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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
STRATUS COMPUTER, INC.
(Name of Registrant as Specified In Its Charter)
STRATUS COMPUTER, INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $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 transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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STRATUS COMPUTER, INC.
55 FAIRBANKS BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
March 15, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Stratus Computer, Inc., which will be held on Tuesday, April 19, 1994, at 2:00
PM, at the offices of the Company, 55 Fairbanks Boulevard, Marlborough,
Massachusetts.
The following Notice of Annual Meeting of Stockholders and Proxy Statement
describes the items to be considered by the stockholders and contains certain
information about Stratus' directors and executive officers.
Please sign and return the enclosed proxy card as soon as possible in the
envelope provided so that your shares can be voted at the meeting in accordance
with your instructions. Even if you plan to attend the meeting, we urge you to
sign and promptly return the enclosed proxy. You can revoke it at any time prior
to the meeting, or vote your shares personally if you attend the meeting. We
look forward to seeing you.
Sincerely,
William E. Foster
Chairman of the Board
Chief Executive Officer
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STRATUS COMPUTER, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 19, 1994
The Annual Meeting of Stockholders of Stratus Computer, Inc. (the
"Company") will be held at the offices of the Company, 55 Fairbanks Boulevard,
Marlborough, Massachusetts, on Tuesday, April 19, 1994, at 2:00 PM, for the
following purposes:
1. To elect two Class I directors for a three year term.
2. To approve amendments to the 1983 Stock Option Plan and the
Non-Qualified Common Stock Option Plan increasing the maximum combined
aggregate number of shares of common stock authorized to be issued
under both plans from 7,680,200 to 8,780,200 and limiting the number of
shares for which options may be granted to any person in any fiscal
year to a maximum of 100,000 shares per plan.
3. To approve an amendment to the Employee Stock Purchase Plan extending
the expiration date of the plan to December 31, 2004.
4. To ratify the selection by the Board of Directors of Ernst & Young as
the Company's independent auditors.
5. To transact such other business as may properly come before the meeting
or any adjournment of the meeting.
Stockholders of record at the close of business on February 22, 1994 will
be entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors
FREDERICK S. PRIFTY, Clerk
Marlborough, Massachusetts
March 15, 1994
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
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STRATUS COMPUTER, INC.
55 FAIRBANKS BOULEVARD
MARLBOROUGH, MASSACHUSETTS 01752
(508) 460-2000
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Stratus Computer, Inc. (the "Company"). The
proxies will be used at the Annual Meeting of Stockholders to be held on April
19, 1994 and at any adjournment of that meeting. Each proxy will be voted in
accordance with the instructions specified, and, if no instruction is specified,
the proxy will be voted in favor of the proposals set forth in the Notice of
Meeting. Any proxy may be revoked by a stockholder at any time before it is
exercised by a written revocation, a subsequently dated proxy or an oral request
at the meeting.
The Board of Directors has fixed February 22, 1994 as the record date for
the determination of stockholders entitled to vote at the meeting. On that date
there were outstanding and entitled to vote 24,125,868 shares of common stock of
the Company. Each share is entitled to one vote.
A plurality of the shares voting is required for the election of directors.
Approval of each of the other matters which is before the meeting will require
the affirmative vote of the holders of a majority of the shares voting thereon.
No votes may be taken at the meeting, other than a vote to adjourn, unless a
quorum has been constituted consisting of the representation of a majority of
the outstanding shares as of the record date. Votes will be tabulated by the
Company's transfer agent subject to the supervision of persons designated by the
board of directors as inspectors.
All shares represented at the meeting, by holders present either in person
or by proxy, will be deemed to be represented for purposes of constituting a
quorum. Shares which are represented at the meeting but as to which the holder
abstains from voting or has no voting authority in respect of a particular
matter (such as in the case of a broker non-vote) will not be deemed to be voted
on such matter and will not be the equivalent of negative votes on such matter.
The following table sets forth, to the knowledge of the Company, the only
beneficial owners of more than 5% of the Company's outstanding common stock as
of February 11, 1994. This information is based on the most recent statements on
Schedule 13G filed with the Securities and Exchange Commission or on other
information available to the Company.
SHARES OF
COMMON
STOCK
BENEFICIALLY
NAME AND ADDRESS OWNED PERCENT
---------------- ------------ --------
Neuberger & Berman......................................... 2,361,563 9.8
605 Third Avenue
New York, New York 10158-3698
FMR Corp................................................... 1,435,000 5.9
82 Devonshire Street
Boston, Massachusetts 02109-3614
Harris Bretall Sullivan & Smith, Inc....................... 1,340,403 5.6
One Post Street, Suite 2300
San Francisco, California 94104
Wertheim Schroder & Co. Incorporated....................... 1,305,750 5.4
787 Seventh Avenue
New York, New York 10019-6016
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The Company's Annual Report to Stockholders for the year ended January 2,
1994 is being mailed to stockholders together with this Proxy Statement. The
date of mailing of this Proxy Statement is expected to be on or about March 15,
1993.
ELECTION OF DIRECTORS
(ITEM 1 OF NOTICE)
The members of the Board of Directors are classified into three Classes.
Classes I and II each currently has two directors and Class III currently has
three directors. The present terms of the Class II and Class III directors
extend until the 1995 and 1996 Annual Meetings of Stockholders, respectively.
The present terms of the Class I directors expire at the 1994 Annual Meeting,
and the Board has fixed at two the number of Class I directors to be elected at
the meeting.
