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 CORPORATION
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(Name of Registrant as Specified in Its Charter)
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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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(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 or Schedule and the date of its filing.
(1) Amount previously paid:
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(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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QUANTUM CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 6, 1995
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 Wednesday, September 6, 1995 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 2,200,000 shares;
3. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 1996; and
4. 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 July 17, 1995 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/ Joseph T. Rogers
Joseph T. Rodgers
Executive Vice President, Finance,
Chief Financial Officer and Secretary
Milpitas, California
July 28, 1995
1
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
Wednesday, September 6, 1995 at 3:00 p.m., or at any adjournment thereof, 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 July 28, 1995 to
all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on July 17, 1995 (the "Record
Date") are entitled to notice of and to vote at the meeting. At the Record Date,
50,727,499 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 $22 5/8 per share.
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 $5,500 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 1996 Annual Meeting must be received by
the Company no later than March 30, 1996 in order that they may be considered
for possible inclusion in the proxy statement and form of proxy relating to that
meeting.
1
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.
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.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
Votes Cast with respect to a particular proposal on which the broker has
expressly not voted. Accordingly, the Company intends to treat broker non-votes
in this matter. Thus, a broker non-vote will not affect the outcome of the
voting on a proposal.
2
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.
The name of and certain information regarding each nominee is set forth
below.
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------- --- --------------------------------------------- ------
Stephen M. Berkley...51 President, SMB Associates; management consultant 1987
for various high technology companies
David A. Brown.......50 Director of Quantum; management consultant for 1988
various high technology companies
Robert J. Casale.....56 Group President, Brokerage Information Services 1993
Group of Automatic Data Processing, Inc.
Edward M. Esber, Jr..43 Chairman, President and Chief Executive Officer 1988
of Creative Insights, Inc.
William J. Miller....49 Chairman of the Board and Chief Executive 1992
Officer of Quantum
Steven C.
Wheelwright........51 Professor of Management at the Graduate 1988
School of Business, 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. 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, he 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 also served as a consultant to several high technology firms since
May 1992.
Mr. 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 became co-founder and Executive Vice
President of Operations at Plus Development Corporation. 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 Vice Chairman of the Board of Directors and Chief Operating Officer
of the Company. Mr. Brown served as Chief Executive Officer of Visioneer
Communications, a communications company, from June 1993 to December 1993 and
since June 1993 has served as Chairman of the Board of Visioneer Communications.
Mr. Brown has also been a management consultant and Board member for various
high technology companies since February 1992.
3
Mr. Casale is a former Director of Automatic Data Processing, Inc. and
current Group President of the Brokerage Information Services Group of Automatic
Data Processing, Inc. since February 1988. From 1986 to February 1988, he was a
Managing Director with Kidder Peabody and Company, Inc. Mr. Casale was employed
by American Telephone & Telegraph Co. ("AT&T") from 1975 to 1986, serving in
various management positions, concluding with Executive Vice President of AT&T
Information Systems. He is also a member of the Board of Directors of
Compression Laboratories and Tricord Systems.
Mr. Esber was named Chairman, President and Chief Executive Officer of
Creative Insights, Inc., a computer toys company, in March 1994. 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. From May 1984 to February 1991, Mr. Esber
was employed by Ashton-Tate Company, a computer software company, serving as
Chief Executive Officer from October 1984 to August 1986, Chief Executive
Officer and Chairman from August 1986 to May 1990, and Vice Chairman from May
1990 to February 1991. He is also a member of the Board of Directors of Magic
Software, Inc.
Mr. Miller joined the Company in March 1992 as Chief Executive Officer and
as a member of the Board of Directors. Mr. Miller became Chairman of the Board
and Chief Executive Officer in July 1993. He previously served for 11 years at
Control Data Corporation ("CDC"), where he was most recently Executive Vice
President, and President of Information Services from January 1991 to March
1992. He also served as President and Chief Executive Officer of Imprimis
Technology, formerly a subsidiary of CDC.
