
In June 1997, the Board of Directors approved an amendment to the Employee
Stock Purchase Plan (the "Purchase Plan") to increase the number of shares
reserved for issuance thereunder from 17,000,000 to 22,800,000 shares of Common
Stock, as adjusted to reflect the two-for-one stock split.
Certain material features of the Purchase Plan, as amended, are outlined
below.
GENERAL
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
PURPOSE
The purpose of the Purchase Plan is to provide employees of the Company and
its majority-owned subsidiaries which have been designated by the Board with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions.
ADMINISTRATION
The Purchase Plan is to be administered by the Board or a committee
appointed by the Board and is currently being administered by the Board. The
administration, interpretation or application of the Purchase Plan by the Board
or its committee shall be final, conclusive and binding upon all participants.
Members of the Board who are eligible employees are permitted to participate in
the Purchase Plan provided that members of the Board who are eligible to
participate in the Purchase Plan may not vote on any matter affecting the
administration of the Purchase Plan or grant any option pursuant to the Purchase
Plan or, if a committee is established to administer the Purchase Plan, no
member of the Board who is eligible to participate in the Purchase Plan may be a
member of the committee.
ELIGIBILITY AND PARTICIPATION
Any person who is regularly employed at least 20 hours per week by the
Company (or by any of its designated subsidiaries) on the first day of each
offering period ("Enrollment Date") is eligible to participate in the Purchase
Plan. Eligible employees become participants in the Purchase Plan by completing
a subscription agreement authorizing a payroll deduction on the form provided by
the Company and filing it with the Company's payroll office prior to the
applicable Enrollment Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible employees with respect to a given
offering period. As of the Record Date, there were 5,319 employees eligible to
participate in the Purchase Plan, of whom 3,510 were participating.
OFFERING DATES
Generally, the Purchase Plan is implemented by means of overlapping
two-year offering periods, starting every six months, with four six-month
exercise periods within each offering period. The Board of Directors has the
power to change the duration of the offering periods and exercise periods with
respect to future offerings without stockholder approval, if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first offering period to be affected.
PURCHASE PRICE
The purchase price per share of the shares offered in a given offering
period shall be the lower of (i) 85% of the fair market value of a share of the
Common Stock of the Company at the commencement of the offering period or (ii)
85% of the fair market value of a share of Common Stock of the Company on the
last day of the applicable six-month exercise period within the offering period.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of shares is accumulated by payroll deductions over the
offering period. The deductions may not exceed 10% of a participant's
compensation. A participant may discontinue participation in the Purchase Plan,
or may change the rate of payroll deductions by giving written notice to the
7
Company authorizing the change. The change becomes effective (i) in the case of
a decrease in rate, with the first payroll following notification, and (ii) in
the case of an increase in rate, at the beginning of the next six-month exercise
period within the two-year offering period following notification. Payroll
deductions shall commence on the first payroll date following the offering date
and shall end on the last payroll date to which such authorization is
applicable, unless sooner terminated as provided in the Purchase Plan.
All payroll deductions made for a participant shall be credited to his/her
account under the Purchase Plan. A participant may not make any additional
payments into such account.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase Plan,
the employee is entitled to have shares placed under option to him/her. The
maximum number of shares placed under the option to a participant in any
exercise period is the number determined by dividing the total amount of his/her
compensation which is to be withheld for the exercise period by 85% of the fair
market value of the Common Stock at the beginning of the offering period or end
of the exercise period, whichever is less. See "Payment of Purchase Price;
Payroll Deductions" for limitations on payroll deductions. Unless the employee's
participation is discontinued, his/her option for the purchase of shares will be
exercised automatically at the end of each exercise period at the applicable
price. See "Withdrawal."
Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code, no employee shall be granted an option under the
Purchase Plan if, immediately after the grant of the option, the employee would
own shares and/or hold outstanding options to purchase stock possessing 5% or
more of the total combined voting power or value of all classes of shares of the
Company or of any designated subsidiary of the Company, nor shall any employee
be granted an option which would permit him or her to buy more than $25,000
worth of stock (determined at the fair market value of the shares at the time
the option is granted) under the Purchase Plan in any calendar year.
WITHDRAWAL
A participant's interest in a given offering may be terminated in whole,
but not in part by signing and delivering to the Company a notice of withdrawal
from the Purchase Plan. Such withdrawal may be elected at any time prior to the
end of the applicable offering period. A participant's withdrawal from an
offering does not have any effect upon such participant's eligibility to
participate in subsequent offerings under the Purchase Plan.
Termination of a participant's employment for any reason, including
retirement or death, cancels the participant's participation in the Purchase
Plan immediately. In such event, the payroll deductions credited to the
participant's account will be returned to such participant or to his or her
beneficiaries.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Company may at any time amend or terminate
the Purchase Plan. No such termination can affect options previously granted,
nor may an amendment make any changes in an option theretofore granted which
adversely affects the rights of any participant. No amendment may be made to the
Purchase Plan without approval of the stockholders of the Company if such
amendment would increase the number of shares that may be issued under the
Purchase Plan, permit payroll deductions at a rate in excess of 10% of a
participant's compensation, materially modify the requirements as to eligibility
for participation in the Purchase Plan, or materially increase the benefits
which may accrue to participants under the Purchase Plan.
AUTOMATIC TRANSFER TO LOWER PRICE OFFERING PERIOD
In the event that the fair market value of the Company's Common Stock on
the first day of an offering period exceeds the fair market value of the
Company's Common Stock on the first day of any subsequent offering period
commencing immediately following an exercise date within the offering period in
progress, then each participant in the offering period in progress is deemed to
have withdrawn from such offering period immediately following the exercise of
his or her option on such exercise date and to have enrolled in such subsequent
offering period as of the first day thereof.