The proxy will be voted to elect as Class I directors the two nominees
(Messrs. Carr and Foster), unless authority to vote for the election of
directors is withheld by marking the proxy to that effect or the proxy is marked
with the names of directors as to whom authority to vote is withheld. Each of
the nominees is presently a director of the Company and has consented to serve
if re-elected.
Each Class I director will be elected to hold office until the third annual
meeting of stockholders following the 1994 Annual Meeting (1997) and until his
successor is elected and qualified. If a nominee becomes unavailable, the proxy
may be voted, unless authority has been withheld as to the nominee, for the
election of a substitute.
Set forth below are the names of each nominee and the positions and offices
held by him, his age at February 1, 1994, the year in which he became a director
of the Company, his principal occupation and business experience for at least
the last five years, and the names of other publicly-held companies for which he
serves as a director. Following that is the same information regarding the other
directors of the Company.
CLASS I DIRECTORS -- NOMINEES FOR ELECTION AT THE ANNUAL MEETING TO BE HELD
APRIL 19, 1994
NAME, PRINCIPAL OCCUPATION, DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
- ---------------------------------------------------------------------------- -------- ---
Arthur Carr................................................................. 1990 62
He was, from 1982 to 1986, Executive Vice President and General Manager of
the Information Systems Group of Motorola, Inc., from 1986 to 1989,
President of Stellar Computer, Inc, a manufacturer of graphics super
computers, from 1989 to 1991, President of Carr & Associates Management
Consultants, and from 1991 through November 1993, Chairman, President and
Chief Executive Officer of Bytex Corporation, a manufacturer of data
communications equipment. Since November 1993, Mr. Carr has been a private
investor. Mr. Carr is a director of Wellfleet Communications, Inc., a data
communications manufacturer.
William E. Foster........................................................... 1980 49
Mr. Foster was a founder of the Company and has been, since 1980, Chairman
and Chief Executive Officer of the Company. From 1980 until November 1993,
Mr. Foster also served as President of the Company.
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NAME, PRINCIPAL OCCUPATION, DIRECTOR
BUSINESS EXPERIENCE AND DIRECTORSHIPS SINCE AGE
- ---------------------------------------------------------------------------- -------- ---
CLASS II DIRECTORS -- TERMS EXTENDING UNTIL 1995
Paul J. Ferri............................................................... 1981 55
He has been, since 1978, a general partner of Hellman, Ferri Investment
Associates, since 1982, a general partner of Matrix Partners, L.P., since
1985, a general partner of Matrix Partners II, L.P., and since 1990, a
general partner of Matrix Partners III, L.P., all of which are venture
capital investment partnerships. Mr. Ferri is a director of BancTec, Inc.,
a manufacturer of check-processing equipment, and Xyplex Corporation, a
manufacturer of data communications equipment.
Gardner C. Hendrie.......................................................... 1985 61
He has been, since May 1985, a private investor and independent
consultant, and since 1987, a general partner of Sigma Partners, a venture
capital investment partnership. Mr. Hendrie was a founder of the Company
and, from 1980 through 1985, served the Company as an executive officer in
various senior engineering management positions.
CLASS III DIRECTORS -- TERMS EXTENDING UNTIL 1996
Alexander V. d'Arbeloff..................................................... 1980 66
He has been, since 1971, President and Chief Executive Officer of
Teradyne, Inc., a producer of automatic test equipment for the electronics
industry. Mr. d'Arbeloff is a director of Teradyne, Inc. and BTU
Corporation, a manufacturer of thermal processing equipment.
Robert M. Morrill........................................................... 1983 56
He was, from July 1983 through December 1990, a general partner of H & Q
Investment Partners, a venture capital investment partnership. Since
January 1991, Mr. Morrill has been a private investor. Mr. Morrill is a
director of VMark Software, Inc., a developer of database and application
software.
Gary E. Haroian............................................................. 1993 42
Mr. Haroian joined the Company in 1983 as Corporate Controller and has
since served in the following senior management positions: 1985-1988, Vice
President, Finance and Administration and Treasurer; 1988-1990, Senior
Vice President, Finance and Administration, Treasurer, and Chief Financial
and Accounting Officer; 1990-1991, Vice President and General Manager,
Corporate Division; 1991-1992, Senior Vice President and General Manager,
Corporate Division; 1992-November 1993, Executive Vice President and
General Manager, Corporate Operations; and since November 1993, President
and Chief Operating Officer.
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STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information as of February 11, 1994 as to
shares of common stock of the Company beneficially owned by each of the
directors and executive officers of the Company and the directors and executive
officers as a group. Except as otherwise indicated, each person has sole
investment and voting power with respect to the shares owned.
BENEFICIAL
OWNERSHIP
OF COMMON STOCK
------------------
NUMBER PERCENT
OF OF
SHARES(1) OWNERSHIP
------- ---------
Alexander V. d'Arbeloff.................................................. 117,588 .5%
Arthur Carr(2)........................................................... 15,000 .06%
Paul J. Ferri............................................................ 98,312 .4%
William E. Foster(3)..................................................... 352,281 1.5%
Gary E. Haroian.......................................................... 101,299 .4%
Gardner Hendrie(4)....................................................... 44,240 .2%
Robert M. Morrill(5)..................................................... 30,000 .1%
Robert E. Donahue........................................................ 34,602 .1%
Richard L. Tarulli....................................................... 65,153 .3%
All directors and executive officers as a group (9 persons).............. 858,475 3.6%
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<FN>
(1) Includes 412,150 shares which may be acquired within sixty days after
February 11, 1994 by exercise of stock options by the directors and
executive officers as follows: Mr. d'Arbeloff, 23,000; Mr. Carr, 14,000;
Mr. Ferri, 22,000; Mr. Foster, 117,500; Mr. Haroian, 99,830; Mr. Hendrie,
18,000; Mr. Morrill, 20,000; Mr. Donahue, 33,320; and Mr. Tarulli, 64,500.
