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Quantum Corporation
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[X]
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Table of Contents
PRELIMINARY PROXYSUBJECT TO COMPLETION
QUANTUM CORPORATION
__________________________________
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
__________________________________
TO BE HELD ON
March 31, 2017
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that
the Annual Meeting of Stockholders (the Annual Meeting or Meeting) of
Quantum Corporation (the Company or Quantum), a Delaware corporation, will
be held on March 31, 2017 at _____, __________________, for the following
purposes:
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1.
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To elect nine directors to serve until the
next annual meeting of Stockholders or until their successors are elected
and duly qualified;
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2.
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To ratify the appointment of
PricewaterhouseCoopers LLP as the independent registered public accounting
firm of the Company for the fiscal year ending March 31,
2017;
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3.
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To adopt a resolution approving, on an
advisory basis, the compensation of the Companys named executive
officers;
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4.
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To vote, on an advisory basis, on the
frequency of future advisory votes on the compensation of the Companys
named executive officers;
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5.
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To approve an amendment to the Companys
Employee Stock Purchase Plan to increase the number of shares available by
6,500,000;
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6.
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To adopt an amendment to the Companys
Amended and Restated Certificate of Incorporation to effectuate a reverse
stock split of our issued and outstanding shares of Common Stock at a
ratio of between 1-for-3 and 1-for-8, inclusive, which ratio will be
selected at the sole discretion of our Board of Directors at any whole
number in the above range (the Reverse Stock Split), with cash paid for
any fractional shares that would otherwise be issued as a result of the
reverse stock split; provided, that our Board of Directors may abandon the
Reverse Stock Split in its sole discretion; and
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7.
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To transact such other business as may
properly come before the meeting or any adjournment or postponement
thereof.
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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 February 1, 2017 are entitled to notice of and to
vote at the meeting and any adjournment or postponement thereof.
All stockholders are
cordially invited to attend the Annual Meeting in person. However, to ensure
your representation at the Meeting, you are urged to submit your proxy via the
Internet or telephone or vote, sign, date and return the enclosed white proxy
card as promptly as possible in the postage-prepaid envelope enclosed for that
purpose. If you attend the Annual Meeting and vote your vote by ballot you will
revoke any proxy previously submitted.
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By
Order of the Board of Directors,
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/s/
Shawn D. Hall
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San
Jose, California
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Shawn D. Hall
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February __, 2017
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Senior Vice President, General Counsel and
Secretary
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3
Table of Contents
YOUR VOTE IS EXTREMELY
IMPORTANT
In order to assure your
representation at the Annual Meeting, you are requested to vote, at your
earliest convenience, by any of the methods described in the accompanying Proxy
Statement. If you decide to attend the Annual Meeting and vote in person, any
previous vote by proxy will be revoked automatically and only your vote at the
Annual Meeting will be counted.
This years Annual Meeting
is a particularly important one, and YOUR vote is extremely
important.
VIEX Capital Advisors, LLC and certain of
its affiliates (collectively, VIEX), who are the owners of approximately 11% of Quantums outstanding
common stock have provided notice that they intend to seek control of the board of directors of Quantum by nominating at
the Annual Meeting their own slate of five nominees (the VIEX Nominees) to stand for election as directors. You
may receive solicitation materials from VIEX seeking your proxy to vote for the VIEX Nominees. THE BOARD OF DIRECTORS OF THE
COMPANY (THE BOARD) RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE BOARDS NOMINEES, WHOSE
NAMES ARE SET FORTH ON THE ENCLOSED WHITE PROXY CARD. THE BOARD URGES YOU NOT TO SIGN OR RETURN ANY [COLOR] PROXY CARD SENT
TO YOU BY VIEX. Even if you return a [COLOR] proxy card sent to you by VIEX, you have every right to change your vote. You
may revoke that proxy and vote as recommended by the Board by signing, dating and returning the enclosed WHITE proxy card in
the enclosed postage paid envelope or by voting via the Internet or by telephone by following the instructions provided on
the enclosed WHITE proxy card. Only your latest dated proxy will be counted.
Because the Board has
nominated candidates for only seven of the nine board seats being contested at
the Annual Meeting, as a practical matter the election of at least two of the
VIEX Nominees to the Board at the Annual Meeting is assured. The Board believes
it is not in the interests of the Companys stockholders for a single
approximately 11% stockholder to control a majority of the seats on the Board.
Your vote FOR the election of the Boards nominees will ensure that VIEX
Nominees do not represent a majority of the members of the Board following the
Annual Meeting.
THE BOARD URGES YOU NOT TO
RETURN ANY [COLOR] PROXY CARD SENT TO YOU BY VIEX, EVEN AS A PROTEST VOTE AGAINST
VIEX OR THE VIEX NOMINEES AS ONLY YOUR LATEST DATED VOTE WILL BE COUNTED AT THE
ANNUAL MEETING.
If you have questions or
need assistance voting your shares please contact:
105 Madison Avenue
New
York, New York 10016
proxy@mackenziepartners.com
Call Collect: (212)
929-5500
or
Toll-Free (800)
322-2885
Your vote is extremely
important, no matter how many or how few shares you own. The Board urges you to
vote your shares to elect the Boards nominees. Even if you plan to attend the
Annual Meeting in person, please promptly sign, date and return the enclosed
WHITE proxy card in the enclosed postage-paid envelope or vote via the Internet
or by telephone by following the instructions provided on the enclosed WHITE
proxy card to be sure that your shares are voted at the Annual
Meeting.
4
Table of Contents
QUANTUM
CORPORATION
5
Table of Contents
PRELIMINARY PROXYSUBJECT TO COMPLETION
QUANTUM CORPORATION
___________________
PROXY STATEMENT
____________________
INFORMATION CONCERNING
SOLICITATION AND VOTING
General
The enclosed white proxy
card is solicited on behalf of the Board of Directors (the Board) of Quantum
Corporation (the Company or Quantum) for use at the Annual Meeting of
Stockholders to be held on March 31, 2017 at _______, or at any adjournment
or postponement thereof (the Annual Meeting or Meeting), for the purposes
set forth herein and in the enclosed white proxy card. The Annual Meeting will
be held ____________________. The Companys telephone number is 408-944-4000 and
the Internet address for its website is
http://www.quantum.com
.
This years Annual
Meeting is a particularly important one, and YOUR vote is extremely
important.
VIEX Capital Advisors, LLC and certain of its affiliates (collectively,
VIEX), who are the owners of approximately 11% of Quantums outstanding common
stock have provided notice that they intend to seek control of the Board by
nominating at the Annual Meeting their own slate of five nominees (the VIEX
Nominees) to stand for election as directors. You may receive solicitation
materials from VIEX seeking your proxy to vote for the VIEX Nominees. THE BOARD
RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE BOARDS NOMINEES, WHOSE
NAMES ARE SET FORTH ON THE ENCLOSED WHITE PROXY CARD. THE BOARD URGES YOU NOT TO
SIGN OR RETURN ANY [COLOR] PROXY CARD SENT TO YOU BY VIEX.
Because the Board has
nominated candidates for only seven of the nine board seats being contested at
the Annual Meeting, as a practical matter the election of at least two of the
VIEX Nominees to the Board of Directors at the Annual Meeting is assured. The
Board believes it is not in the interests of the Companys stockholders for a
single approximately 11% stockholder to control a majority of the seats on the
Board. Your vote FOR the election of the Boards nominees will ensure that
VIEX Nominees do not represent a majority of the members of the Board following
the Annual Meeting.
IMPORTANT NOTICE REGARDING
THE AVAILABILITY OF PROXY MATERIALS AND ANNUAL REPORT FOR STOCKHOLDERS MEETING
TO BE HELD ON MARCH 31, 2017
The proxy statement and
annual report to stockholders are available at ___________. Our proxy materials
are first being mailed on or about _________, 2017 to all stockholders entitled
to vote at the Meeting.
Record Date; Outstanding
Shares
Stockholders of record at
the close of business on February 1, 2017 (the Record Date) are entitled to
notice of and to vote at the Meeting. At the Record Date,
271,327,956
shares of the Companys common stock, $0.01 par value (the Common
Stock), were issued and outstanding. Other than the Common Stock, the Company
has no other voting securities entitled to vote at the Annual Meeting.
6
Table of Contents
Voting
With respect to matters other than the election of directors, each share of Common Stock is entitled
to one vote, as provided in the Companys Amended and Restated Certificate of
Incorporation. Accordingly, a total of
271,327,956
votes may be cast at the
Meeting with respect to matters other than the election of directors. For voting with respect to the election of
directors, stockholders may cumulate their votes. Cumulative voting means that a
stockholder has the right to give any one candidate who has been properly placed
in nomination a number of votes equal to the number of directors to be elected
multiplied by the number of shares the stockholder is entitled to vote, or to
distribute such votes on the same principle among as many properly nominated
candidates (up to the number of persons to be elected) as the stockholder may
wish. For example, if you own 100 shares of Common Stock, and there are nine
directors to be elected at the Annual Meeting, you could cast a total 900 FOR
votes (nine times one hundred) among as few or as many of the nine nominees to
be voted on at the Meeting as you choose. As discussed further in this Proxy
Statement, we are nominating seven director nominees for a nine-member Board. As
a result, stockholders voting for the election of directors at the Annual
Meeting on the WHITE proxy card will be able to vote for only seven nominees for
a nine-member Board and will not be able to vote for the two remaining directors
to serve on our Board. If a stockholder voting for the election of directors at
the Annual Meeting on our WHITE proxy card cumulates votes, such stockholder
will only be able to allocate their total number of votes among the Companys
seven nominees. See Additional Information on the Mechanics of Cumulative
Voting below for more information on the operation of cumulative
voting.