Mr. Wheelwright has served as a professor of management at the Graduate
School of Business, Harvard University since August 1988. Mr. Wheelwright
additionally 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 Allegheny-Ludlum Steel Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight (8) meetings
during the fiscal year ended March 31, 1995. During the fiscal year ended March
31, 1995, 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, 1995.
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 meets in conjunction with Board
meetings, 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 nine (9) meetings during the fiscal year
ended March 31, 1995.
The Board of Directors does not have a Nominating Committee nor any
committee performing such function.
DIRECTOR COMPENSATION
During the year ended March 31, 1995 each director who was not an employee
("Outside Director") received an annual retainer of $27,000 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 $1,000 per day for any
Board meeting attended. Outside Directors serving on Board committees receive
$750 per meeting for meetings held on days when there was no regularly scheduled
Board meeting. Outside Directors may also
4
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.
Options may be 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 7,500 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 30,000 shares on the date of his or her appointment or election
(the "Initial Option"), 7,500 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 7,500 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 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 governing options
granted to Outside Directors may not be amended more than once every six (6)
months.
During fiscal 1995, each of the Company's Outside Directors, Mr. Berkley,
Mr. Brown, Mr. Casale, Mr. Esber and Mr. Wheelwright received an option to
purchase 7,500 shares of Common Stock at an exercise price of $15.6875 per
share.
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 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.
5
PROPOSAL TWO
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
In July 1995, 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 6,300,000 to 8,500,000 shares of Common
Stock.
Certain 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 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 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 5,166 employees eligible to
particiapte in the Purchase Plan, of whom 3,056 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.
6
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
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
7
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.
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.
8
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 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 DOLLAR
OR IDENTITY OF GROUP SHARES VALUE
AND POSITION DATE PURCHASED (#) ($)(1)
- --------------------------------- --------------- ------------- -----------
William J. Miller ............... July 25, 1994 0 $ 0
Chairman of the Board January 25, 1995 2,500 15,625
and Chief Executive Officer
Michael A. Brown ................ July 25, 1994 662 4,262
President, Desktop and January 25, 1995 2,500 15,625
Portable Storage Group
William F. Roach ................ July 25, 1994 0 0
Executive Vice President, January 25, 1995 0 0
Worldwide Sales
Kenneth Lee ..................... July 25, 1994 337 754
Executive Vice President, January 25, 1995 1,295 2,862
Technology and Engineering,
Vice President, Recording
Heads Group, Chief
Technical Officer
Joseph T. Rodgers ............... July 25, 1994 736 4,738
Executive Vice President, January 25, 1995 2,500 15,625
Finance, Chief Financial
Officer and Secretary
All current executive ......... July 25, 1994 3,257 16,582
officers as a group January 25, 1995 10,412 56,878
All other employees ............ July 25, 1994 400,682 2,232,031
as a group January 25, 1995 454,738 2,305,043
- ----------
(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.
9
PROPOSAL THREE
INDEPENDENT AUDITORS
In July 1995, 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, 1996.
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 1996 FISCAL
YEAR.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 forms 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, 1995, all Section 16(a) filing requirements
applicable to its executive officers, directors and ten percent stockholders
were complied with.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 17, 1995 certain information with
respect to the beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, by each director, by each of the executive
officers named in the Summary Compensation Table, and by all directors and
executive officers as a group.
APPROXIMATE
NAME AMOUNT OWNED PERCENTAGE OWNED
- -------------------------------------- ------------ ----------------
FMR Corp. ............................ 5,988,368 11.42%
82 Devonshire Street
Boston, MA 02109-3014
J.P. Morgan & Company, Inc. .......... 4,893,746(1) 9.33%
522 Fifth Avenue
New York, NY 10036
Franklin Templeton Group ............. 3,235,230 6.17%
777 Mariners Island Blvd.
San Mateo, CA 94404
William J. Miller .................... 378,658(3) *
Michael A. Brown ..................... 190,359(2) *
Joseph T. Rodgers .................... 140,197(3) *
Kenneth Lee .......................... 118,651(2) *
Stephen M. Berkley ................... 76,203(3) *
William F. Roach ..................... 66,873(2) *
Steven C. Wheelwright ................ 38,625(2) *
David A. Brown ....................... 15,312(2) *
Robert J. Casale ..................... 15,000(2) *
Edward M. Esber, Jr. ................. 2,500(2) *
All directors and executive officers
as a group (13 persons) .............. 1,239,907(4) 2.36%
- ----------
* Less than 1%.