Of those shares, 141,599 would be fully vested as to all directors and all
executive officers as a group within that sixty day period, and the holders
would have investment and voting powers; the remaining shares would be
subject to vesting, and the holders would have voting but not investment
powers until the shares vested.
(2) Excludes 400 shares held by Mr. Carr's wife, beneficial ownership of which
he disclaims.
(3) Excludes 67,000 shares held directly by Mr. Foster's wife, beneficial
ownership of which he disclaims.
(4) Excludes 700 shares held by Mr. Hendrie for the benefit of his children,
beneficial ownership of which he disclaims.
(5) Includes 10,000 shares held by Morrill Associates Limited Partners, of which
Mr. Morrill and members of his family are partners.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1993, the Board of Directors of the Company held seven meetings.
Each incumbent director attended at least 75% of the aggregate number of the
meetings of the Board and the meetings of the committees of the Board on which
he served.
The Board of Directors has an Audit Committee which held two meetings during
1993. The current members of the Audit Committee are Messrs. Ferri and Morrill.
The principal functions of the Committee are to review matters relating to the
examination of the Company by its independent auditors and its accounting
control procedures.
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The Board of Directors has a Compensation and Stock Option Committee which
held two meetings during 1993. The current members of this Committee are Messrs.
d'Arbeloff, Carr, Ferri, Hendrie and Morrill, comprising all of the non-employee
directors. The principal functions of the Committee are to fix the compensation
of senior management and to administer the grant of options under the Company's
stock option plans.
The Board of Directors does not have a nominating or similar committee.
EXECUTIVE COMPENSATION
I. SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid for services rendered
to the Company in all capacities during the fiscal years ended January 2, 1994,
January 3, 1993 and December 29, 1991 to the chief executive officer, the three
persons serving as executive officers on January 2, 1994, and the two other
persons who served as executive officers during fiscal 1993.
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SHARES UNDER
NAME AND -------------------- OPTION ALL OTHER
PRINCIPAL POSITION SALARY(1) BONUS AWARDS(2) COMPENSATION(1)
(AT JANUARY 2, 1994) YEAR ($) ($) (#) ($)
- ------------------------------------ ---- --------- ------ ------------ ---------------
- ------------------------------------
William E. Foster................... 1993 450,000 29,100 60,000 7,075
Chairman & Chief 1992 475,008 6,600 0 8,728
Executive Officer 1991 465,008 35,800 30,000 8,475
Gary E. Haroian..................... 1993 315,000 19,123 62,000 7,075
President & 1992 315,000 5,715 0 8,728
Chief Operating Officer 1991 284,667 30,685 22,000 8,475
Robert E. Donahue................... 1993 225,000 7,483 24,000 6,836
Vice President Finance & 1992 195,000 2,855 0 6,400
Chief Financial Officer 1991 161,666 15,345 9,000 4,850
Richard L. Tarulli.................. 1993 300,000 41,547 45,000 7,075
Senior Vice President, 1992 285,000 6,120 0 8,728
Worldwide Sales and Service 1991 263,827 15,580 15,000 8,475
Robert A. Freiburghouse(3).......... 1993 310,000 27,571 38,000 568,325
1992 300,000 6,100 0 8,728
1991 294,168 30,300 18,000 8,475
Paul R. Tucker(4)................... 1993 300,000 0 27,000 7,075
1992 300,000 900 0 8,728
1991 291,668 7,800 15,000 8,475
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<FN>
(1) Salary includes amounts deferred by the named executive officer and All
Other Compensation consists exclusively of (except for Mr. Freiburghouse in
1993) the Company's contribution under the Company's capital accumulation
plan established pursuant to Section 401(k) of the Internal Revenue Code.
Under the capital accumulation plan, each participant may defer up to
fifteen percent of his annual salary up to an annual maximum amount
prescribed by IRS regulations ($7,075 in 1993). The Company matches such
deferrals to the extent of achievement by the Company of certain profit
goals.
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(2) All options granted in 1991 were canceled in 1993 under a share for share
option exchange program. 1993 option grants include new options granted in
exchange for the canceled 1991 options. See Option Grants Table and
Ten-Year Option Repricing Table below.
(3) Mr. Freiburghouse was a founder of the Company and served as Senior Vice
President and General Manager of the Telecommunications Division until his
resignation as an executive officer in November 1993. Upon his resignation,
the Company entered into an employment agreement with Mr. Freiburghouse
pursuant to which his salary ($25,833 per month) will continue through
December 31, 1995. The amount set forth for him in 1993 for all other
Compensation consists of $7,075 contributed by the Company under the
capital accumulation plan and $561,250, which is the amount accrued by the
Company in 1993 for all salary payable under the employment agreement.
(4) Mr. Tucker served as Senior Vice President and General Manager of the
International Division until his resignation in April 1993 and thereafter
was not an executive officer.