With respect to Proposal One, Election
of Directors, the nine director nominees who receive the highest number of
affirmative votes will be elected; abstentions and broker non-votes will have no
effect on this proposal.
In addition to returning the WHITE
proxy card, stockholders of record with Internet access may submit proxies by
following the Vote by Internet instructions or may vote by telephone by
following the Vote by Phone instructions on the enclosed WHITE proxy card.
Stockholders who hold shares beneficially in street name may vote by the methods
specified on the voting instruction card provided by their broker, bank or
nominee. Stockholders may also vote by attending the Annual Meeting and voting
in person while the polls are open.
Revocability of Proxies
Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted. Proxies may be revoked by (i) filing a written notice of revocation
bearing a later date than the proxy with the Secretary of the Company (currently
Shawn D. Hall) at or before the taking of the vote at the Meeting, (ii) duly
executing a later dated proxy relating to the same shares and delivering it to
the Secretary of the Company at or before the taking of the vote at the Annual
Meeting, (iii) voting on a later date by telephone or via the Internet, or (iv)
attending the Annual Meeting and voting in person while the voting polls are
open (although attendance at the Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequent proxy
must be delivered to the Secretary of the Company before the Meeting.
The Board urges you to revoke any [color]
proxy card you may have returned from VIEX. If you have previously signed a
[color] proxy card sent to you by VIEX, you have every right to change your vote.
You may revoke that proxy and vote as recommended by the Board by signing,
dating and returning the enclosed WHITE proxy card in the enclosed postage-paid
envelope or by voting via the Internet or by telephone by following the
instructions provided on the enclosed WHITE proxy card. Only your latest-dated
proxy will be counted. Submitting a VIEX [color] proxy cardeven if you withhold
your vote on the VIEX Nomineeswill revoke any votes that you previously made on
the WHITE proxy card. Accordingly, if you wish to vote pursuant to the
recommendation of the Board, you should disregard any proxy card that you
receive that is not a WHITE proxy card. Do not return any [color] proxy card that
you may receive from VIEX, even as a protest vote against VIEX or the VIEX
Nominees.
Quorum; Abstentions; Broker
Non-Votes
A majority of the shares of Common
Stock issued and outstanding on the Record Date will constitute a quorum for the
transaction of business at the Annual Meeting.
7
Table of Contents
While there is no definite
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 shares entitled to vote at
the Annual Meeting with respect to a proposal. Abstentions are treated as votes
cast with respect to proposals requiring stockholder approval under NYSE rules.
Thus, an abstention has the effect of a vote against Proposal Five regarding the
amendment of our Employee Stock Purchase Plan. For proposals requiring approval
of a majority of the shares of Common Stock present in person or represented by
proxy at the annual meeting and entitled to vote, as well as the proposal
requiring approval of a majority of our outstanding shares of Common Stock,
abstentions will count as votes against the proposal. In the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
in this manner. Due to the contested nature of the election of directors at the
Annual Meeting, directors will be elected by plurality vote; therefore,
abstentions will have no effect on the outcome of the election (and will not be
an available option on the WHITE proxy card). Abstentions will also have no
effect on the advisory vote on the frequency of future advisory votes on named
executive officer compensation.
Broker non-votes occur on a
matter when a bank, broker or other nominee is not permitted to vote on that
matter without instructions from the beneficial owner and instructions are not
given. These matters are referred to as non-routine matters. Given the
contested nature of the election at the Annual Meeting, all matters scheduled to
be voted on are non-routine. Thus, we do not anticipate any broker non-votes
at the Annual Meeting.
It is
therefore important that you provide instructions to your broker if your shares
are held by a broker so that your votes are counted.
Without your instructions,
your broker will not be able to vote your shares for any of the proposals.
Therefore, if your shares are held
by a broker, it is important that you provide instructions to your broker so
that your votes with respect to the election of directors, the ratification of
the appointment of auditors, the advisory vote to approve executive
compensation, the advisory vote on the frequency of future advisory votes on
named executive officer compensation, the approval of an amendment to the
Companys Employee Stock Purchase Plan and the adoption of the amendment to the
Companys Amended and Restated Certificate of Incorporation to effectuate a
reverse stock split are counted.
Voting Requirements
For Proposal One, because
the election for directors is contested, at the Annual Meeting, directors will
be elected by a plurality of the votes cast with respect to that nominee. In
this context, this means that the nine directors receiving the most votes, after
stockholders are allowed to cumulate votes, will be elected. As discussed
further in this Proxy Statement, we are nominating seven director nominees for a
nine-member Board. As a result, stockholders voting for the election of
directors at the Annual Meeting on the WHITE proxy card will be able to vote for
only seven nominees for a nine-member Board and will not be able to vote for the
two remaining directors to serve on our Board. If a stockholder voting for the
election of directors at the Annual Meeting on our WHITE proxy card cumulates
votes, such stockholder will only be able to allocate their total number of
votes among the Companys seven nominees. See Additional Information on the
Mechanics of Cumulative Voting below for more information on the operation of
cumulative voting.
8
Table of Contents
For Proposals Two and Three, the
ratification of the appointment of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for the fiscal year ending March 31, 2017 and
the adoption of a resolution approving, on an advisory basis, the compensation
of our named executive officers, respectively, the affirmative vote of a
majority of the shares of Common Stock present in person or represented by proxy
and entitled to vote on the matter is required. Proposal Three is advisory only;
however, the Board and the Leadership and Compensation Committee of the Board
consider the input of its stockholders important and will take into account the
outcome of the vote when evaluating our future executive compensation programs.
For Proposal Four, the advisory vote on the frequency of future advisory votes
on named executive officer compensation, the option of every 1 year, 2 years or
3 years that receives the most votes For will be the option selected by our
stockholders. Proposal Four is advisory only, however, the Board and the
Leadership and Compensation Committee of the Board consider the input of its
stockholders important and will take into account the outcome of the vote when
evaluating the frequency of future votes on named executive officer
compensation. For Proposal Five, the approval of an amendment to the Companys
Employee Stock Purchase Plan, approval of a majority of the votes cast is
required. For purposes of Proposal Five, abstentions count as votes against the
proposal, so votes For must exceed Against and Abstain votes combined. For
Proposal Six, the adoption of an amendment to the Companys Amended and Restated
Certificate of Incorporation to effectuate a reverse stock split, approval of a
majority of the shares of Common Stock outstanding and entitled to vote is
required. Accordingly, abstentions and broker non-votes will have the effect of
a vote Against Proposal Six.
Board of Directors Voting
Recommendations
The Board recommends that you vote your
shares FOR each of the Boards nominees that are standing for election to the
Board (Proposal One in this Proxy Statement), FOR the ratification of the
appointment of the Companys independent registered public accounting firm
(Proposal Two in this Proxy Statement), FOR the approval of the advisory vote
on executive compensation (Proposal Three in this Proxy Statement), every 1
Year for the frequency of future advisory votes on named executive officer
compensation (Proposal Four in this Proxy Statement), FOR the approval of an
amendment to the Companys Employee Stock Purchase Plan (Proposal Five in this
Proxy Statement) and FOR the amendment to the Companys Amended and Restated
Certificate of Incorporation to effectuate a reverse stock split (Proposal Six
in this Proxy Statement). As of the date of this Proxy Statement, the Company is
not aware of any other matter that may be voted on at the Annual Meeting. The
proxy solicited for the Annual Meeting by the Board grants the proxy holders
discretionary authority to vote on any other matter (other than Proposals One
through Six) that may be properly brought before the Annual Meeting or any
adjournment or postponement of the Annual Meeting.
Stockholder Proposals for Inclusion
in the Companys Proxy Materials Pursuant to Rule 14a-8
Stockholders may submit proposals for
consideration at future stockholder meetings. For a stockholder proposal to be
considered for inclusion in the Companys proxy statement for the Annual Meeting
for the fiscal year ending March 31, 2017 (the Next Annual Meeting), the
Secretary of the Company must receive the written proposal at the Companys
principal executive offices no later than ______________. Such proposals
must also comply with SEC regulations under Rule 14a-8 regarding the inclusion
of stockholder proposals in company-sponsored proxy materials. Stockholders
should contact the Secretary of the Company in writing at 224 Airport Parkway,
Suite 550, San Jose, CA 95110, to make any submission or to obtain additional
information as to the proper form and content of submissions.
9
Table of Contents
Stockholder Proposals
Not Intended for Inclusion in the Companys Proxy Materials Pursuant to Rule
14a-8
Proposals Other than for
Nominees to the Board of Directors
Proposals of stockholders
of the Company which are to be presented at the Next Annual Meeting may be made
by a stockholder of the Company who is a stockholder at the time of submitting
such proposal and at the time of the record date set for that meeting and who
complies with the notice procedures set forth in the Companys Bylaws. Such
proposals must be received by the Secretary of the Company not later than the
45
th
day nor earlier than the 75
th
day before the one-year
anniversary of the date on which the Company first mailed its proxy materials or
a notice of availability of proxy materials (whichever is earlier) for this
years Annual Meeting (see Section 2.4(i)(a) of the Companys
Bylaws)
provided
,
however
, that in the event
that the date of the Next Annual Meeting is advanced by more than 30 days prior
to or delayed by more than 60 days after the one-year anniversary of the date of
the previous annual meeting, then, for notice by the stockholder to be timely,
it must be so received by the Secretary of the Company not earlier than the
close of business on the 120th day prior to the Next Annual Meeting and not
later than the close of business on the later of (i) the 90th day prior to the
Next Annual Meeting, or (ii) the tenth day following the day on which public
announcement of the date of the Next Annual Meeting is first made. The
stockholders submission must include the information specified in Section
2.4(i)(b) of the Companys Bylaws. The Companys Bylaws are available on the
Corporate Governance Governance Documents section of the About Us / Investor
Relations portion of our website at www.quantum.com.