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TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Plan are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be
subject to tax, and the amount of tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two years from the first
day of the offering period and one year from the date the shares are purchased,
the participant will recognize ordinary income measured as the lesser of (a) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (b) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to participants except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding periods described above.
The foregoing is only a summary of the effect of federal income taxation
upon a participant and the Company with respect to the shares purchased under
the Purchase Plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences in the
event of a participant's death or the income tax laws of any state or foreign
country in which the participant may reside.
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PARTICIPATION IN THE PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. Non-employee directors are not eligible to
participate in the Purchase Plan. No purchases have been made under the Purchase
Plan since its amendment by the Board. However, purchases were made under the
Purchase Plan prior to such amendment. The following table sets forth certain
information regarding shares purchased under the Purchase Plan during the last
fiscal year for each of the named executive officers, for all current executive
officers as a group and for all other employees who participated in the Purchase
Plan as a group:
AMENDED PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN
NAME OF INDIVIDUAL NUMBER OF
OR IDENTITY OF GROUP SHARES DOLLAR VALUE
AND POSITION DATE PURCHASED (#)* ($)(1)
- ------------------------------- ---------------- -------------- --------------
Michael A. Brown ............... July 25, 1996 0 $ 0
President and Chief January 24, 1997 3,826 41,650
Executive Officer
Kenneth Lee .................... July 25, 1996 530 492
President, Workstation January 24, 1997 3,826 41,650
and Systems Storage Group,
Chief Technical Officer
Mark W. Jackson ................ July 25, 1996 432 401
President, Recording January 24, 1997 3,826 41,650
Heads Group
Young K. Sohn .................. July 25, 1996 918 852
President, Desktop and January 24, 1997 3,826 41,650
Portable Storage Group
Claude Barathon ................ July 25, 1996 0 0
Executive Vice President, January 24, 1997 2,944 32,048
Worldwide Sales
All current executive officers July 25, 1996 3,098 2,875
as a group January 24, 1997 20,256 220,506
All other employees as a group July 25, 1996 1,545,452 1,434,334
January 24, 1997 1,647,320 17,932,643
- ----------
* Amounts are adjusted to reflect the two-for-one stock split.
(1) Market value of shares on date of purchase, minus the purchase price under
the Plan.
REQUIRED VOTE
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment of the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND RATIFICATION
OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
10
PROPOSAL THREE
AMENDMENT TO THE 1993 LONG-TERM INCENTIVE PLAN
In June 1997, the Board of Directors approved an amendment to the 1993
Long-Term Incentive Plan (the "Incentive Plan") to add certain stock option
grant limitations for the purpose of complying with Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), subject to stockholder
approval. This proposal seeks stockholder approval of the stock option grant
limitations described below for purposes of Section 162(m) of the Code, only.
Outlined below is a description of the proposed amendment to the Incentive Plan
and the material features of the Incentive Plan.
SECTION 162(M) AMENDMENT
Section 162(m) of the Code may limit the Company's ability to deduct for
United States federal income tax purposes compensation in excess of $1,000,000
per person paid to the Company's Chief Executive Officer and its four other
highest paid executive officers (collectively, the "Executive Officers") who are
employed on the last day of the fiscal year unless the compensation is not
otherwise subject to the deduction limit. In order to preserve the Company's
ability to deduct the compensation income associated with stock options granted
to the Executive Officers, the amendment to the Incentive Plan provides that no
employee or consultant may be granted in any fiscal year of the Company, options
to purchase more than 500,000 shares of Common Stock. Notwithstanding this
limit, however, in connection with an employee's or consultant's initial
employment or upon promotion, he or she may be granted options to purchase up to
an additional 1,000,000 shares of Common Stock.
GENERAL
The Incentive Plan allows for the granting of (i) stock options, (ii) stock
appreciation rights, (iii) stock purchase rights and (iv) long-term performance
awards. The total number of shares of Common Stock initially reserved and
available for issuance under the Incentive Plan was 2,000,000 shares increased
each April 1 by a number of shares equal to 4% of the number of shares of Common
Stock of the Company outstanding on the preceding March 31. The maximum number
of shares reserved and available for issuance pursuant to incentive stock
options was initially 2,000,000 shares which is increased each year by 1,500,000
shares, which is part of the 4% of shares added annually to the Incentive Plan.
As of the Record Date, 16,506,998 shares were reserved for future issuance.
PURPOSE OF THE INCENTIVE PLAN
The purpose of the Incentive Plan is to provide an incentive to eligible
employees, consultants and officers of the Company whose present and potential
contributions are important to the continued success of the Company, to give
these individuals the opportunity to acquire a proprietary interest in the
Company, and to enable the Company to enlist and retain the best available
talent for the conduct of its business.
ELIGIBILITY
Officers, consultants and other employees of the company or any parent or
subsidiary of the Company whom the administrator deems to have the potential to
contribute to the success of the Company are eligible to receive awards under
the Incentive Plan. The Incentive Plan provides that Nonstatutory Stock Options,
Stock Appreciation Rights, Stock Purchase Rights or Long-Term Performance Awards
may be granted to employees (including officers) and consultants of the Company
or any parent or subsidiary of the Company. Incentive Stock options may be
granted only to employees (including officers) of the Company or any parent or
subsidiary of the Company.
ADMINISTRATION
The Incentive Plan is administered with respect to all grants of options
and rights to eligible participants by the Board of Directors of the Company or
by a committee designated by the Board. The interpretation and construction of
any provision of the Incentive Plan will be within the sole discretion of the
Board or its committee, whose determination will be final and conclusive.
11
STOCK OPTIONS
The Incentive Plan permits the granting of nonstatutory stock options
("NSOs") or stock options that qualify as incentive stock options under Section
422 of the Code ("ISOs").