II. OPTION GRANTS TABLE
The following table sets forth information with respect to stock options
granted by the Company to the named executive officers in the fiscal year ended
January 2, 1994.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION
OPTIONS FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(1)
GRANTED(2) EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (# SHARES) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ------------------------------------ ----------- ------------ --------- ---------- -------- --------
William E. Foster................... 30,000 1.83 30.75 2/25/03 579,900 1,470,000
30,000(3) 1.83 23.25 9/08/03 438,700 1,111,600
Gary E. Haroian..................... 40,000 2.44 30.75 2/25/03 773,200 1,960,000
22,000(3) 1.34 23.25 9/08/03 321,600 815,200
Robert E. Donahue................... 15,000 0.92 30.75 2/25/03 290,000 735,000
9,000(3) 0.55 23.25 9/08/03 131,600 333,500
Richard L. Tarulli.................. 15,000 0.92 30.75 2/25/03 290,000 735,000
15,000 0.92 21.00 8/09/03 198,800 502,100
15,000(3) 0.92 23.25 9/08/03 219,000 556,000
Robert A. Freiburghouse............. 20,000 1.22 30.75 2/25/03 386,600 980,000
18,000(3) 1.10 23.25 9/08/03 263,190 666,900
Paul R. Tucker...................... 12,000 0.73 30.75 2/25/03 232,000 588,000
15,000(3) 0.92 23.25 9/08/03 219,300 555,800
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<FN>
(1) As required by the rules of the Securities and Exchange Commission,
potential values are stated based on the prescribed assumption that the
common stock will appreciate in value from the date of grant to the end of
the option term at rates (compounded annually) of 5% and 10%, respectively,
and therefore do not reflect past results and are not intended to forecast
possible future appreciation, if any, in the price of the common stock.
(2) All options are exercisable, but the underlying shares are subject to
vesting over a five-year period.
(3) Issued pursuant to a share for share option exchange program. See Ten-Year
Option Repricing Table below.
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III. OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth, for the named executive officers, the
number of shares for which stock options were exercised in the fiscal year ended
January 2, 1994, the realized value or spread (the difference between the
exercise price and market value on date of exercise) and the number and
unrealized spread of the unexercised options held by each at fiscal year end.
NUMBER
OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
SHARES AT OPTIONS
ACQUIRED FY-END AT
ON VALUE (# FY-END
NAME EXERCISE(#) REALIZED($) SHARES)(1) ($)(1)
- --------------------------------------- ----------- ----------- ---------- --------
William E. Foster...................... 37,500 703,125 117,500 1,083,438
Gary E. Haroian........................ 0 0 99,830 684,029
Robert E. Donahue(2)................... 0 0 33,320 194,384
Richard L. Tarulli(2).................. 0 0 64,500 542,438
Robert A. Freiburghouse................ 17,275 330,384 66,105 553,338
Paul R. Tucker(2)...................... 6,650 126,350 47,000 409,375
- ---------------
<FN>
(1) With the exception of Mr. Freiburghouse, whose options are fully vested, all
shares shown are exercisable and are subject to vesting in accordance with
a five-year schedule from date of grant of each stock option award. Options
may be exercised at any time after the date of grant, but may not be
disposed of until they have vested. Options vest at the rate of 5% every
three (3) months over a five (5) year period from the date of grant. The
following number of shares held by the named executive officers were fully
vested as of fiscal year-end: Mr. Foster, 16,000 shares, Mr. Haroian,
29,190 shares, Mr. Donahue, 7510 shares, Mr. Tarulli, 11,350 shares, Mr.
Freiburghouse, 66,105 shares, and Mr. Tucker, 5,950 shares.
(2) Does not include 732 shares purchased by Mr. Donahue, 653 shares purchased
by Mr. Tarulli and 519 shares purchased by Mr. Tucker during 1993 under the
Company's Employee Stock Purchase Plan.
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IV. TEN-YEAR OPTION REPRICING TABLE
As discussed in the report on executive compensation below, in 1993 the
Company gave holders of stock options, including executive officers, the
opportunity to exchange certain of those options for new options with a lower
exercise price and with a new five year vesting schedule beginning on the grant
date of the new option. The following table sets forth certain information
concerning the exchange and repricing, during the last ten fiscal years, of
options held by the named executive officers and any other persons who have been
executive officers of the Company.
MARKET
PRICE
NUMBER OF
OF STOCK EXERCISE
OPTIONS AT PRICE LENGTH OF ORIGINAL
REPRICED TIME AT TIME NEW TERM REMAINING
(# OF OF EXERCISE AT DATE OF
NAME DATE SHARES) REPRICING REPRICING PRICE REPRICING(1)
- ---------------------------- -------- ------ --------- ----------- ----- ------------------
William E. Foster........... 10/12/90 85,000 15.25 19.75-21.50 15.25 8Y 1M
9/8/93 30,000 23.25 40.00 23.25 8Y 3M
Gary E. Haroian............. 12/7/87 6,400 18.00 19.75-21.50 18.00 8Y 11M
10/12/90 9,350 15.25 20.00 15.25 5Y 2M
9/8/93 22,000 23.25 40.00 23.25 8Y 3M
Robert E. Donahue........... 12/7/87 5,600 18.00 19.75-20.25 18.00 8Y 11M
10/12/90 3,400 15.25 20.00 15.25 5Y 2M
9/8/93 9,000 23.25 40.00 23.25 8Y 3M
Richard L. Tarulli.......... 10/12/90 11,000 15.25 20-22.25 15.25 8Y 1M
9/8/93 15,000 23.25 40.00 23.25 8Y 3M
Robert A. Freiburghouse..... 12/7/87 18,000 18.00 19.75-21.50 18.00 8Y 11M
10/12/90 31,100 15.25 18-21.25 15.25 8Y 1M
9/8/93 18,000 23.25 40.00 23.25 8Y 3M
Paul R. Tucker.............. 12/7/87 4,000 18.00 28.25 18.00 9Y 1M
10/12/90 20,000 15.25 20-21.25 15.25 8Y 1M
9/8/93 15,000 23.25 40.00 23.25 8Y 3M
John H. Curtis(2)........... 12/7/87 13,500 18.00 19.25-21.50 18.00 8Y 11M
William H. Thompson(3)...... 12/7/87 2,000 18.00 28.25 18.00 9Y 1M
James E.D. Austin(4)........ 12/7/87 12,800 18.00 19.75-21.50 18.00 8Y 1M
10/12/90 36,000 15.25 18.00-21.50 15.25 8Y 11M
- ---------------
<FN>
(1) All original options had ten-year terms and a five-year vesting schedule.