Proposals not meeting the
requirements of the immediately preceding paragraph will be considered untimely
and will not be entertained at the Next Annual Meeting. Stockholders should
contact the Secretary of the Company in writing at 224 Airport Parkway, Suite
550, San Jose, CA 95110, to make any submission or to obtain additional
information as to the proper form and content of submissions.
Except as otherwise
described in this proxy statement, we are not aware of any stockholder intending
to present a stockholder proposal from the floor at this years Annual Meeting.
The proxy solicited for the Annual Meeting by the Board grants the proxy holders
discretionary authority to vote on any other matter (other than Proposals One
through Six) that may be properly brought before the Annual Meeting or any
adjournment or postponement of the Annual Meeting.
Proposals for Nominees
to the Board of Directors
Nominations of persons for
election to the Board may be made by a stockholder of the Company who is a
stockholder at the time of submitting such nomination and at the time of the
record date set for that meeting and who complies with the notice procedures set
forth in the Companys Bylaws. Such nominations, other than those made by or at
the direction of the Board, shall be made pursuant to timely notice in writing
to the Secretary of the Company. To be timely, a stockholders notice must be
received by the Secretary of the Company not later than the 45
th
day
nor earlier than the 75
th
day before the one-year anniversary of the
date on which the Company first mailed its proxy materials or a notice of
availability of proxy materials (whichever is earlier) for this years Annual
Meeting )
provided
,
however
, that in the event
that the date of the Next Annual Meeting is advanced by more than 30 days prior
to or delayed by more than 60 days after the one-year anniversary of the date of
the previous annual meeting, then, for notice by the stockholder to be timely,
it must be so received by the Secretary of the Company not earlier than the
close of business on the 120th day prior to the Next Annual Meeting and not
later than the close of business on the later of (i) the 90th day prior to the
Next Annual Meeting, or (ii) the tenth day following the day on which public
announcement of the date of the Next Annual Meeting is first made (see Sections
2.4(i)(a) and (ii)(a) of the Companys Bylaws). The stockholders submission
must include the information specified in Section 2.4(ii)(b) of the Companys
Bylaws. The Companys Bylaws are available on the Corporate Governance -
Governance Documents section of the About Us / Investor Relations portion of our
website at www.quantum.com.
Proposals for nominees to
the Board not meeting the requirements of the immediately preceding paragraph
will be considered untimely and will not be entertained at the Next Annual
Meeting. Stockholders should contact the Secretary of the Company in writing at
224 Airport Parkway, Suite 550, San Jose, CA 95110, to make any submission or to
obtain additional information as to the proper form and content of submissions.
10
Table of Contents
Householding
The SEC has adopted rules
that permit companies and intermediaries, such as brokers, to satisfy delivery
requirements for proxy materials with respect to two or more stockholders
sharing the same address by delivering a single proxy statement addressed to
such stockholders. This process, which is commonly referred to as
householding, potentially provides extra convenience for stockholders and cost
savings for companies. Quantum and some brokers household proxy materials unless
contrary instructions have been received from one or more of the affected
stockholders. If, at any time, you no longer wish to participate in householding
and would prefer to receive separate proxy materials, or if you are receiving
multiple copies of the proxy materials and wish to receive only one, please so
indicate by (i) contacting Broadridge Financial Solutions, Inc. (Broadridge)
by telephone at 1-866-540-7095 (have your proxy card in hand when you call and
then follow the instructions), or (ii) writing to Broadridge at Broadridge c/o
Householding Department, 51 Mercedes Way, Edgewood, NY 11717, or (iii)
contacting Quantums Investor Relations Department by telephone at 212-331-8433
if you are a registered stockholder and contacting your broker if you hold
shares beneficially in street name. Due to the proxy contest at this years
Annual Meeting, accounts will not be householded and each stockholder will
receive a separate package of the proxy materials.
Solicitation
The Company will bear the
cost of soliciting proxies, including the preparation, assembly, Internet
hosting, printing and mailing of this Proxy Statement, the WHITE proxy card and
any other proxy materials furnished to stockholders by the Company in connection
with the Annual Meeting. The Company may also reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may be
solicited by certain of the Companys directors and officers, without additional
compensation, personally or by telephone, email or otherwise. Annex A to this
Proxy Statement sets forth certain information relating to the directors,
officers and other persons who are participants in the solicitation of proxies.
As a result of the proxy contest initiated by VIEX, the Company will incur substantial
additional costs in connection with the solicitation of proxies. We have
retained MacKenzie Partners, Inc. (MacKenzie) to assist us in the solicitation
of proxies for a fee of up to $200,000 plus out-of-pocket expenses. MacKenzie
expects that approximately [25] of its employees will assist in the
solicitation. Our expenses related to the solicitation of proxies from
stockholders this year will substantially exceed those normally spent
for an annual meeting of stockholders. Such additional costs are
expected to aggregate to approximately $[__], exclusive of any costs related to
any litigation in connection with the Annual Meeting. These additional
solicitation costs are expected to include: the fee payable to our
proxy solicitor; fees of outside counsel to advise the Company in connection
with a contested solicitation of proxies; increased mailing costs, such as the
costs of additional mailings of solicitation material to stockholders, including
printing costs, mailing costs and the reimbursement of reasonable expenses of
banks, brokerage houses and other agents incurred in forwarding solicitation
materials to beneficial owners of Common Stock; and the costs of retaining an
independent inspector of election. To date, we have incurred approximately
$85,000 of solicitation costs.
VIEX has nominated five directors. Depending
on how many VIEX Nominees are elected at the Annual Meeting, the VIEX Nominees could constitute a majority of the Board
following the Annual Meeting. Election of VIEX Nominees to a majority of the seats on the Board would result in a change of
control under the severance and change of control agreements we have with our management. Pursuant to these agreements,
certain severance payments may be triggered following a change of control, if an event constituting a qualifying termination
occurs within twelve months of such change of control. A change in a majority of the seats on the Board may also result in
a change of control under certain contracts with third parties, including our Directors and Officers Liability
Insurance Policy, if we are unable to secure appropriate waivers or amendments to any such contracts.
If You Receive More than
One Proxy Card
If you hold your shares of
Common Stock in more than one account, you will receive a WHITE proxy card for
each account. To ensure that all of your shares of Common Stock are voted,
please sign, date and return the WHITE proxy card for each account. You should
vote all of your shares of Common Stock.
11
Table of Contents
VIEX
has provided notice that it intends to nominate the VIEX Nominees at the
Annual Meeting to stand for election as directors. As a result, you may receive
proxy solicitation material from VIEX. If you wish to vote pursuant to the
recommendation of the Board, you should disregard any proxy card that you
receive that is not a WHITE proxy card.
If you withhold your vote
on any VIEX Nominee using VIEXs [color] proxy card, your vote will not be counted
as a vote for our nominees and will result in the revocation of any previous
vote that you may have cast on the WHITE proxy card. THE BOARD URGES YOU NOT TO
RETURN ANY [COLOR] PROXY CARD SENT TO YOU BY VIEX, EVEN AS A PROTEST VOTE AGAINST
VIEX OR THE VIEX NOMINEES AS ONLY YOUR LATEST DATED PROXY CARD WILL BE VOTED AT
THE ANNUAL MEETING.
Attending the Annual
Meeting
All stockholders are
cordially invited to attend the Annual Meeting. However, to ensure your
representation at the Meeting, you are urged to submit your proxy via the
Internet or telephone or vote, sign, date and return the enclosed WHITE proxy
card as promptly as possible in the postage-prepaid envelope enclosed for that
purpose. If you attend the Annual Meeting, are a holder of record, and vote by
ballot you will revoke any vote on a previously submitted proxy card. If you
hold your shares through a bank or broker (or other financial intermediary) and
wish to attend the Annual Meeting for purposes of voting, you will need to
obtain a legal proxy from your bank or broker in order to do so.
Additional Information
on the Mechanics of Cumulative Voting
All stockholders will have
the right to cumulate their votes in the election of directors. Cumulative
voting means that each stockholder may cumulate such stockholders voting power
for the election by distributing a number of votes, determined by multiplying
the number of shares held by the stockholder as of the record date by nine (the
number of directors to be elected at the Annual Meeting). Such stockholder may
distribute all of the votes to one individual director nominee, or distribute
such votes among any two or more director nominees, as the stockholder chooses.
If you do not specifically instruct otherwise, the proxy we are soliciting will
confer upon the proxy holders the authority to cumulate votes at the instruction
and discretion of the Board or any committee thereof so as to provide for the
election of the maximum number of the Companys director nominees (for whom
authority is not otherwise specifically withheld by voting FOR ALL EXCEPT and
naming one or more nominees or WITHHOLD ALL) including, but not limited to,
the prioritization of such nominees to whom such votes may be allocated. In
addition, the proxyholders may vote your shares for fewer than all seven of our
nominees.