The term of each option will be fixed by the administrator. In the case of
ISOs granted to the owner of Common Stock possessing, on the date of grant, more
than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary, the term may not exceed five (5) years from
the date of grant. In the case of all other ISOs, the term may not exceed ten
(10) years from the date of grant. If the fair market value of shares subject to
ISOs first exercisable in one (1) calendar year is greater than $100,000, the
excess options will be treated as NSOs. For this purpose, fair market value is
determined on the date of grant, and all ISOs granted by the Company or its
subsidiaries to an individual are aggregated.
The administrator will determine the time or times each option may be
exercised. Options may be made exercisable in installments, exercisability may
be suspended during certain leaves of absence or reductions in work hours, and
the exercisability of options may be accelerated by the administrator.
The option exercise price for each share covered by either an ISO or NSO
will not be less than 100% of the fair market value of a share of Common Stock
on the date of grant of such option. In the case of ISOs granted to the owner of
Common Stock possessing, on the date of such grant, more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary, the option exercise price for each share covered by such option will
not be less than 110% of the fair market value of a share of Common Stock on the
date of grant of such option.
Under the Incentive Plan, in the event of an optionee's termination of
employment or consulting relationship for any reason other than death or total
and permanent disability, an option may thereafter be exercised, to the extent
it was exercisable at the date of such termination, for such period of time as
the administrator will determine at the time of grant (not to exceed six (6)
months, or three (3) months in the case of ISOs, but only to the extent that the
term of the option has not expired. However, if an optionee's employment or
consulting relationship is terminated as a result of the optionee's death or
total and permanent disability, the option will be exercisable for twelve (12)
months following such termination, but only to the extent it was exercisable at
the date of termination and to the extent the term of the option has not
expired.
STOCK APPRECIATION RIGHTS
The Incentive Plan also permits the granting of stock appreciation rights
("SARs"). SARs may be granted in connection with all or any part of an option,
either concurrently with the grant of the option or at any time thereafter
during the term of the option. An SAR granted in connection with an option will
entitle the optionee to exercise the SAR by surrendering to the Company
unexercised a portion of the related option. The optionee will receive in
exchange from the Company an amount equal to the excess of the fair market
value, on the date of exercise of the SAR, of the Common Stock covered by the
surrendered portion of the related option, over the exercise price of the Common
Stock covered by the surrendered portion of the related option. Notwithstanding
the foregoing, the administrator of the Incentive Plan may place limits on the
aggregate amount that may be paid upon exercise of an SAR. However, such limits
will not restrict the exercisability of the related option.
When an SAR granted in connection with an option is exercised, the related
option, to the extent surrendered, will cease to be exercisable. An SAR granted
in connection with an option will be exercisable until, and will expire no later
than, the date on which the related option ceases to be exercisable or expires.
An SAR granted in connection with an option may be exercised only at a time when
the fair market value of the Common Stock covered by the related option exceeds
the exercise price of the Common Stock covered by the related option.
SARs may also be granted without related options. In such an event, the SAR
will entitle the optionee, by exercising the SAR, to receive from the Company an
amount equal to the excess of the fair market value of the Common Stock covered
by the exercised portion of the SAR as of the date of such exercise, over the
fair market value of the Common Stock covered by the exercised portion of the
SAR
12
as of the last market trading date prior to the date on which the SAR was
granted. Nevertheless, the administrator of the Incentive Plan may place limits
on the aggregate amount that may be paid upon exercise of an SAR. An SAR granted
independently of a related option will be exercisable, in whole or in part, at
such time as the administrator will specify in the recipient's SAR agreement.
The Company's obligation arising upon the exercise of an SAR may be paid in
Common Stock or cash, or any combination therof, as the administrator may
determine. Shares issued upon the exercise of an SAR will be valued at their
fair market value as of the date of exercise.
STOCK PURCHASE RIGHTS
Upon the granting of a Stock Purchase Right under the Incentive Plan, the
offeree will be advised in writing of the terms, conditions and restrictions
related to the offer, including the number of shares of Common Stock that the
offeree will be entitled to purchase, the price to be paid and the time within
which the offeree must accept such offer. The offer will be accepted by
execution of a restricted stock purchase agreement between the Company and the
offeree.
Unless the administrator of the Incentive Plan determines otherwise, the
restricted stock purchase agreement will grant to the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment or consulting relationship with the Company for any
reason (including death or permanent and total disability). The purchase price
for shares repurchased pursuant to the restricted stock purchase agreement will
be the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The repurchase option will
lapse at such rate as the administrator may determine. Upon exercise of a Stock
Purchase Right, the purchaser will have rights equivalent to those of a
stockholder of the Company.
LONG-TERM PERFORMANCE AWARDS
The Incentive Plan also permits the granting of Long-Term Performance
Awards. Such awards will be based upon the performance of the Company, parent,
subsidiary or individual over designated periods based on such performance
factors or other criteria as the administrator deems appropriate. Performance
objectives may vary from participant to participant, group to group, and period
to period.
The administrator may adjust Long-Term Performance Awards as it deems
necessary or appropriate in order to avoid windfalls or hardships or to
compensate for changes in tax, accounting or legal rules.
Long-Term Performance Awards will be payable in cash, Common Stock or a
combination of both.
NONTRANSFERABILITY OF OPTIONS, STOCK APPRECIATION RIGHTS, STOCK PURCHASE RIGHTS
AND LONG-TERM PERFORMANCE AWARDS
Options, SARs, Stock Purchase Rights and Long-Term Performance Awards
granted pursuant to the Incentive Plan are nontransferable by the participant,
other than by will or by the laws of descent and distribution and may be
exercised, during the lifetime of the participant, only by the participant.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Subject to any required action by the stockholders of the Company, 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 issued
shares of Common Stock without receipt of consideration by the Company, an
appropriate adjustment shall be made in the number of shares which have been
reserved for issuance under the Incentive Plan (including shares subject to an
option or right) and the price per share covered by each outstanding option,
SAR, Stock Purchase Right and Long-Term Performance Award. Conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration."