All repriced options have a new ten-year term and a new five-year vesting
schedule beginning on the grant date.
(2) Mr. Curtis served as Chief Financial Officer from 1980 to 1985, Senior
Vice-President and Chief Operating Officer in 1986, and Senior
Vice-President of Sales from 1987 to 1988.
(3) Mr. Thompson served as North American Vice-President of Sales from 1983 to
1986, Senior Vice-President of Marketing from 1987 to 1988, and Senior
Vice-President/General Manager for the System/88 Division in 1989.
(4) Mr. Austin served as Senior Vice-President of Manufacturing from 1983 to
1989, Vice President of Corporate Manufacturing in 1990, and Vice-President
for Corporate Quality from 1991 to 1992.
DIRECTORS COMPENSATION
Each director of the Company who is not an employee is paid $12,500 per
year and $1,000 for each meeting of the Board attended. In addition, members of
the Audit Committee, Compensation and Stock Option Committee and any other
special committees formed from time to time are paid $1,000 for each meeting of
such committee attended. Directors of the Company who are not employees have
also been granted stock options in connection with the performance of their
duties.
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The following report on executive compensation and the Performance Graph on
page 11 shall not be incorporated by reference into any filings by the Company
with the Securities and Exchange Commission.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The following report prepared by the Compensation and Stock Option
Committee, addresses the Company's executive compensation policies and the basis
on which fiscal 1993 executive officer compensation determinations were made.
The Committee (aided by compensation professionals employed by the Company)
designs and approves all components of executive pay.
To ensure executive compensation is designed and administered in an objective
manner, the Committee's members are all non-employee directors. The duty of the
Committee is to set the base salary and variable compensation for all executive
officers, as well as the design of all other elements of the executive pay
program.
POLICY: The Company's overall policy for compensating its executive officers is
to establish aggregate compensation levels which (i) provide appropriate
incentives for individual and Company performance, (ii) are sufficiently
competitive within the computer/high-technology industry to retain and, when
necessary, attract executive officers who are capable of leading the Company to
achieve its business objectives, (iii) reward outstanding performance, and (iv)
tie the interests of the Company's executives to the interests of the Company's
stockholders.
The principal components of the executive compensation programs are base salary,
variable bonus and stock options, as described below. In addition, executives
are eligible to participate, on a non-discriminatory basis, in various benefit
programs provided to all full-time employees, including the capital accumulation
and employee stock purchase plans and the group medical, disability and life
insurance programs. In reaching its decisions with regard to the actual
compensation levels, the Committee takes into consideration all elements of the
program rather than any one element in isolation.
Competitive market data is obtained by using market standard surveys. This
competitive market data compares the Company's compensation programs to those of
a group of computer/high-technology companies consisting of substantially the
same companies as the industry index shown on the stock performance graph below.
The Company's overall compensation is generally targeted at the mid-range of the
comparison group.
BASE SALARY AND VARIABLE BONUS: The 1993 executive compensation program was
designed with a view toward continuing the process begun in 1991 of more
directly tying the performance of the Company to the executive officers'
compensation.
Consistent with the foregoing, Mr. Foster's base salary for 1993 was reduced by
approximately 5% compared to 1992, while his potential bonus was increased by
150% compared to 1992, resulting in an overall targeted annual compensation
increase of approximately 15% over 1992. The Committee determined that the
overall targeted compensation was approximately at the mid-range of compensation
for chief executive officers of comparable companies. Mr. Foster's potential
bonus for 1993 was based upon attainment by the Company of certain goals for
revenue and earnings per share. In fact, Mr. Foster received no bonus amount in
respect of earnings per share as the Company did not achieve the minimum
earnings per share goal set for purposes of his bonus. His bonus of $29,100
resulted from the extent of the Company's attainment of the applicable revenue
goal established for bonus purposes.
Approximately 75% of the aggregate targeted annual compensation for the other
five executive officers for 1993 consisted of base salaries, and the remainder
consisted of potential bonuses predicated upon attainment
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of certain goals based on a combination of (i) for all executive officers,
earnings per share of the Company and (ii) for Messrs. Haroian and Donahue,
revenues of the Company and (iii) for Messrs. Tarulli, Frieburghouse and Tucker,
revenues of the respective divisions for which they had responsibility. The
overall targeted annual compensation for each of the executive officers was
determined by the Committee to be approximately at the mid-range of compensation
for similar positions in comparable companies.
STOCK OPTIONS: The Committee believes that stock ownership by executive
officers is important in aligning management and stockholder interests in the
long term enhancement of stockholder value. Since the early years of the
Company, stock options have been granted to executive officers and other key
employees annually. The options granted to executive officers have had exercise
prices equal to the fair market value of the stock on the date of grant and have
vested over five years. Prior to 1992, stock option awards were made in the
latter part of each year. In 1992, the Committee changed the timing of option
awards to coincide with performance appraisals and compensation actions, which
are made in the early part of each year. Accordingly no options were granted in
1992 and the 1993 option awards were made in February of that year.