If you elect to grant us
your proxy and do not specifically instruct otherwise, you are authorizing the
proxy holders to vote your shares in their discretion, including to cumulate
your votes in favor of certain nominees (rather than allocating votes equally
among the nominees) and to determine the specific allocation of votes to
individual nominees. You may withhold your authority to vote for one or more
nominees by voting FOR ALL EXCEPT and writing in such nominee(s) or WITHHOLD
ALL, in which case the proxy holders will retain discretion to allocate your
votes among our other nominees unless you specifically instruct otherwise. If
you do not wish to grant the proxy holders authority to cumulate your votes in
the election of directors, you must state this objection on your proxy card.
Under no circumstances may the proxy holders cast your votes for any nominee for
whom you have withheld authority to vote by voting FOR ALL EXCEPT and named
such nominee or WITHHOLD ALL.
For example, a proxy marked
FOR ALL EXCEPT may only be voted for those of our director nominees for whom
you have not otherwise specifically withheld authority to vote, a proxy marked
WITHHELD ALL may not be voted for any of our director nominees, and a proxy
marked FOR ALL may be voted for all of our director nominees. In exercising
its discretion with respect to cumulating votes, the proxy holders may cumulate
and cast the votes represented by your proxy for any of our director nominees
for whom you have not otherwise withheld authority by voting FOR ALL EXCEPT
and naming such nominee or voting WITHHOLD ALL. For example, if you grant a
proxy with respect to shares representing 900 cumulative votes, and mark FOR
ALL EXCEPT and list one of our director nominees, the proxy holders may cast
the 900 votes for any or all of our seven director nominees, other than the
nominee you listed. Moreover, the proxy holders may allocate the 900 votes among
the other director nominees as it determines, such that each of those other
director nominees may receive unequal portions of the 900 votes or none at all.
12
Table of Contents
Assuming cumulative voting
applies, unless you specifically instruct otherwise, the Board will instruct the
proxy holders to cast the votes as to which voting authority has been granted so
as to provide for the election of the maximum number of our director nominees,
and will provide instructions as to the order of priority of the nominees in the
event that fewer than all of our nominees are elected. No determination has been
made as to the order of priority of candidates to which votes will be allocated,
and any determination will be made, if necessary, at the Annual Meeting.
Accordingly, if you grant a proxy to us and have not specifically instructed
otherwise, your shares will be voted for our director nominees at the discretion
of the Board with respect to all of your shares (except that the Board will not
be able to vote your shares for a candidate from whom you have withheld
authority to vote). If you wish to exercise your own discretion as to allocation
of votes among nominees, and you are a record holder of shares, you will be able
to do so by attending the meeting and voting in person, by appointing another
person as your representative to vote on your behalf at the meeting, or by
providing us with specific instructions as to how to allocate your votes.
A holder of record who
wishes to provide vote allocation instructions must submit a proxy card by mail
and should handwrite the number of votes such holder wishes to allocate to each
nominee as specified on the enclosed WHITE proxy card. You may provide vote
allocation instructions for all or a portion of the votes you are entitled to
cast. If you provide vote allocation instructions for all of the votes you are
entitled to cast, the proxy holders will vote in accordance with your
instructions. If you provide vote allocation instructions for less than all of
the votes that you are entitled to cast, the proxy holders will retain
discretionary authority to cast your remaining votes, except for any nominee for
whom you have withheld authority by marking the FOR ALL EXCEPT box and
specifically naming that nominee. If you wish to grant the proxy holders
discretionary authority to allocate votes among all our nominees you may check
the FOR ALL box, but you are not required to do so. The proxy holders will
retain discretionary authority to allocate votes among all our nominees except
where you provide a specific instruction stating your objection to the proxy
holder cumulating your votes, by hand marking the number of votes to be
allocated to one or more nominees, or by voting FOR ALL EXCEPT and naming one
or more nominees, or WITHHOLD ALL.
Any stockholder who holds
shares in street name and desires to specifically allocate votes among nominees
may do so by either informing the stockholders broker, banker or other nominee
of the stockholders desire to attend the Annual Meeting, and requesting a legal
proxy to attend the meeting, or by providing the broker, banker or other nominee
with instructions as to how to allocate votes among nominees, which can then be
delivered to the Company. Because each broker, banker or nominee has its own
procedures and requirements, a stockholder holding shares in street name who
wishes to allocate votes to specific nominees should contact its broker, banker
or other nominee for specific instructions on how to obtain a legal proxy or
provide vote allocation instructions.
Please note you will not
be able to submit vote allocation instructions for director elections if you
grant a proxy by telephone or the Internet.
Any stockholder that has
any question regarding the procedures for specifically allocating votes among
nominees may call our proxy solicitor, MacKenzie Partners, Inc. at
1-800-322-2885.
If You Have Any
Questions
If you have questions or
need assistance voting your shares please contact:
105 Madison Avenue
New
York, New York 10016
proxy@mackenziepartners.com
Call Collect: (212)
929-5500
or
Toll-Free (800)
322-2885
13
Table of Contents
CERTAIN BACKGROUND
INFORMATION
On December 28, 2015, VIEX
filed a Schedule 13D disclosing ownership of approximately 5.5% of the Common
Stock. VIEX filed an amendment to its Schedule 13D in January 2016 indicating
that it had increased its ownership to 7.8% of the Common Stock and a further
amendment in February 2016 indicating that it had increased its ownership to
9.9% of the Common Stock. On April 28, 2016, VIEX filed a further amendment to
its Schedule 13D disclosing that it had increased its ownership to 11.2% of the
Common Stock and disclosing a letter VIEX sent to the Board criticizing the
Companys performance. VIEX indicated that it believed changes in composition of
the Board were necessary. On June 6, 2016, VIEX submitted a nomination notice to
the Company nominating five director candidates for election to the Board at the
Company's next annual meeting.
At various times between
January 2016 and January 2017, members of the Board and management and
representatives of the Company have held discussions with VIEX regarding VIEXs
views of the Company, the Companys performance and alternatives for avoiding a
potential proxy contest at the annual meeting.
On September 26, 2016, the
Company entered into an agreement with VIEX that would postpone a potential
proxy contest until after December 1, 2016. Under this agreement, the Company
granted John Mutch and Raghavendra Rau, two of VIEXs Board nominees, observer
rights until December 1, 2016, and VIEX agreed to abide by certain customary
standstill provisions. Messrs. Mutch and Rau participated as observers at
meetings of the Board and committees of the Board after the date of that
agreement until December 1, 2016. Messrs. Mutch and Rau are subject to customary
confidentiality agreements with the Company that prohibit sharing with VIEX
non-public information received in their capacity as Board observers.
On October 21, 2016, the
Company entered into a new credit facility which allows for maximum borrowings
of up to $170 million and gives the Company financial flexibility to redeem the
Companys outstanding 4.50% convertible subordinated notes. On October 26, 2016,
the Company announced its earnings results for the second quarter of its current
fiscal year and for the six months ended September 30, 2016. These results
reflected year-over-year total revenue growth of 10% for the first half of the
2017 fiscal year and a 34% growth rate for the first half of fiscal 2017 in the
Companys scale-out tiered storage and related service revenue compared to the same
period a year ago.
On December 2, 2016, the
Company entered into an amendment to the agreement with VIEX to extend the Board
observer rights of Messrs. Mutch and Rau until February 1, 2017, subject to
certain conditions, and VIEX agreed to extend the standstill provisions of the
Agreement related to the solicitation of proxies and other matters until
February 1, 2017. Quantum also agreed to hold its annual meeting on March 31,
2017. The amendment further postponed a potential proxy contest until after
February 1, 2017. Messrs. Mutch and Rau continued to participate as observers at
meetings of the Board and committees until February 1, 2017.
On January 25, 2017, the Company announced its earnings results for the third quarter of its current fiscal year and for the nine months ended December 31, 2016. These results reflected year-over-year total revenue growth of 8% for the first nine months of the 2017 fiscal year and a 26% growth rate for the first nine months of fiscal 2017 in the Company's scale-out tiered storage and related service revenue compared to the same period a year ago. The Company also increased its fiscal 2017 revenue and earnings guidance.
During January 2017,
representatives of the Company engaged in multiple discussions with VIEX in an
attempt to avoid a potential proxy contest. In those discussions, the Company
indicated a willingness to nominate a number of VIEX nominees for election to
the Board at the annual meeting, and to commit to replace a number of directors
(other than the VIEX nominees) as promptly as practicable following the annual
meeting with new, independent directors selected by mutual agreement between the
Company and VIEX, so that the VIEX nominees and the new directors would together
constitute a majority of the Board promptly following the annual meeting. VIEX
rejected this proposal.
While the Company believes
that it has made significant improvements in operational performance, reduced
its cost structure, implemented careful ongoing expense management practices and
eliminated potential liquidity concerns relating to the maturity of the
Companys 4.50% convertible subordinated notes,
VIEX nonetheless intends to seek the election of five Board nominees at the
annual meeting.
The election of five VIEX
nominees would result in VIEXs nominees being in control of the Board. The
Company believes that this result could adversely impact the operations and
strategic direction of the Company and, in addition, lead to a majority of the
members of the Board being focused on the specific financial objectives of VIEX
rather than the best interests of the stockholders as a whole. Consequently, the
Board believes that it is not in the best interests of the Companys
stockholders (other than VIEX) to allow VIEX to take control of the Board. For
these reasons, the Board is soliciting in opposition to
the election of the VIEX nominees.