AMENDMENT AND TERMINATION
The Board may amend, alter, suspend or discontinue the Incentive Plan at
any time but such amendment, alteration, suspension or discontinuation shall not
adversely affect any option, SAR, Stock
13
Purchase Right or Long-Term Performance Award then outstanding under the
Incentive Plan, without written consent of the participant. To the extent
necessary to comply with applicable laws and regulations, including the
requirements of an established stock exchange or quotation system, the Company
shall obtain stockholder approval of any amendment to the Incentive Plan in such
a manner and to such a degree as required.
Subject to applicable laws and the specific terms of the Incentive Plan,
the administrator may accelerate any option, right or award or waive any
condition or restriction pertaining to such option, right or award at any time.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of the federal income tax consequences of
transactions under the Incentive Plan based on federal securities and income tax
laws in effect as of the date of this Proxy Statement. This summary is not
intended to be exhaustive and does not discuss the tax consequences of a
participant's death or provisions of the income tax laws of any municipality,
state or foreign country in which an optionee may reside.
No taxable income is recognized by the optionee upon the grant or exercise
of an ISO unless the optionee is subject to alternative minimum tax. Upon the
sale or exchange of the shares issued on exercise of an ISO more than two years
from the date of grant of the option and one year after exercising the option,
any gain or loss will be treated as long-term capital gain or loss. If these
holding periods are not satisfied, then generally, the optionee will recognize
ordinary income in the year of disposition in an amount equal to the lesser of
the fair market value of the shares at the time of exercise or the amount
realized on such disposition over the exercise price of such shares. The Company
is entitled to a corresponding tax deduction. Any further gain or loss realized
will be taxed as short-term or long-term capital gain or loss depending on the
holding period of such shares.
Except as noted below, with respect to NSOs, (i) no income is recognized by
the optionee at the time the option is granted; (ii) generally, at exercise,
ordinary income is recognized by the optionee in an amount equal to the excess
of the fair market value of the shares on the date of exercise and the option
exercise price paid for the shares, and the Company is entitled to a tax
deduction in the same amount; and (iii) at disposition, any gain or loss is
treated as capital gain or loss. In the case of an optionee who is also an
employee, any income recognized upon exercise of a Nonstatutory Stock Option
will constitute wages for which withholding will be required.
No income will be recognized by a recipient in connection with the grant of
an SAR. When the SAR is exercised, the recipient will generally recognize as
ordinary income an amount equal to the amount of cash received and/or the fair
market value of any Common Stock received. In the case of a recipient who is
also an employee, any income recognized upon exercise of an SAR will constitute
wages for which withholding will be required. If the optionee receives Common
Stock upon the exercise of an SAR, any gain or loss on the sale of such stock
will be treated as long-term or short-term capital gain or loss depending on the
holding period.
Stock Purchase Rights will generally be taxed in the same manner as NSOs.
Generally, no income will be recognized by a recipient in connection with
the grant of a Long-Term Performance Award, unless an election under Section
83(b) of the Code is filed with the Internal Revenue Service within thirty (30)
days of the date of the grant in the case of an award of stock. Otherwise, at
the time the Long-Term Performance Award is no longer subject to a substantial
risk of forfeiture, the recipient will generally recognize compensation income
in an amount equal to the cash paid and/or the fair market value of the stock.
Generally, in the case of stock the recipient will be taxed in the same manner
as NSOs. In the case of a recipient who is also an employee, any amount included
in income will be subject to withholding by the Company. The Company will be
entitled to a tax deduction in the amount and at the time the recipient
recognizes ordinary income with respect to a Long-Term Performance Award.
Generally, individuals who purchase restricted stock may have their
recognition of compensation income and the beginning of their capital gains
holding period deferred until the restrictions lapse (the
14
"Deferral Date"). The excess of the fair market value of the stock determined as
of the Deferral Date over the purchase price will be taxed as ordinary income,
and the tax holding period of any subsequent gain or loss will begin on the
Deferral Date. However, a restricted stock purchaser who so elects under Code
Section 83(b) on a timely basis may instead be taxed on the difference between
the excess of the fair market value on the date of transfer over the purchase
price, with the tax holding period beginning on such date.
The following table sets forth certain information regarding shares granted
under the Incentive Plan during the last fiscal year for each of the named
executive officers, for all current executive officers as a group and for all
other employees as a group:
AMENDED PLAN BENEFITS
1993 LONG-TERM INCENTIVE PLAN
AVERAGE NUMBER OF
NAME OF INDIVIDUAL NUMBER OF EXERCISE RESTRICTED AVERAGE
OR IDENTITY OF GROUP OPTIONS PRICE SHARES EXERCISE
AND POSITION GRANTED (#)* ($)(1)* GRANTED (#)* PRICE ($)
- ------------------------------------------ ------------- ------------ ------------ ----------
Michael A. Brown .......................... 200,000 $10.3125 0 $ 0
President and Chief Executive Officer
Kenneth Lee ............................... 80,000 10.3125 0 0
President, Workstation and Systems
Storage Group, Chief Technical Officer
Mark W. Jackson ........................... 150,000(3) 12.725 0 0
President, Recording Heads Group
Young K. Sohn ............................. 20,000 10.3125 0 0
President, Desktop and Portable Storage
Group
Claude Barathon ........................... 80,000(2) 9.805 2,500 0.01
Executive Vice President, Worldwide Sales
All current executive officers as a group 1,075,000 10.269 55,000 0.01
All other employees as a group .............. 4,071,036 8.85 299,290 0.01
- ----------
* Amounts are adjusted to reflect the two-for-one stock split.