The number of shares for which options were granted to executive officers
in 1993 was determined by the Committee based upon consideration of several
factors including the executive's position, his past and future expected
performance, the competitive survey data as described above, and the number of
shares under options previously granted.
COMPENSATION NOT QUALIFYING FOR TAX DEDUCTIBILITY: New Section 162(m) of the
Internal Revenue Code, adopted in 1993, provides in general that compensation to
certain individual executive officers during any year in excess of $1 million is
not deductible by a public company. The Committee believes that, given the
general range of salaries and bonuses for executive officers of the Company, and
the amendment to the stock option plans to be acted upon at the stockholder's
meeting (see Item 2 of Notice), the $1 million threshold of Section 162(m) will
not be reached by any executive officer of the Company in the foreseeable
future. Accordingly, the Committee has not considered what its policy regarding
compensation not qualifying for federal tax deductibility might be at such time,
if ever, as that threshold is within range of any executive officer.
Compensation and Stock Option Committee
ALEXANDER V. D'ARBELOFF
ARTHUR CARR
PAUL J. FERRI
GARDNER C. HENDRIE
ROBERT A. MORRILL
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COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON OPTION REPRICING
The Committee decided in September 1993 that the exercise prices of certain
stock options previously granted was at such a high level that the incentives
associated with such options had been substantially negated. Accordingly, the
Committee authorized the Company to offer, to all employees who held outstanding
options with an exercise price of $40.00 or greater, the opportunity to exchange
such options on a one-for-one basis for new options. The new options issued
pursuant to such exchange had an exercise price of $23.25, which was the fair
market value of the common stock on the date of the exchange. Optionees who
elected to make the exchange received the lower exercise price and a new
ten-year option, but lost the accumulated vesting on the exchanged and cancelled
options; a new vesting schedule began on the new options at a rate of 5% per
quarter from the date of grant. Following consideration of various factors, the
Committee determined that executive officers would be entitled to participate in
the exchange program on the same basis as all other employees holding such
options.
Compensation and Stock Option Committee
ALEXANDER V. D'ARBELOFF
ARTHUR CARR
PAUL J. FERRI
GARDNER C. HENDRIE
ROBERT A. MORRILL
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STOCK PERFORMANCE GRAPH
The following graph assumes an investment of $100 on December 31, 1988 and
compares annual changes thereafter in the market price of the Company's common
stock with a broad market index (S&P 500) and an industry index (S&P Computer
Systems). The Company paid no dividends during the periods shown; the
performance of the indexes is shown on a total return (dividend reinvestment)
basis. The graph lines merely connect year-end dates and do not reflect
fluctuations between those dates.
STOCK PERFORMANCE GRAPH
88 89 90 91 92 93
S&P 500 100 131.69 127.60 166.47 179.15 197.21
Stratus 100 84.40 84.86 182.57 124.31 115.14
S&P Comp Sys 100 83.00 93.00 82.65 60.67 62.97
CLOSE OF BUSINESS AT CALENDAR YEAR END
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COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation & Stock Option Committee are Messrs.
D'Arbeloff, Carr, Ferri, Hendrie and Morrill. Mr. Hendrie was a founder of the
Company and was employed by the Company in various executive positions until
1985. Mr. Haroian, President, Chief Operating Officer and a member of the Board
of Directors of the Company, served as a director of Bytex Corporation until
November 1993; Mr. Carr, was Chairman, President and Chief Executive Officer of
Bytex Corporation until November 1993.
APPROVAL OF AMENDMENTS TO STOCK OPTION PLANS
(ITEM 2 OF NOTICE)
On January 25, 1994 the Board of Directors of the Company adopted
amendments to both the 1983 Incentive Stock Option Plan ("1983 Plan") and the
Non-Qualified Common Stock Option Plan ("NQSO Plan") (see plan descriptions
below) to (i) increase the maximum combined aggregate number of shares
authorized to be issued under both plans so that, as amended, the maximum
aggregate number of shares available under both plans combined is 8,780,200, an
increase of 1,100,000 shares and (ii) to limit the number of shares for which
options may be granted to any person in any fiscal year to a maximum of 100,000
shares per plan. The purpose of the increase in the combined number of shares
was to permit the continuing grant of stock options, which the Board of
Directors believes is necessary to continue to attract and retain key employees.
The purpose of the limitation on the number of shares for which options may be
granted is to enable taxable compensation to executives in respect of such
options to be exempt from the limitation on deductibility imposed by Section
162(m) of the Internal Revenue Code (the "Code"). Section 162(m) provides in
general that compensation to certain individual executive officers during any
year in excess of $1 million is not deductible by a public company for federal
tax purposes. However, compensation pursuant to plans meeting certain
qualifications is not included in determining the deductibility limitation, and
the Company believes that, with the amendment limiting the number of shares for
which options may be granted, the Company's plans will meet such qualifications.
Approval of the amendments by the stockholders is sought in order to meet
the stockholder approval requirements of (i) the respective plans, (ii) Section
422 of the Code, which requires stockholder approval of any increase in the
number of shares which may be issued under an ISO Plan, (iii) Rule 16(b)-3 of
the Securities Exchange Act of 1934, which, in the case of certain option plans
which have been approved by stockholders, prevents the grant of options to
directors, officers, and certain other affiliates from being deemed "purchases"
for purposes of the profit recapture provisions of Section 16(b) of that Act
and, (iv) Section 162(m) of the Code, which among other qualifications requires
stockholder approval of an option plan to exempt the spread (the difference
between the exercise price and the market value at the time of exercise) of NSOs
from the limitation on deductibility under that section. The executive officers
and certain directors of the Company who may receive such options will benefit
from such approval. The Board of Directors recommends stockholder approval of
the amendment.