14
Table of Contents
At the same time, the
current Board is committed to meaningful changes in the Boards composition. If
a majority of the Companys nominees are elected at the annual meeting, the
Board will engage a nationally recognized director search firm to assist the
Company in recruiting not less than two highly qualified new, independent
directors as promptly as practicable following the annual meeting. Those
directors will replace nominees of the Company elected at the annual meeting, so
that stockholders of the Company are assured that there will be a majority of
new directors of Quantum promptly following the annual meeting, regardless of
the outcome of any proxy contest.
BOARD OF DIRECTORS AND
COMMITTEES
The Boards key roles
include, but are not limited to: (i) the selection and evaluation of the
Companys Chief Executive Officer (CEO), and overseeing CEO succession
planning; (ii) advising the CEO and management on the Companys fundamental
strategies; (iii) reviewing and approving the CEOs objectives; (iv) approving
acquisitions, divestitures and other significant corporate actions; (v) advising
the CEO on the performance of senior management, and significant organizational
changes, including succession planning; and (vi) approving the annual operating
financial plan.
The names of our directors
and the nominees for election as directors and certain information about them as
of January 31, 2017, are set forth below.
Name of
Director or Nominee
|
|
Age
|
|
Director
Since
|
|
Principal
Occupation
|
Company
Nominees
|
|
|
|
|
|
|
Robert J.
Andersen
(1)
|
|
53
|
|
2015
|
|
Executive Vice President and Chief Financial
Officer, Tessera Technologies, Inc.
|
Paul R. Auvil
III
(1)(3)
|
|
53
|
|
2007
|
|
Chief Financial Officer, Proofpoint,
Inc.
|
Louis DiNardo
(2)
|
|
57
|
|
2013
|
|
Principal, BackBeat Management
Solutions
|
Jon W. Gacek
|
|
55
|
|
2011
|
|
President and Chief Executive Officer of
Quantum
|
David A. Krall
(2)
|
|
56
|
|
2011
|
|
Strategic Advisor, Roku, Inc., Universal
Audio, Inc.
|
Gregg J.
Powers
(3)
|
|
54
|
|
2013
|
|
Chief Executive Officer, Private Capital
Management, LLC
Chairman, Private Capital Management, LLC
|
David E.
Roberson
(1)(2)
|
|
62
|
|
2011
|
|
Business Consultant
Board Member, Brocade
Communications Systems, Inc.
Chairman, Push Technology
|
|
|
|
|
|
|
|
Other Current Directors
|
Dale L. Fuller
(3)
|
|
58
|
|
2014
|
|
Chairman of the Supervisory Board of AVG
Technologies N.V.
|
Clifford Press
(3)
|
|
63
|
|
2016
|
|
Managing Member, Oliver Press Partners,
LLC
|
___________________
(1)
|
|
Member of
the Audit Committee.
|
(2)
|
|
Member of
the Leadership and Compensation Committee.
|
(3)
|
|
Member of
the Corporate Governance and Nominating
Committee.
|
Except as set forth below,
each of the directors has been engaged in his or her principal occupation
described above during the past five years. There are no family relationships
between any directors or executive officers of the Company.
15
Table of Contents
Director Nominees
Mr. Robert J.
Andersen
has served as Executive
Vice President and Chief Financial Officer of Tessera Technologies, Inc., a
leading developer of semiconductor packaging solutions and advanced imaging
products, since January 2014. From June 2011 to July 2013, he served as the
Executive Vice President and Chief Financial Officer of G2 Holdings Corp. d/b/a
Components Direct, a privately held provider of cloud-based product life cycle
solutions that was acquired by Avnet, Inc. in April 2013. From September 2008 to
June 2011, Mr. Andersen served as Vice President of Finance and then as Chief
Financial Officer at Phoenix Technologies Ltd., a publicly traded developer of
core system software and productivity solutions for personal computers. Prior to
his time at Phoenix Technologies, Mr. Andersen served in various senior
financial roles at Wind River Systems, Inc., a publicly traded embedded systems
software company, and NextOffice, Inc., a privately held technology company. Mr.
Andersen began his finance career at Hewlett-Packard Company, where he served in
various controller, treasury and technology finance management roles. Mr.
Andersen has a B.A. in Economics from the University of California, Davis, and
an M.B.A. from the Anderson School of Management at the University of
California, Los Angeles. We believe that Mr. Andersen possesses specific
attributes that qualify him to serve as a member of the Board, including his
significant expertise in financial operations, capital allocation decisions and
M&A transactions.
Mr. Paul R. Auvil
III
has served as Chief Financial
Officer of Proofpoint, Inc. since March 2007, leading the companys public
offering in April of 2012. Prior to joining Proofpoint, Mr. Auvil was an
entrepreneur-in-residence with Benchmark Capital, a venture capital firm, from
October 2006 to March 2007. While at Benchmark, he evaluated a broad range of
investments and advised various portfolio companies throughout the technology
industry. From August 2002 to July 2006, he held the position of Chief Financial
Officer of VMware, Inc., a global leader in virtualization and cloud
infrastructure companies. Prior to that, Mr. Auvil served for four years as
Chief Financial Officer at Vitria Technology, where he led various aspects of
the companys financial and business operations, executing both an initial and
secondary public offering during his tenure. Earlier in his career, he spent 10
years at VLSI Technology, ultimately becoming vice president and general manager
of its Internet and Secure Products Division. Mr. Auvil holds a Bachelor of
Engineering degree from Dartmouth College and a Master of Management degree from
the J.L. Kellogg Graduate School of Management at Northwestern University. He
also serves on the Board of Directors of Marin Software, a provider of a Revenue
Acquisition Management platform for advertisers and agencies. Mr. Auvil is the
Chairman of Quantums Board and is a member of the Companys Corporate
Governance and Nominating Committee as well as the Audit Committee. With a
career in finance and technology spanning more than 25 years, Mr. Auvil brings
valuable management, financial and corporate leadership experience to Quantum.
In particular, he brings to the Board a deep understanding of financial
statements, corporate finance, accounting and capital markets; senior management
experience at technology companies relevant to Quantums business; and expertise
on issues facing public companies and governance matters. As a trained engineer,
Mr. Auvil also holds patents related to digital video compression in Japan and
high-speed, PCI compatible on-chip data bus in the U.S., which demonstrates his
extensive technological expertise and provides valuable insight to our Board on
the critical role of innovation and strategic growth direction.
Mr. Louis
DiNardo
has served as a Principal
of BackBeat Management Solutions, a venture capital company, since May 2016. He
served as the President and Chief Executive Officer of Exar Corporation, a
provider of integrated circuits and solutions for data communication,
networking, storage, consumer and industrial applications, from January 2012 to
October 2015. From January 2008 through December 2011, he was a Partner at
Crosslink Capital, a stage-independent venture capital and growth equity firm
based in San Francisco and focused on semiconductor and alternative energy
technology investment in private companies. Mr. DiNardo was a partner at
VantagePoint Venture Partners from January 2007 through January 2008. Mr.
DiNardo was President and Chief Operating Officer at Intersil Corporation from
January 2006 through October 2006. Prior to his promotion, Mr. DiNardo held the
position of Executive Vice President of the Power Management Business at
Intersil. He held the position of President and Chief Executive Officer, as well
as Co-Chairman of the Board of Directors at Xicor Corporation, a public company,
from 2000 until Intersil acquired the company in July of 2004. Mr. DiNardo spent
thirteen years at Linear Technology where he was Vice President of Worldwide
Marketing and General Manager of the Mixed-Signal Business Unit. He began his
career in the semiconductor industry at Analog Devices Incorporated where he
served for eight years in a variety of technical and management roles. Mr.
DiNardo currently serves on the Boards of Fixeus, Incorporated and of San Diego
State University, Lavin Entrepreneur Center and served on the Board of Directors
of Exar Corporation from 2012 to 2015. Mr. DiNardo is a member of Quantums
Leadership and Compensation Committee. We believe that Mr. DiNardo possesses
specific attributes that qualify him to serve as a member of the Board,
including his executive and board experience.
16
Table of Contents
Mr. Jon W.
Gacek
has served as President and
Chief Executive Officer of Quantum Corporation since April 2011 and was also
appointed to the Companys Board of Directors in April 2011. He was President
and Chief Operating Officer of Quantum from January 2011 through March 2011,
with responsibility for operations, sales, marketing and service. Mr. Gacek
joined the Company as Executive Vice President and Chief Financial Officer in
August 2006 following Quantums acquisition of Advanced Digital Information
Corporation (ADIC), and he was promoted to Executive Vice President, Chief
Financial Officer and Chief Operating Officer in June 2009. Prior to joining
Quantum, Mr. Gacek served as the Chief Financial Officer at ADIC, a manufacturer
of tape libraries and storage management software, from 1999 to 2006. He also
led ADICs Operations division during his last three years at the company.
Before ADIC, Mr. Gacek was an audit partner at PricewaterhouseCoopers LLP,
leading the Technology Practice in the firms Seattle office. While there, he
assisted several private equity investment firms with numerous mergers,
acquisitions and leveraged buyouts situations, among other transactions. Mr.
Gacek served on the boards of Power-One from 2008 through 2013, of Market Leader
from 2006 to 2013 and of LWD Technology from 2003 through 2007. Mr. Gacek holds
a Bachelor of Arts degree in Accounting from Western Washington University. With
nearly 30 years of business, operating and leadership experience, he brings to
the Quantum Board extensive knowledge of the data storage and data protection
industry and the Companys worldwide business in particular.
Mr. David A.
Krall
has served as a strategic
advisor to Roku, Inc., a leading manufacturer of media players for streaming
entertainment, since December 2010 and to Universal Audio, Inc., a manufacturer
of audio hardware and software plug-ins, since August 2011. From February 2010
to November 2010, he served as President and Chief Operating Officer of Roku,
where his was responsible for managing all functional areas of the company.