(1) All options were granted with an exercise price equal to the fair market
value on the date of grant.
(2) Includes 50,000 options granted to Mr. Barathon in conjunction with his
promotion to Executive Vice President, Worldwide Sales.
(3) Includes 100,000 options granted to Mr. Jackson in conjunction with his
promotion to President, Recording Heads Group.
REQUIRED VOTE
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the 1993 Long-Term Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND
RATIFICATION OF THE AMENDMENT TO THE 1993 LONG-TERM INCENTIVE PLAN.
15
PROPOSAL FOUR
INDEPENDENT AUDITORS
In June 1997, the Board of Directors of the Company adopted a resolution
whereby Ernst & Young LLP was selected as the Company's independent auditors to
audit the financial statements of the Company for the fiscal year ending March
31, 1998.
A representative of Ernst & Young LLP is expected to be available at the
Annual Meeting to make a statement if such representative desires to do so and
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS FOR THE 1998 FISCAL
YEAR.
OTHER INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors, and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.
Based solely on its review of the copies of such reports received by the
Company, or on written representations from certain reporting persons that no
reports were required for such persons, the Company believes that, during the
fiscal year ended March 31, 1997, all Section 16(a) filing requirements
applicable to its executive officers, directors and ten percent stockholders
were complied with.
CERTAIN TRANSACTIONS
In August 1996, Quantum's Chairman, Stephen M. Berkley, became a
nonexecutive Chairman of the Company. Of the 250,000 shares, as adjusted to
reflect the two-for-one stock split, unvested at the time he ceased to be an
employee of the Company, 230,000 shares shall continue to vest through August
1997. The Company also entered into a consulting agreement (the "Consulting
Agreement") with Mr. Berkley. The Consulting Agreement provides that Mr. Berkley
shall receive $5,000 per day for consulting services requested by Quantum
beginning August 23, 1996 through August 22, 1999.
In November 1996, the Company loaned $235,539 to Claude Barathon, Executive
Vice President, Worldwide Sales to assist in his relocation to the United
States. The loan is non-interest bearing and is to be repaid upon the sale of
Mr. Barathon's property in Europe. As of June 3, 1997, the entire balance of
this loan was still outstanding.
In January 1997, the Company loaned $250,000 to Debora Shoquist, Executive
Vice President, Hard Disk Drive Operations. This loan bears interest at a rate
of 8% and is to be forgiven over four (4) years. Interest accrues on an annual
basis as the loan is forgiven. The outstanding balance of this loan as of June
3, 1997 was $250,000.
In July 1996, the Company loaned $112,000 to Gerard Schenkkan, Vice
President, Strategic Planning and Business Development to assist in his
relocation. The loan is non-interest bearing and is to be repaid upon the sale
of Mr. Schenkkan's property in Idaho. As of June 3, 1997, the entire balance of
this loan was still outstanding. In July 1996, the Company also loaned $100,000
to Mr. Schenkkan. This loan bears interest at a rate of 8% and is to be forgiven
over four (4) years. Interest accrues on an annual basis as the loan is
forgiven. The outstanding balance of this loan as of June 3, 1997 was $100,000.
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 3, 1997 certain information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
the Company's Chief Executive Officer and each of the four other most highly
compensated individuals who served as executive officers of the Company at
fiscal year end and (iv) all directors and executive officers as a group.
APPROXIMATE
NAME AMOUNT OWNED** PERCENTAGE OWNED
- ------------------------------------------------------------ -------------- ----------------
FMR Corp .................................................... 15,040,200(1) 11.20%
82 Devonshire Street
Boston, MA 02109-3014
Sanford C. Bernstein & Co. .................................. 12,357,334 9.21%
767 Fifth Avenue
New York, NY 10153
Michael A. Brown ............................................ 823,668(2) *
Stephen M. Berkley .......................................... 699,710(3) *
Kenneth Lee ................................................. 451,940(4) *
Mark W. Jackson ............................................. 173,628(5) *
Claude Barathon ............................................. 159,028(6) *
Young K. Sohn ............................................... 88,428(7) *
Robert J. Casale ............................................ 58,750(9) *
Steven C. Wheelwright ....................................... 46,000(9) *
Edward M. Esber, Jr. ........................................ 45,000(8) *
David A. Brown .............................................. 8,750(9) *
All directors and executive officers as a group (15 persons). 2,778,314(10) 4.14%
- ----------
* Less than 1%.
** Share amounts are adjusted to reflect the two-for-one stock split.
(1) Amount based on share ownership information provided by FMR Corp as of May
1, 1997.
(2) Includes 795,318 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(3) Includes 627,914 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(4) Includes 418,114 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(5) Includes 169,370 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(6) Includes 138,538 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(7) Includes 79,532 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(8) Includes 5,000 shares subject to stock options which were exercisable at
June 3, 1997 or within sixty (60) days thereafter.
(9) Represents shares subject to stock options which were exercisable at June
3, 1997 or within sixty (60) days thereafter.
(10) Includes 2,510,394 shares subject to stock options held by directors and
executive officers which were exercisable at June 3, 1997 or within sixty
(60) days thereafter.
17
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to any person serving as Chief Executive
Officer during fiscal 1997 and each of the four other most highly compensated
executive officers whose salary plus bonus exceeded $100,000, information
concerning compensation paid for services to the Company in all capacities
during the fiscal year ended March 31, 1997, as well as the total compensation
paid to each such individual for the Company's previous two fiscal years.