1983 Stock Option Plan
The 1983 Plan currently provides for the grant, to key employees of the
Company, of either "incentive stock options" ("ISOs") within the meaning of the
Internal Revenue Code or "nonstatutory stock options" ("NSOs") for the purchase
of common stock of the Company. The exercise price for ISOs granted under the
1983 Plan must be at least equal to the fair market value of the underlying
shares of common stock at the time of grant, and the exercise price for NSOs
granted under the 1983 Plan must be at least equal to 50% of the fair market
value of the underlying shares of common stock at the time of grant. The 1983
Plan is administered by
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the Compensation and Stock Option Committee of the Board of Directors, which
determines the option price, exercise period and other terms and conditions of
options at the time of each grant. All options granted to date under the 1983
Plan become exercisable in full not later than one year from the date of grant,
expire ten years from the date of grant to the extent not exercised, are
nontransferable by the optionee, and are exercisable only during the employment
of the optionee by the Company and, in certain cases, for a limited period
thereafter. Shares of common stock purchased pursuant to the options vest in
accordance with a five-year schedule from the date of grant. Any shares not
vested upon termination of employment are subject to the Company's right of
repurchase at the original purchase price. It is expected that options granted
in the future under the 1983 Plan will have terms and conditions substantially
the same as those described above. Approximately 700 employees of the Company
are eligible to receive options under the 1983 Plan.
Non-Qualified Stock Option Plan
The Non-Qualified Common Stock Option Plan (the "NQSO Plan") provides for
the grant, to key employees and directors of the Company, of NSO's for the
purchase of common stock of the Company. The NQSO Plan is administered by the
Compensation and Stock Option Committee, which determines the option price,
exercise period and other terms and conditions of options at the time of each
grant. To date, the terms and conditions of options granted under the NQSO Plan
have been substantially the same as those described above for options under the
1983 Plan. Approximately 700 employees of the Company are eligible to receive
options under the NQSO Plan.
Currently, the only material differences between the 1983 Plan, as it
provides for NSOs, and the NQSO Plan is that the NQSO Plan permits (i) the grant
of NSOs (other than to directors) having exercise prices less than 50% of the
fair market value of the underlying shares at the time of grant, and (ii) the
grant of NSOs to directors who are not employees of the Company. Under both
Plans, the grant of options to directors, whether or not employees, are subject
to certain limitations.
Federal Income Tax Information
For federal tax purposes, no taxable income is recognized by the optionee
upon grant of any option. No taxable income is recognized by the optionee upon
exercise of an ISO so long as the shares acquired are held for at least two
years from the date of grant and one year from the date of exercise and,
correspondingly, there is no compensation deductible by the Company. Upon sale
of the shares by the optionee after such holding periods, any gain or loss over
the exercise price is long-term capital gain or loss. In the case of NSOs,
ordinary compensation income is recognized by the optionee upon exercise in the
amount of any excess of the then fair market value over the exercise price, and
the Company is entitled to a corresponding deduction. In the event an optionee
disposes of shares purchased under an ISO before the holding periods referred to
above are met, the disposition is treated similarly to the exercise of an NSO.
The foregoing general summary is not intended to be exhaustive, does not address
certain special federal tax provisions, and does not address state, municipal or
foreign tax laws.
Option Grants and Outstanding Option Totals
During the fiscal year ended January 2, 1994, NSOs for the purchase of
1,637,083 shares of common stock were issued under the 1983 Plan, of which
approximately 650,000 were issued pursuant to the share for share exchange
program described above and approximately 170,000 were issued to employees of
subsidiaries in connection with certain acquisitions. The exercise prices of
substantially all such options were equal to the fair market value of the
underlying shares at the time of grant; options for 20,538 shares were granted
to two new employees at 50% of the fair market value on the date of grant.
During the fiscal year ended January 2, 1994, NSOs for the purchase of 32,500
shares of common stock were issued under the NQSO Plan. The
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exercise price for these shares was equal to the fair market value of the
underlying shares at the time of grant. During the fiscal year ended January 2,
1994, no ISOs were granted under the 1983 plan. The following table sets forth
the number of shares for which NSOs were granted during the fiscal year ended
January 2, 1994 to the named executive officers, the current executive officers
as a group, the non-employee directors, and the non-executive officer employees.
For additional information as to options granted to the named executive
officers, see the Options Grants Table above.
1983 PLAN NSO PLAN
--------- --------
William E. Foster..................................... 60,000 0
Gary E. Haroian....................................... 62,000 0
Robert E. Donahue..................................... 24,000 0
Richard L. Tarulli.................................... 45,000 0
Robert A. Freiburghouse............................... 38,000 0
Paul R. Tucker........................................ 27,000 0
Current executive officers as a group................. 191,000 0
Non-employee directors as a group..................... 48,750
Non-executive officer employees....................... 1,340,083
At January 2, 1994, options outstanding under both the 1983 Plan and the
NQSO Plan were for the purchase of an aggregate of 2,825,874 shares of common
stock, and of the 7,680,200 authorized shares, 1,427,844 shares remained
available for grant under the Plan.