Prior to that, Mr. Krall spent two years as President and Chief Executive
Officer of QSecure, Inc., a developer of secure credit cards based on
micro-electro-mechanical-system technology. From 1995 to July 2007, he held a
variety of positions of increasing responsibility and scope at Avid Technology,
Inc., a leading provider of digital media creation tools for the media and
entertainment industry. His tenure at Avid included serving seven years as the
companys President and Chief Executive Officer. Earlier in his career, Mr.
Krall worked in engineering and project management at several companies. He
holds Bachelor and Master degrees in Electrical Engineering from the
Massachusetts Institute of Technology and a Master of Business Administration
degree, with distinction, from Harvard Business School. Mr. Krall also currently
serves on the Board of Directors for Universal Audio, Audinate Pty Ltd., and
Progress Software Corp. He is the Chair of Quantums Leadership and Compensation
Committee. Mr. Krall brings to the Quantum Board a broad set of business skills,
a strong educational background in engineering and 30 years of diverse
professional experience. This includes significant achievements in a wide
variety of disciplines and he has demonstrated leadership in a variety of
management roles. In addition, throughout his career Mr. Krall has had a strong
focus on market-driven product development, corporate strategy and global
operating expertise. Further, his experience as a member of many public and
private company Boards provides him with an enhanced perspective on an array of
governance issues.
Mr. Gregg J.
Powers
serves as Chairman and
Chief Executive Officer of Private Capital Management LLC (along with its
successor entities PCM), a provider of equity portfolio management. After
joining PCM in 1988, he became co-portfolio manager during the mid-1990s,
focusing on the firms primary underwriting of investments in technology,
healthcare and telecommunications. He was named President of PCM in 1999, Chief
Executive Officer in 2008 and Chairman in 2009. As portfolio manager, Mr. Powers
oversees all aspects of the investment of PCM client portfolios. He also
currently serves as Chairman of the Board of Directors of Alere, Inc., a global
leader in near-patient diagnosis, monitoring and health information technology.
Mr. Powers has a Bachelor of Science degree in Finance from the University of
Florida. He is the Chair of Quantums Corporate Governance and Nominating
Committee. Mr. Powers offers critical investor insights and shareholder
representation to the Quantum Board, helping to guide the Companys strategic
direction and overall operational and financial performance. He also brings deep
financial expertise, providing an understanding of corporate finance, accounting
and capital markets.
17
Table of Contents
Mr. David E.
Roberson
has served as a business
consultant to technology companies since 2012. Mr. Roberson served as Senior
Vice President within the Enterprise Servers, Storage and Networking Group of HP
from May 2007 to May 2011, where he was responsible for building on the
companys foundation as a leading provider of storage solutions and pursuing new
opportunities for global growth. Additionally, he was General Manager of HPs
StorageWorks Division from May 2007 to October 2010. Prior to that, Mr. Roberson
spent 26 years at Hitachi Data Systems, starting as corporate counsel and
eventually becoming President and Chief Executive Officer, a position he held
from 2006 to May 2007. He also served as President and Chief Operating Officer
from 2002 to 2006 and Chief Operating Officer from 2000 to 2002. Mr. Roberson
began his technology career at Amdahl
Corporation in 1980 following posts as adjunct professor at Golden Gate
University School of Law and research director at UC Hastings College of the
Law. He also serves on the Board of Brocade Communications Systems, Inc., a
networking solutions company and as Chairman of Push Technology, a company
focused on optimizing data delivery for web, mobile and IoT apps. In addition,
Mr. Roberson has significant previous experience serving as a board member of
public companies in the software and technology industries, including
International Game Technology Corporation, where he served on the board from
2008 to 2013, Spansion Corporation (2005-2008), and Integrated Device Technology
Corporation (2004-2005). Mr. Roberson holds a Bachelor of Social Ecology degree
from the University of California at Irvine, and a law degree from Golden Gate
University School of Law in San Francisco. He also studied financial management
at Harvard Business School. He is the Chair of the Quantums Audit Committee and
a member of the Companys Leadership and Compensation Committee. Mr. Roberson
brings to the Quantum Board vast storage industry knowledge that lends keen
insight into the nature of the Companys business, enabling him to provide
meaningful guidance on strategic direction, technology innovation and growth
opportunities.
Board Independence
Quantums Corporate
Governance Principles provide that a majority of the Board shall consist of
independent directors. The Board has determined that none of the directors
standing for election, other than Jon W. Gacek, has any material relationship
with Quantum (either directly or as a partner, stockholder or officer of an
organization that has a relationship with Quantum), and that such directors and
nominees (other than Mr. Gacek) are independent under all applicable
regulations, including the rules of the NYSE and the SEC.
Board Meetings and
Committees
The Board held a total of
nine (9) meetings during Fiscal 2016. In addition, in Fiscal 2016, the
independent directors held four (4) meetings without management present. During
Fiscal 2016, each of our directors standing for election attended at least 75%
of the meetings of the Board and the meetings of committees, if any, upon which
such director served, except for Mr. DiNardo. All of our directors are expected
to attend each meeting of the Board and the committees on which they serve and
are encouraged to attend annual stockholder meetings, to the extent reasonably
possible. Messrs. Andersen, Auvil, DiNardo, Gacek and Roberson attended our 2015
annual meeting. Mr. Press was not a director at the time of last years annual
meeting.
The Companys standing
committees of the Board include an Audit Committee, a Leadership and
Compensation Committee, and a Corporate Governance and Nominating Committee.
From time to time, the Board may form committees for other purposes. Paul R.
Auvil III is the Chairman of the Companys Board and as such presides at the
independent directors meetings.
The Company has a
separately-designated standing Audit Committee which currently consists of Mr.
Roberson, Chair of the committee, Mr. Andersen and Mr. Auvil, all of whom are
independent directors, including all applicable enhanced independence
requirements for audit committee members under NYSE listing standards and SEC
rules, and are financially literate, as defined in the applicable NYSE listing
standards and SEC rules and regulations. Our Board has determined that David E.
Roberson is an audit committee financial expert as defined by SEC rules. The
Audit Committee, which generally meets at least twice per quarter, once prior to
quarterly earnings releases and again prior to the filing of the Companys
quarterly and annual reports with the SEC, appoints the Companys independent
registered public accounting firm and is responsible for approving the services
performed by the Companys independent registered public accounting firm and for
reviewing and evaluating the Companys accounting principles and its systems of
internal accounting controls. At each meeting, the Audit Committee first meets
with Company management and the Companys independent registered public
accounting firm in order to review financial results and conduct other
appropriate business. In addition, the Audit Committee regularly meets
separately with the Companys independent registered public accounting firm
without the presence of management, as well as with the Companys management and
with the Companys Internal Audit department. The Audit Committee held a total
of ten (10) meetings during Fiscal 2016.
The Leadership and
Compensation Committee of the Board is currently composed of Mr. Krall, Chair of
the committee, Mr. DiNardo and Mr. Roberson, all of whom are independent
directors, including all applicable enhanced independence requirements for
compensation committee members under NYSE listing standards. Mr. Smith and Mr.
Black served on the committee until their respective resignations from the Board
in May 2015 and February 2016. The Leadership and Compensation Committee
generally meets in conjunction with Board meetings and at other times as deemed
necessary by the committee or the Board. The
Leadership and Compensation Committees primary mission is to ensure the Company
provides appropriate leadership and compensation programs to enable the
successful execution of its corporate strategy and objectives and to ensure the
Companys programs and practices are market competitive and consistent with
corporate governance best practices. The Leadership and Compensation Committees
primary objectives are to (1) review and approve the Companys compensation
philosophy, strategy and practices, (2) review and approve executive
compensation for all executive officers (other than for the CEO) and make
recommendations to the Board regarding CEO and non-employee director
compensation, (3) review the Companys strategy and practices relating to the
attraction, retention, development, performance and succession of its leadership
team, and (4) develop guidelines to be used by the Companys management for
establishing and adjusting the compensation of all non-executive vice
presidents. The Leadership and Compensation Committee held a total of five (5)
meetings during Fiscal 2016.
18
Table of Contents
The Leadership and
Compensation Committee has the power to delegate its authority to the Companys
management or to a subcommittee (subject to limitations of applicable law and
provided that the Leadership and Compensation Committee may not delegate its
authority as it relates to the compensation of the CEO and the other executive
officers), but did not do so during Fiscal 2016. The Leadership and Compensation
Committee is also empowered to hire outside advisors in connection with
performing its duties.
The Corporate Governance
and Nominating Committee is currently composed of Mr. Powers, Chair of the
committee, Mr. Auvil, Mr. Fuller and Mr. Press, all of whom are independent
directors, as defined in the applicable NYSE listing standards. The Corporate
Governance and Nominating Committee, which meets at least twice annually,
assists the Board by identifying and recommending prospective director nominees,
develops corporate governance principles for Quantum, advises the Board on
corporate governance matters, including Board and committee composition, roles
and procedures, recommends to the Board a Chair of the Board, oversees the
evaluation of the Board, considers questions of possible conflicts of interest
of Board members and of senior executives, and oversees and reviews the process
for succession planning of the Companys Chief Executive Officer. The Corporate
Governance and Nominating Committee will consider nominees recommended by
stockholders pursuant to the procedures outlined in the Companys Bylaws and as
set forth herein. The Corporate Governance and Nominating Committee held four
(4) meetings during Fiscal 2016.