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION(1)
-------------------------------------- -------------------------------------
AWARDS
-------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
COMPEN- AWARDS OPTIONS/ COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SATION ($) ($)(2) SARS (#)* TION ($)(3)
- --------------------------- ------ ---------- ------------- ------------- ------------ ------------ -----------
Michael A. Brown ........... 1997 644,540 633,813 0 0 200,000 2,466
President and Chief 1996 452,846 0 0 0 720,000 4,071
Executive Officer 1995 348,703 470,421 0 0 150,000 884
Kenneth Lee ................ 1997 381,938 378,861 0 0 80,000 1,066
President, Workstation 1996 363,385 0 0 262,350 110,000 2,496
and Systems Storage Group, 1995 324,687 426,814 0 0 100,000 1,688
Chief Technical Officer
Mark W. Jackson ............ 1997 342,530 414,205 0 0 150,000 3,005
President, Recording 1996 262,189 0 0 0 90,000 3,761
Heads Group 1995 198,825 206,100 0 0 50,000 1,139
Young K. Sohn .............. 1997 282,574 270,237 144,259(4) 0 20,000 1,917
President, Desktop and 1996 214,462 0 69,696(5) 0 80,000 2,113
Portable Storage Group 1995 179,803 210,912 188,883(6) 0 30,000 1,237
Claude Barathon ............ 1997 303,814 223,909(8) 298,407(9) 18,034 80,000 1,692
Executive Vice President, 1996 323,231 544,095 93,015 0 30,000 0
Worldwide Sales(7) 1995 306,346 423,491 102,764 0 30,000 0
- ----------
* Option amounts are adjusted to reflect the two-for-one stock split
(1) The Company has not granted any stock appreciation rights and does not have
any Long-Term Incentive Plans as that term is defined in regulations
promulgated by the Securities and Exchange Commission (the "SEC").
(2) As of March 31, 1997 Mr. Lee held 15,000 shares and Mr. Barathon held 2,500
shares valued at $289,538 and $48,269, respectively. Mr. Barathon's shares
will vest within three (3) years according to the following schedule: 500
shares will vest on July 1, 1997, 750 shares will vest on July 1, 1998 and
1,250 shares will vest on July 1, 1999. The aggregate market value is based
on $19.3125 per share, the fair market value of the Company's common stock
as of March 31, 1997, as adjusted to reflect the two-for-one stock split.
Cash dividends are not paid on Quantum stock.
(3) Represents amounts contributed by the Company to the defined benefit
contribution plan approved under Internal Revenue Code section 401(k) (the
"401(k) Plan") maintained by the Company for each executive officer, except
as expressly indicated otherwise.
(4) Represents reimbursement for taxes associated with Mr. Sohn's foreign
assignment.
(5) Represents reimbursement for expenses associated with Mr. Sohn's relocation
to the United States upon the termination of his foreign assignment.
(6) Represents reimbursement of $147,720 for taxes associated with Mr. Sohn's
foreign assignment and $41,163 for reimbursement for expenses associated
with Mr. Sohn's relocation.
(7) Mr. Barathon was promoted to Executive Vice President, Worldwide Sales in
November 1996. In conjunction with his promotion, Mr. Barathon relocated to
the United States from Switzerland. Amounts reported in this table for Mr.
Barathon that were earned while he was an employee in Switzerland were
translated to U.S. dollars using the exchange rate as of the last day of
each fiscal year.
18
(8) Includes sales commission of $151,756 earned by Mr. Barathon prior to his
promotion to Executive Vice President, Worldwide Sales. Amounts included in
this column for 1996 and 1995 reflect sales commissions earned by Mr.
Barathon during each such fiscal year.
(9) Represents $190,671 of expenses related to Mr. Barathon's relocation to the
United States from Switzerland upon his promotion to Executive Vice
President, Worldwide Sales; $55,010 related to accrued vacation earned in
Switzerland and paid to Mr. Barathon upon his relocation to the United
States; $34,191 and $18,535 related to the lease of an apartment and
automobile, respectively, for Mr. Barathon paid for by the Company due to
the high cost of living in Switzerland. Amounts paid to Mr. Barathon while
employed in Switzerland were translated to U.S. dollars using the exchange
rate as of March 31, 1997. Amounts included in this column for 1996 and
1995 reflect lease payments of $62,972 and $73,522, respectively, for an
apartment and lease payments of $30,043 and $29,242, respectively, for an
automobile for Mr. Barathon paid for by the Company due to the high cost of
living in Switzerland.
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth information with respect to the stock
options granted to the named executive officers under the Company's stock option
plans, the options exercised by such named executive officers during the fiscal
year ended March 31, 1997 and the options held by such named executive officers
as of March 31, 1997.
The Option Grant Table sets forth hypothetical gains for the options at the
end of their respective ten (10)-year terms, as calculated in accordance with
the rules of the SEC. Each gain is based on an arbitrarily assumed annualized
rate of compound appreciation of the market price of 5% and 10%, less the
exercise price, from the date the option was granted to the end of the option
term. Actual gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock.
OPTION GRANTS IN FISCAL YEAR 1997
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------- -------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTION EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)* FISCAL YEAR ($/SHARE)* DATE 5% ($) 10% ($)
- ----------------- ------------- --------------- ---------- ------------ ------------ ------------
MICHAEL A. BROWN 200,000(2) 3.42 $10.3125 04/24/06 $1,297,095 $3,287,094
KENNETH LEE ...... 80,000(2) 1.37 10.3125 04/24/06 518,838 1,314,838
MARK W. JACKSON . 50,000(2) 0.85 10.3125 04/24/06 324,273 821,773
100,000(4) 1.71 13.9375 12/18/06 876,522 2,221,279
YOUNG K. SOHN ... 20,000(2) 0.34 10.3125 04/24/06 129,710 328,709
CLAUDE BARATHON . 30,000(2) 0.51 10.3125 04/24/06 194,564 493,064
50,000(3) 0.85 9.5000 10/22/06 298,725 757,028
- ----------
* Amounts are adjusted to reflect the two-for-one stock split.