(1) Includes 493,971 shares subject to the Convertible Subordinated Debenture
due April 1, 2002.
(2) Represents shares subject to stock options exercisable at July 17, 1995 or
within sixty (60) days thereafter.
(3) Includes 371,873 shares, 71,665 shares and 136,959 shares subject to stock
options held by Mr. Miller, Mr. Berkley and Mr. Rodgers respectively, which
were exercisable at July 17, 1995 or within sixty (60) days thereafter.
(4) Includes 1,223,022 shares subject to stock options held by executive
officers and directors which were exercisable at July 17, 1995 or within
sixty (60) days thereafter.
11
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of
the four other most highly compensated executive officers whose salary plus
bonus exceeded $100,000, information concerning compensation paid for services
to the Company in all capacities during the fiscal year ended March 31, 1995, as
well as the total compensation paid to each such individual for the Company's
previous two fiscal years (if such person was the Chief Executive Officer or an
executive officer, as the case may be, during any part of such fiscal year).
LONG-TERM
COMPENSATION(1)
---------------
ANNUAL
COMPENSATION(1)(2) AWARDS
----------
SECURITIES
UNDERLYING ALL OTHER
OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SARS (#) (3)
- --------------------------- ---- --------- --------- --------- ------------
William J. Miller .......... 1995 $561,023 $870,000 125,000 $1,212
Chairman of the Board and 1994 516,976 0 125,000 0
Chief Executive Officer 1993 400,058 536,610 400,000 0
Michael A. Brown ........... 1995 348,703 470,421 75,000 884
President, Desktop and 1994 329,228 0 75,000 0
Portable Storage Group 1993 258,495 259,650 172,810 0
William F. Roach ........... 1995 324,134 436,819 50,000 1,688
Executive Vice President, 1994 283,607 0 50,000 0
World-Wide Sales 1993 201,464 157,659 70,000 0
Kenneth Lee ................ 1995 324,687 426,814 50,000 1,688
Executive Vice President, 1994 276,389 0 50,000 0
Technology and Engineering, 1993 199,929 124,632 70,000 0
Vice President, Recording
Heads Group, Chief
Technical Officer
Joseph T. Rodgers .......... 1995 323,035 400,417 50,000 1,688
Executive Vice President, 1994 298,149 0 50,000 0
Finance, Chief Financial 1993 273,781 264,635 50,000 0
Officer and Secretary
- ----------
(1) The Company has not granted any stock appreciation rights or restricted
stock awards 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) The value of perquisites fell below the lesser of $50,000 or 10% of reported
salary plus bonus for each executive. Therefore, the Other Annual
Compensation column has not been included in this table.
(3) Represents amounts contributed by the Company to the executive officer's
defined benefit contribution plan under 401(k).
12
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth information with respect to the stock
options granted to the named executive officers under the Company's stock option
plans, the options exercised by such named executive officers during the fiscal
year ended March 31, 1995 and the options held by such named executive officers
as of March 31, 1995.
The Option Grant Table sets forth hypothetical gains for the options at the
end of their respective ten (10)-year terms, as calculated in accordance with
the rules of the SEC. Each gain is based on an arbitrarily assumed annualized
rate of compound appreciation of the market price of 5% and 10%, less the
exercise price, from the date the option was granted to the end of the option
term. Actual gains, if any, on option exercises are dependent on the future
performance of the Company's common stock.