Each of our standing
committees is governed by a written charter, copies of which are posted on our
website. The Internet address for our website is http://www.quantum.com, where
the charters may be found by clicking About Us from the home page, selecting
Investor Relations and then Governance Documents. A free printed copy of the
charters also is available to any stockholder who requests it from Quantums
Investor Relations Department at the address stated below in the Section of this
Proxy Statement entitled Communicating with the Company.
Boards Role in Risk
Oversight
The Company faces a wide
spectrum of risks, including financial, strategic, operational, and regulatory
exposures. On behalf of the Board, the Companys Audit Committee has primary
responsibility for the oversight of those risks. In accordance with its charter,
the Audit Committee oversees the Companys policies and processes for risk
assessment and management, including discussions of its major risk exposures,
the associated risk mitigation activities, and the practices under which risk
management is implemented throughout the Company. The Boards other committees
also oversee risks associated with their respective areas of responsibility,
such as the Leadership and Compensation Committees review of risks arising from
compensation practices. The full Board is updated regarding its committees risk
oversight and other activities through its regular reporting and discussion
practices.
While the Board is
responsible for risk oversight, risk management accountability lies with the
Companys management team. The Companys general counsel has executive
responsibility for the majority of its risk management practices, including
maintenance of its enterprise risk management practices, completion of the
annual risk assessment, and management and promotion of the Companys ethics and
compliance program. Formal risk management reports are provided by the general
counsel to the Audit Committee on a periodic basis, with ongoing updates and
discussions occurring as appropriate at Board meetings. In addition, other
appropriate risk assessment and mitigation techniques are implemented and
applied throughout the Companys different operations and functional teams, with
the involved management representatives providing updates to the Board as
needed.
19
Table of Contents
Leadership Structure
The Board is committed to
strong, independent Board leadership and oversight of managements performance
and therefore has appointed Paul R. Auvil III as the non-executive, independent
Chair. In addition, the Board believes that separating the positions of
independent Chair and Chief Executive Officer allows our Chief Executive Officer
to focus on the Companys day-to-day operations while our Chairman can devote
his time and attention to addressing matters relating to the responsibility of
the Board.
The roles and
responsibilities of the Chair, which are described in the Companys Corporate
Governance Principles, include:
●
|
In consultation with and with the assistance of
the Chief Executive Officer and the Companys Secretary, the
Chair plans and organizes the activities of
the Board.
|
●
|
The Chair may call meetings of the Board or of
the non-management directors.
|
●
|
The Chair ensures, in conjunction with the
Corporate Governance and Nominating Committee, that processes that
govern the Boards work are effective to
enable the Board to exercise oversight and due diligence in the
fulfillment of its mandate, including
its oversight responsibilities in Company strategy and
risk.
|
●
|
The Chair leads Board meetings and sessions of
the non-management directors.
|
●
|
Where Board functions have been delegated to
committees, the Chair works with the respective committee chairs
to ensure that each committee functions
effectively and keeps the Board apprised of actions
taken.
|
●
|
The Chair may attend, as a non-voting
participant, meetings of any Board committees on which the Chair is not a
member.
|
●
|
The Chair has unrestricted access to Company
management.
|
●
|
The Chair builds relationships with senior
management and may meet with relevant senior management when
problems arise.
|
●
|
The Chair provides advice to the Chief
Executive Officer and senior management on important
issues.
|
●
|
The Chair facilitates effective communication
between directors and senior management, both inside and outside
of Board meetings.
|
●
|
The Chair works with the Chief Executive
Officer to ensure that Management strategies and plans are
appropriately represented to the Board and
that issues are openly communicated to the Board.
|
●
|
The Chair communicates the Boards concerns to
the Chief Executive Officer.
|
●
|
With the assistance of the Leadership and
Compensation Committee, the Chair leads the Board in evaluating the
performance of the Chief Executive
Officer.
|
Consideration of Director Nominees
Stockholder
Recommendations and Nominations
Recommendations
It is the policy of the
Corporate Governance and Nominating Committee to consider recommendations for
candidates to the Board from stockholders. A stockholder that desires to
recommend a candidate for election to the Board must direct the recommendation
in writing to Quantum Corporation, attention: Company Secretary, 224 Airport
Parkway, Suite 550, San Jose, CA 95110.
Nominations
Please see above under
Proposals for Nominees to the Board of Directors for information about
stockholder nominations to the Board.
20
Table of Contents
Identifying and
Evaluating Nominees for Director
The Corporate Governance
and Nominating Committee uses the following procedures to identify and evaluate
individuals recommended or offered for nomination to the Board:
●
|
The committee regularly reviews the current
composition and size of the Board.
|
●
|
The committee annually evaluates the
performance of the Board as a whole and the performance and qualifications
of
individual members of the Board
eligible for re-election at the annual meeting of
stockholders.
|
●
|
In evaluating and identifying candidates, the
committee has the authority to retain and terminate any third party search
firm that is used to identify director
candidates and has the authority to approve the fees and retention terms
of any
search firm.
|
●
|
The committee reviews the qualifications of any
candidate who has been properly recommended or nominated by a
stockholder, as well as any candidate who
has been identified by management, individual members of the Board or,
if
the committee determines, a
search firm. Such review may, in the committees discretion, include a
review solely of
information
provided to the committee or may also include discussions with persons
familiar with the candidate, an
interview with the candidate or other actions that the committee
deems proper, including the retention of third parties
to review potential
candidates.
|
●
|
The committee will evaluate each candidate in
light of the general and specific considerations that follow. The
committee evaluates all nominees, whether or
not recommended by a stockholder, in the same manner, as described
in
this Proxy
Statement.
|
●
|
After reviewing and considering all candidates
presented to the committee, the committee will recommend a slate of
director nominees to be approved by the full
Board.
|
●
|
The committee will endeavor to promptly notify,
or cause to be notified, all director candidates of its decision as to
whether to nominate such individual
for election to the Board.
|
General Considerations
A candidate will be
considered in the context of the current perceived needs of the Board as a
whole. Generally, the Corporate Governance and Nominating Committee believes
that the Board should be comprised of directors who (i) are predominantly
independent, (ii) are of high integrity, (iii) have qualifications that will
increase overall Board effectiveness and (iv) meet other requirements as may be
required by applicable rules, such as financial literacy or financial expertise
with respect to audit committee members.
Specific Considerations
Specific considerations
include the following:
●
|
The current size and composition of the Board
and the needs of the Board and its committees.
|
●
|
Previous experience serving on a public company
board or as a member of the senior management of a public
company.
|
●
|
Whether the candidate would be an independent
director as defined under all applicable regulations, including the
rules of the NYSE and the SEC.
|
●
|
The possession of such knowledge, experience,
skills, expertise and diversity so as to enhance the Boards ability to
manage and direct the affairs and
business of the Company.
|
●
|
Key personal characteristics such as strategic
thinking, objectivity, independent judgment, integrity, intellect and the
courage to speak out and actively
participate in meetings.
|
●
|
Knowledge of, and familiarity with, information
technology.
|
●
|
The absence of conflicts of interest with the
Companys business.
|
●
|
A willingness to devote a
sufficient amount of time to carry out his or her duties and
responsibilities effectively,
including, at a minimum, a commitment to attend at least six Board
meetings per year and to serve on a committee.
|
●
|
Commitment to serve on the Board
for an extended period of time.
|
●
|
Diversity of thinking or
background.
|
●
|
Such other factors as the
Corporate Governance and Nominating Committee may consider
appropriate.
|
21
Table of Contents
The Board believes that all
of the Companys nominees for election to our Board meet the general and
specific considerations outlined above.
The Board does not maintain
a formal diversity policy for its members. However, in evaluating the overall
composition of the Board, the Board and the Nominating and Corporate Governance
Committee consider diversity of knowledge, experience, cultural background,
race, gender, and age. The Companys nominees represent a diverse group of
business leaders with different experiences, backgrounds and areas of expertise.
Most of the Companys nominees either held or are currently holding senior
leadership positions at major companies and also have experience serving on
boards of directors and board committees of other public companies, which
provides them with an understanding of different business processes, challenges
and strategies. The Board believes that a Board comprising directors with a
diverse range of perspectives, skills and experiences enables the Board to more
effectively oversee all aspects of the Companys business.
The Corporate Governance
and Nominating Committee and the Board believe that the skill and experience set
of the Companys nominees for election at the Annual Meeting provide the Company
with a diverse range of judgment and perspectives critical in guiding the
Companys strategies and overseeing their execution.
All of the Companys
nominees for election to our Board have previously served as Quantum directors.
VIEX Settlement
On June 6, 2016, VIEX
Capital Advisors, LLC and its affiliates (collectively, VIEX) announced that
it had nominated five candidates for Quantums board of directors. On September
23, 2016, Quantum entered into an agreement (the Agreement) with VIEX pursuant
to which Quantum granted Board observer rights to John Mutch and Raghu Rau until
December 1, 2016, subject to certain conditions. In addition, Quantum agreed to
use its reasonable best efforts to hold the Annual Meeting on January 31, 2017,
or another date mutually agreed by the parties. Under the Agreement, VIEX agreed
to abide by certain standstill provisions related to the solicitation of proxies
and other matters until December 1, 2016, subject to earlier termination under
certain circumstances.
On December 2, 2016, the
Company entered into an amendment to the Agreement to extend the Board observer
rights of Messrs. Mutch and Rau until February 1, 2017, subject to certain
conditions, and VIEX agreed to extend the standstill provisions of the Agreement
related to the solicitation of proxies and other matters until February 1, 2017.