(1) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten (10)-year option
term. Potential realizable value is shown net of exercise price. These
numbers are calculated based on the regulations promulgated by the SEC and
do not reflect the Company's estimate of future stock price growth.
(2) Options were granted on April 24, 1996 at fair market value, fully vesting
within four (4) years from the grant date.
(3) Options were granted to Mr. Barathon in conjunction with his promotion to
Executive Vice President, Worldwide Sales. Options were granted on October
22, 1996 at fair market value, fully vesting within four (4) years from the
grant date.
(4) Options were granted to Mr. Jackson in conjunction with his promotion to
President, Recording Heads Group. Options were granted on December 18, 1996
at fair market value, fully vesting within four (4) years from the grant
date.
19
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ACQUIRED ON VALUE AT FISCAL YEAR END (#)* AT FISCAL YEAR END ($)(1)
NAME EXERCISE (#)* REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ------------- ------------ ------------- --------------- ------------- ---------------
Michael A. Brown 187,508 $1,155,476 679,044 647,920 $7,714,789 $6,113,321
Kenneth Lee ...... 0 0 428,966 152,508 5,629,329 1,624,155
Mark W. Jackson . 0 0 131,664 200,634 1,564,310 1,577,154
Young K. Sohn ... 14,000 100,500 55,576 77,090 659,679 829,895
Claude Barathon . 0 0 116,658 93,342 1,494,386 951,239
- ----------
* Amounts are adjusted to reflect the two-for-one stock split.
(1) Total value of vested options based on fair market value of the Company's
Common Stock of $19.3125 per share as of March 31, 1997, less the exercise
price.
EMPLOYMENT TERMS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into agreements (the "Agreements") with certain
officers, including the officers named in the Summary Compensation Table,
whereby in the event there is a "change of control" of the Company, which is
defined in the Agreements to include, among other things, a merger or sale of
assets of the Company or a reconstitution of the Company's Board of Directors,
the exercisability and vesting of all stock-based compensation awards granted to
the officers shall be accelerated. Under the Agreements, upon a change of
control, 50% of the unvested shares or options to purchase shares held by an
officer become exercisable and the remaining 50% of such unvested shares or
options to purchase shares become vested and exercisable upon the earlier of the
date of the first anniversary of the change of control or upon such officer's
"Involuntary Termination" after the change of control. Under the Agreements,
"Involuntary Termination" is defined to include, among other things, any
termination without "cause" by the Company of the employee without such
employee's express written consent or a significant reduction of or addition to
the employee's duties. Additionally, such officers receive twelve (12) months
severance pay and continued health and medical benefits during the severance
period. The purpose of the Agreements is to assure that the Company will have
the continued dedication of its officers by providing such individuals with
certain compensation arrangements, competitive with those of other corporations,
to provide sufficient incentive to the individuals to remain with the Company,
to enhance their financial security, as well as protect them against unwarranted
termination in the event of a change of control.
COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee of the Board of Directors (the "Committee") is
made up of Outside Directors of the Company. The Committee generally determines
base salary levels and determines targets under the Annual Incentive Plan for
executive officers of the Company at the start of the fiscal year. Each year the
Committee evaluates the Company's compensation practices and equity programs
based on comparisons with other companies in the industry, and compares the
Company's performance to a group of peer companies in making determinations with
respect to compensation plans.
COMPENSATION PHILOSOPHY
The Company's executive compensation policies are designed to attract and
retain experienced and qualified executive officers critical to the success of
the Company, and to provide incentive for such individuals to maximize the
Company's corporate performance and strategic objectives. The target levels of
the executive officers' total compensation package are intended to be
competitive at the 50th percentile in average performance years and above
average when the Company's performance is above average with executives in the
Company's industry, taking into account corporate performance and individual
achievement. With respect to Section 162(m) of the Code (which limits
deductibility of executive compensation exceeding $1 million per individual per
year unless certain conditions are met), the Company has qualified its Chief
Executive Officer's Annual Incentive Plan for an exemption from Section 162(m).
The 1993 Long Term Incentive Plan currently qualifies for a temporary exemption
from Section 162(m), and the
20
Company herein is taking the steps to secure a permanent exemption. The Company
will continue to evaluate its other compensation programs in light of Section
162(m), although it has no current plans to qualify any of its other
compensation programs for exemptions.
COMPENSATION PLANS
The principal components of executive compensation are described below:
Base Compensation. Base salaries for executive officers are set by the
Committee, in consultation with the Chief Executive Officer, after considering
factors such as the competitive environment, experience levels, position and
responsibility, corporate performance and overall contribution levels of the
individuals. The Company obtains competitive salary information from independent
survey sources of peer companies in competition for similar management talent,
which includes both direct competitors of the Company and other companies in the
high technology industry which have similar size and performance profiles. Most
of the companies included in these surveys are also included in the Hambrecht &
Quist Technology Index (see PERFORMANCE GRAPH). This survey data is then
analyzed by independent consultants and the Company to provide the necessary
information to the Committee.
Annual Incentive Plan. The Annual Incentive Plan provides for cash bonuses
to be paid to executive officers of the Company subject to the Company meeting
certain performance targets set by the Committee at the beginning of the fiscal
year. The purposes of the Annual Incentive Plan are to (i) tie compensation to
achievement of performance measures that provide an optimum return on total
capital in the current fiscal year (ii) drive long-term stockholder value
creation and (iii) ensure that payments are targeted to provide a competitive
level of compensation, taking into account the Company's performance against its
peers in the disk drive and related industries. In fiscal year 1997, the
Company's performance for return on total capital was slightly below the Plan
target level. The Committee, using its discretion as permitted by the Plan,
adjusted the award pool. The approved pool available for bonuses was set at the
target level determined by the Committee.