OPTION GRANTS IN FISCAL YEAR 1995
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
-------------------------------------------------- -------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTION EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ----------------- ----------- ------------- --------- ---------- ---------- ----------
William J. Miller..... 125,000(2) 5.36% $12.875 05/16/04 $1,015,625 $2,562,500
Michael A. Brown...... 75,000(2) 3.22 12.875 05/16/04 609,375 1,537,500
William F. Roach...... 50,000(2) 2.14 12.875 05/16/04 406,250 1,025,000
Kenneth Lee .......... 50,000(2) 2.14 12.875 05/16/04 406,250 1,025,000
Joseph T. Rodgers..... 50,000(2) 2.14 12.875 05/16/04 406,250 1,025,000
<FN>
- ----------
(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. The stock
prices utilized for the table showing a 5% and a 10% rate of return were
approximately $21 and $33 3/8 , respectively, per share.
(2) Options were granted on May 16, 1994 at fair market value, fully vesting
within four (4) years from the grant date.
</FN>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES VALUE UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ACQUIRED ON REALIZED AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
NAME EXERCISE (#) $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ------------- ---------- ------------- --------------- ------------- ---------------
William J. Miller.... 0 $ 0 280,207 269,793 $811,974 $775,526
Michael A. Brown..... 16,000 131,573 175,358 161,878 535,563 469,491
William F. Roach..... 0 0 73,879 117,919 285,879 338,135
Kenneth Lee ......... 0 0 121,211 117,918 557,421 338,130
Joseph T. Rodgers.... 0 0 95,293 118,752 446,612 346,363
<FN>
- ----------
(1) Total value of vested options based on fair market value of the Company's
Common Stock of $14 7/8 per share as of March 31, 1995, less the exercise
price.
</FN>
13
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.
14
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 Company currently intends to take 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 Compensation 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 and increase in market share 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 1995, the Company exceeded its targets for market
share growth and return on total capital. Payments made under the Annual
Incentive Plan were based on a process which took into account changes in market
share relative to the disk drive industry, return on total capital performance
relative to companies in the disk drive and related industries and individual
performance as measured by specific individual objectives. Due to the
acquisition of the storage businesses of Digital Equipment Corporation during
the fiscal year 1995, the Compensation Committee determined it was appropriate
to use proforma financial calculations, excluding the acquisition, to most
accurately reflect the current year performance for purposes of calculating the
Annual Incentive Plan pool.
15
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 1995, 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 1995, the Chief Executive Officer did achieve the
majority of his individual objectives, including maintaining the Company's
position as the largest independent supplier of 3 1/2 -inch disk drives. The
Company exceeded its targets for market share growth and return on total
capital. For the Chief Executive Officer's Annual Incentive Plan, all financial
calculations were made using total business performance (inclusive of the
acquisition and all related costs) as defined by the CEO Annual Incentive Plan
which was approved by the shareholders in fiscal year 1995. The qualitative
factors used in determining CEO incentive compensation were market share change
and return on total capital. For fiscal year 1995, the Compensation Committee
also considered objectives that specifically reflected performance related to
the integration of the acquired businesses. In addition to the bonus paid under
the CEO Annual Incentive Plan, the Compensation Committee approved a
discretionary bonus for fiscal year 1995 to reflect the CEO's performance in
achieving the successful acquisition and integration of the Digital storage
businesses.
MEMBERS OF THE COMPENSATION COMMITTEE
Steven C. Wheelwright
Edward M. Esber, Jr.
Robert J. Casale
16
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, 1990 through fiscal year ended March 31, 1995.
(The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T)
THE H&Q TOTAL RETURN GROWTH & TECHNOLOGY INDICES
ANNUAL DATA SERIES
SCALED PRICES
DATES Quantum Corp. H&Q Technology S&P 500
- ------ ------------- -------------- -------
Mar-90 100 100 100
Mar-91 183.18 114.93 114.41
Mar-92 164.04 135.29 127.05
Mar-93 143.00 148.41 146.39
Mar-94 183.66 165.84 148.55
Mar-95 166.84 212.32 171.68
17
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: July 28, 1995
18