APPROVAL OF AMENDMENTS TO EMPLOYEE STOCK PURCHASE PLAN
(ITEM 3 OF NOTICE)
On January 25, 1994 the Board of Directors of the Company adopted an
amendment to the Employee Stock Purchase Plan ("ESPP") to extend the expiration
date of the ESPP until December 31, 2004; the other terms of the ESPP remain
unchanged. The ESPP was originally approved by the stockholders in April of
1984, with an expiration date of December 31, 1994. Approval of the Shareholders
is sought to meet the Shareholder approval requirements of the ESPP and of Rule
16(b)-3 of the Securities and Exchange Act of 1934. The Board of Directors
believes that the ESPP provides an important incentive to all employees and
therefore recommends stockholder approval of the amendment.
The ESPP is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. As such, no income is taxable to a
participant until shares which have been purchased are sold, and the federal tax
treatment upon sale depends upon whether the shares have been held for two years
following the beginning of the applicable offering period and one year from the
date of purchase. If shares are held for those periods, there is no compensation
deduction for the Company. The purpose of the ESPP is to provide employees of
the Company (of which there are approximately 2,600) an opportunity to
participate in the growth and development of the Company through the purchase of
common stock. The plan is implemented by offerings from time to time and for
such offering period(s) as determined by the Board of Directors or the
Compensation and Stock Option Committee of the Board. Each offering period shall
be no longer than twenty-seven months. The price at which common stock is
purchased under the plan is the lower of 85% of its fair market value at the
commencement of an offering period, or 85% of its fair market value on the last
day of the offering period. The maximum value of common stock an employee may
purchase during an offering period is 10% of the employee's annual rate of
compensation at the time the option is granted. As of February 22, 1994, of the
1,700,000 shares authorized under the ESPP, 614,619 shares remain available for
issuance under further offerings. The following table sets forth the number of
shares purchased under the
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ESPP during the fiscal year ended January 2, 1994 by the named executive
officers, the current executive officers as a group, and the non-executive
officer employees.
NO. OF
SHARES
-------
William E. Foster............................................... 0
Gary E. Haroian................................................. 0
Robert D. Donahue............................................... 732
Richard L. Tarulli.............................................. 653
Robert A. Freiburghouse......................................... 0
Paul R. Tucker.................................................. 519
Current executive officers as a group........................... 1,385
Non-executive officer employees................................. 240,756
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM 4 OF NOTICE)
Subject to approval by the stockholders, the Board of Directors has
selected the firm of Ernst & Young as independent auditors of the Company for
the fiscal year ending January 1, 1995.
Although there is no legal requirement that this matter be submitted to a
vote of the stockholders, the Board of Directors believes that the selection of
independent auditors is of sufficient importance to seek stockholder
ratification. In the event the selection of Ernst & Young is not ratified by the
affirmative vote of a majority of the shares represented and voting at the
meeting, the Board will reconsider its selection.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting of Stockholders. They will have an opportunity to make a statement if
they desire to do so and will also be available to respond to appropriate
questions from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise to act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone and
personal interviews.
Proposals of stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by the Company at its principal
executive offices not later than November 7, 1994, for inclusion in the proxy
statement for that meeting. Other requirements for inclusion are set forth in
Rule 14a-8 under the Securities Exchange Act of 1934 as amended.
By order of the Board of Directors
FREDERICK S. PRIFTY, Clerk
March 15, 1994
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, date, sign and
return the enclosed proxy in the accompanying envelope. Prompt response will
greatly facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their stock personally
even though they have sent in their proxies.
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PROXY
STRATUS COMPUTER, INC.
Proxy Solicited by Board of Directors
for Annual Meeting April 19, 1994
The undersigned stockholder of Stratus Computer, Inc. hereby appoints
Alexander V. d'Arbeloff, Paul J. Ferri, William E. Foster and Gary Haroian, or
any one or more of them, attorneys and proxies for the undersigned with power
of substitution in each to act for and to vote, as designated below, with the
same force and effect as the undersigned, all shares of Stratus Computer, Inc.
common stock standing in the name of the undersigned at the Annual Meeting of
Stockholders of Stratus Computer, Inc. to be held at the Company's offices, 55
Fairbanks Boulevard, Marlborough, Massachusetts on April 19, 1994 at 2:00 PM
and any adjournments thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
GRANT AUTHORITY TO VOTE FOR ALL NOMINEES FOR CLASS I DIRECTORS AND WILL BE
VOTED "FOR" THE OTHER PROPOSALS. THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTERS.
To elect two Class I Directors for the ensuing year.
NOMINEES: Arthur Carr and William E. Foster
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You need not mark
any boxes.
------------------
SEE REVERSE SIDE
------------------
21
- --- Please mark
X votes as in
- --- this example.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE TH MEETING OR ANY ADJOURNMENT THEREOF.
The undersigned hereby acknowledges receipt of the Notice of said meeting and
the related Proxy Statement.
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4.
1. Election of Class I Directors (see reverse side).
FOR
NOMINEES / / WITHHELD / / FOR ALL NOMINEES EXCEPT AS NOTED ABOVE / /
2. Approve amendments to 1983 Stock Option Plan and Non-Qualified Common Stock Option Plan to
(a) increase the maximum aggregate number of shares authorized to be issued under both plans
and (b) limit the number of shares for which options may be granted to any person in any
fiscal year.
FOR / / AGAINST / / ABSTAIN / /
3. Approve amendment to the Employee Stock Purchase Plan extending the Plan for a ten year period.
FOR / / AGAINST / / ABSTAIN / /
4. Ratify Ernst & Young as independent auditors.
FOR / / AGAINST / / ABSTAIN / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature:______________________________ Date___________________
Signature:______________________________ Date___________________