Long-Term Incentive Compensation. Another component of the total
compensation package for the Company's executive officers is in the form of
stock option awards. The Company's 1986 Stock Option Plan and 1993 Long-Term
Incentive Plan provide for long-term incentive compensation for employees of the
Company, including executive officers. An important objective of the 1986 Stock
Option Plan and 1993 Long-Term Incentive Plan is to align the interest of
executive officers with those of stockholders by providing an equity interest in
the Company, thereby providing incentive for such executive officers to maximize
stockholder value. Option awards directly tie executive compensation to the
performance of the Company's stock. The Committee is responsible for
determining, subject to the terms of such Plan, the individuals to whom grants
should be made, the timing of grants, the exercise or purchase price per share
and the number of shares subject to each grant. Grants are determined based on
the individual's position in the Company, comparative market data, and the
number of unvested shares already held by each officer. The option program also
utilizes vesting periods to encourage retention of executive officers and reward
long-term commitment to the Company.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The process of determining the compensation for the Company's Chief
Executive Officer and the factors taken into consideration in such determination
are generally the same as the process and factors used in determining the
compensation of all of the Company's executive officers. During 1997, the
Company increased the Chief Executive Officer's base salary based on an analysis
of salaries paid by peer companies and the Chief Executive Officer's individual
performance. In fiscal year 1997, payments made to the Chief Executive Officer
from the Chief Executive Officer's Annual Incentive Plan were based on the
actual level of Company performance.
MEMBERS OF THE COMPENSATION COMMITTEE
Steven C. Wheelwright
Edward M. Esber, Jr.
Robert J. Casale
21
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual change (on a dividend
reinvested basis) in five-year cumulative total return between Quantum
Corporation, the S&P 500 Index and the Hambrecht & Quist Technology Index. The
graph assumes $100 invested in the Company's common stock and in each index on
March 31, 1992 through fiscal year ended March 31, 1997.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regualtion S-T]
QNTM
Cumulative Total Return
-------------------------------------------
3/92 3/93 3/94 3/95 3/96 3/97
Quantum Corp QNTM 100 87 112 102 123 264
S & P 500 I500 100 115 117 135 179 214
H & Q TECHNOLOGY IHQT 100 119 137 177 241 281
OTHER MATTERS
The Company knows of no other matters to be submitted at the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: June 17, 1997
22
Appendix A
PROXY QUANTUM CORPORATION PROXY
Annual Meeting of Stockholders - July 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated June 17, 1997, and the 1997 Annual
Report to Stockholders, and appoints Michael A. Brown and Richard L. Clemmer, or
either of them, as the proxies and attorneys-in-fact, with full power to each of
substitution on behalf and in the name of the undersigned to vote and otherwise
represent all of the shares registered in the name of the undersigned at the
1997 Annual Meeting of Stockholders of the Company to be held on Tuesday, July
22, 1997 at 3:00 p.m. (local time) at the Company's headquarters located at 500
McCarthy Boulevard, Milpitas, California 95035, and any adjournment thereof with
the same effect as if the undersigned were present and voting such shares, on
the following matters and in the following manner:
TO ASSURE YOUR REPRESENTATION AT THE
ANNUAL MEETING, PLEASE MARK, SIGN AND
DATE THIS PROXY AND
RETURN IT PROMPTY IN THE
ENCLOSED ENVELOPE.
(Continue and to be signed on reverse side.)
QUANTUM CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. (X)
FOR ALL (Except
1. The election of the following persons as directors FOR WITHHOLD Nominees(s)
of the Company to serve until the next Annual Meeting ALL ALL written below)
of Stockholders and until their successers shall be
duly elected and qualified - Nominees: Stephen M. ( ) ( ) ( )
Berkley, David A. Brown, Michael A. Brown, Robert J.
Casale, Edward M. Esber, Jr. and Steven C. Wheelwright.
-------------------------------------------------------
2. To approve and ratify an amendment to the Company's FOR AGAINST ABSTAIN
Employee Stock Purchase Plan for the purpose of
increasing the number of shares reserved for issuance ( ) ( ) ( )
thereunder by 5,800,000.
3. To approve and ratify an amendment to the 1993 Long- FOR AGAINST ABSTAIN
Term Incentive Plan for the purpose of adding stock
opton grant limitations in order to comply with Section ( ) ( ) ( )
162(m) of the Internal Revenue Code of 1986, as
amended.
4. To ratify the appointment of Ernst & Young LLP as FOR AGAINST ABSTAIN
independent auditors for the Company for the fiscal
year ending March 31, 1998. ( ) ( ) ( )
5. To vote or otherwise represent the shares on any other FOR AGAINST ABSTAIN
business which may properly come before the meeting or
any adjourment thereof, according to their discretion ( ) ( ) ( )
and in their discretion.
The shares represented by this proxy will be voted in accordance with the specification made.
If no specification is made, the shares represented by this proxy will be voted for each of
the above persons and proposals, and for or against such other matters as may properly come
before the meeting as the proxyholders deem advisable.
Dated:__________________________________, 1997
Signature(s)________________________________________________________________________________
____________________________________________________________________________________________
(Title, if appropriate)_____________________________________________________________________
Sign exactly as your name(s) appear on the stock certificate. A Corporation is requested to
sign its name by its President or other authorized officer, with the office held designated.
Executors, administrators, trustees, etc., are requested to so indicate when signing, if
stock is registered in two names, both should sign.
I plan to attend the meeting: Yes ___ No ___