Quantum also agreed to hold its annual meeting on March 31, 2017.
Messrs. Andersen and
DiNardo
Messrs. Andersen and
DiNardo (the Starboard Nominees) were approved by the Board for nomination to
the Board at the Annual Meeting. Mr. DiNardo was initially nominated for
election to the Board pursuant to a settlement agreement (the 2013 Settlement
Agreement) between the Company and Starboard Value LP and certain of its
affiliates (collectively, Starboard) dated May 13, 2013, as described in our
Current Report on Form 8-K filed with the SEC on May 14, 2013. Mr. DiNardo was
re-nominated for election to the Board pursuant to a settlement agreement (the
2014 Settlement Agreement) between the Company and Starboard dated July 28,
2014, as described in our Current Report on Form 8-K filed with the SEC on July
29, 2014. Mr. Andersen joined the Board in May 2015 as a successor to Jeffrey C.
Smith. Mr. Smith was initially elected to the Board pursuant to the 2013
Settlement Agreement and re-nominated pursuant to the 2014 Settlement
Agreement.
Evaluation of the Board
In accordance with
Quantums corporate governance principles and the rules of the NYSE, annual
self-evaluations of its Board, its committees, and individual directors were
performed. The purpose of the self-assessment process is to help build a
strategic Board that contributes to superior long-term shareholder value. The
Board and selected executive staff members were surveyed on matters related to
Board and Committee composition, effectiveness, decision making and individual
director performance. The results of the survey were compiled by the Companys
inside legal counsel and a summary for the Board was provided to the Chairman of
the Board and a summary for each committee to the relevant committee chair.
After review, the Chairman of the Board and the committee chairs followed up
with individual directors as necessary. Summaries of the results of the survey
were discussed with the applicable committees and summaries were then presented
to the Board. Following the presentations, the Corporate Governance and
Nominating Committee, with input from all directors, recommends to the Board any
appropriate changes to the Corporations governance process.
22
Table of Contents
Communications to the
Board
Stockholders, employees and
other interested parties may contact the Board, the Chairman of the Board, the
independent directors as a group or any of our directors by writing to them c/o
Quantum Corporation, attention: Company Secretary, 224 Airport Parkway, Suite
550, San Jose, CA 95110, or by email to BoardofDirectors@Quantum.com.
Communications that are intended specifically for the Chairman or the
independent directors should be sent to the email address or street address
noted above, to the attention of the Chairman. If any such interested party
wishes to contact the Board, a member of the Audit Committee, the Chairman of
the Board, our independent directors as a group or any of our directors to
report a concern about Quantums conduct or about questionable accounting,
internal accounting controls or auditing matters, such party may do so
anonymously by using the address above and designating the communication as
confidential. Alternatively, concerns may be reported anonymously by phone or
via the world-wide-web to the following toll-free phone number or Internet
address 1-866-ETHICSP (1-866-384-4277);
www.ethicspoint.com
. These
resources are operated by Ethicspoint, an external third-party vendor that has
trained professionals to take calls in confidence, and to report concerns to the
appropriate persons for proper handling. Communications raising safety, security
or privacy concerns, or that otherwise relate to improper activities will be
addressed in an appropriate manner.
Director Compensation
The Leadership and
Compensation Committee, together with the full Board, are responsible for
determining the amount and form of compensation for the Companys non-employee
directors. The Companys management team provides information, analysis and
recommendations to the Leadership and Compensation Committee on matters such as
competitive market practices, target compensation levels and non-employee
director compensation program design. In addition, the Leadership and
Compensation Committees compensation consultant, as identified in the
Compensation Discussion & Analysis, also provides analysis and advice on the
market competitiveness of our non-employee directors compensation program (both
in relation to the Companys peer group and to the broader technology industry),
as well as on current trends and developments, and specific non-employee
director compensation program design recommendations. While the Leadership and
Compensation Committee carefully considers all of the information and
recommendations made by members of management and its compensation consultant,
ultimate authority for all decisions relating to the non-employee director
compensation program rests with the Board.
The Leadership and
Compensation Committee has determined that it will conduct a comprehensive
review of the compensation program for the Companys non-employee directors
every two years. As the last comprehensive review of the non-employee director
compensation occurred in fiscal year 2014, the management team and the
consultant conducted a comprehensive review of the Fiscal 2016 compensation
programs in fiscal year 2016 and concluded that the total compensation delivered
to non-employee directors is competitive in comparison to the Companys
compensation peer group (discussed in the Compensation Discussion and Analysis
below). As a result of this review, the management team and the consultant
recommended to the Leadership and Compensation Committee that they do not
approve changes to either the type or the amount of compensation for the Board
is needed at this time, except for an increase to the Chairman annual retainer
of $5,000, from $25,000 to $30,000 per year. Mr. Auvil, however, later declined
to accept this increase, so that the annual Chairman retainer remains at
$25,000. The table below details the specific elements of the Companys Fiscal
2016 compensation program for its non-employee directors. All cash compensation
is paid in equal quarterly installments.
23
Table of Contents
Compensation
Element
|
Quantum Board
Compensation Program
|
Board Service Cash
|
➢
Annual cash retainer: $50,000
|
|
➢
Initial award: restricted stock units with grant date value
of $125,000
|
|
●
Vest over two years (50% after one year and 50% over the second year)
|
|
➢
Annual award: restricted stock units with grant date value of
$100,000
|
Board Service Equity
|
● Vest quarterly over one year
|
|
➢
Annual cash retainers:
|
|
●
Audit Committee
: $25,000
|
|
●
Leadership & Compensation Committee
: $17,500
|
|
●
Corporate Governance & Nominating Committee
: $15,000
|
Committee Chair Service
|
➢
Meeting fees: none
|
|
➢
Annual cash retainers:
|
|
●
Audit Committee
: $12,500
|
|
●
Leadership & Compensation Committee
: $10,000
|
|
●
Corporate Governance & Nominating Committee
: $7,500
|
Committee Member Service
|
➢
Meeting fees: none
|
Lead Director / Chairman
|
➢
Annual cash retainer: $25,000
|
During Fiscal 2016, the
non-employee directors received the following equity awards: Messrs. Auvil,
Black, DiNardo, Fuller, Krall, Powers, and Roberson each received 90,090
restricted stock units and Mr. Anderson received 22,523 restricted stock units
that vest as follows: 25% vest on each of December 1, 2015, March 1, 2016, June
1, 2016, and the date of the Annual Meeting. Mr. Andersen, who joined the Board
on May 6, 2015, received 64,767 restricted stock units that will vest as
follows: 50% will vest on June 1, 2016 and 50% will vest on June 1, 2017. Due to
Mr. Blacks resignation from the Board in February 2016, any unvested restricted
stock units were forfeited.
The Board, in its
discretion, determines the time or times at which equity awards may be granted,
the form in which such awards are granted, the number of shares of the Companys
stock subject to each award and, in the case of stock options, the period over
which such stock options become exercisable.
We also maintain a
non-qualified deferred compensation plan which allows our non-employee directors
to contribute some or all of their cash fees to an irrevocable trust for the
purpose of deferring federal and state income taxes. Participants direct the
deemed investment of their deferred accounts among a pre-selected group of
investment funds, which does not include shares of the Companys Common Stock.
The deemed investment accounts mirror the investment options available under the
Companys 401(k) Savings Plan. Participants deferred accounts are credited with
interest based on their deemed investment selections. During Fiscal 2016, none
of our non-employee directors elected to defer any of their cash fees to the
non-qualified deferred compensation plan.
Effective October 2015, in
connection with his service on the Company's Board, Mr. Auvil declined to
receive any further cash fees and this forgone compensation will not be made up
to Mr. Auvil in any other form.
Employee directors receive
no additional compensation for their service on the Board or on committees of
the Board.
Compensation paid to the
non-employee directors during Fiscal 2016 is set forth in the following table.
Mr. Press joined the Board in fiscal year 2017 and therefore, did not receive
compensation during Fiscal 2016.
24
Table of Contents
Fiscal 2016 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
Earned
|
|
Stock
|
|
Option
|
|
Non Equity
|
|
Deferred
|
|
|
|
|
|
|
or Paid in
|
|
Awards
|
|
Awards
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
Name
|
|
Cash
(1)
|
|
(2)(4)
|
|
(3)(4)
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Andersen, Robert J.*
|
|
$50,000
|
|
$150,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$200,000
|
Auvil III, Paul R.**
|
|
$47,500
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$147,500
|
Black, Philip***
|
|
$61,250
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$161,250
|
DiNardo, Louis
|
|
$61,250
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$161,250
|
Fuller, Dale L.
|
|
$57,500
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$157,500
|
Krall, David A.
|
|
$67,500
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$167,500
|
Powers, Gregg J.
|
|
$61,250
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$161,250
|
Roberson, David E.
|
|
$85,000
|
|
$100,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$185,000
|
Smith, Jeffrey C.****
|
|
$15,000
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$15,000
|
____________________
*
|
|
Mr.
Andersen joined the Board effective May 6, 2015.
|
|
**
|
|
Effective
October 2015, Mr. Auvil declined to receive any further cash fees in
connection with his service on the Company's Board.
|
|
***
|
|
Mr. Black
resigned effective February 3, 2016 and part of his equity grant was
canceled.
|
|
****
|
|
Mr. Smith
resigned effective May 6, 2015.
|
(1)
Amounts reflect compensation earned by each
director during Fiscal 2016. Fees Earned or Paid in Cash include the following:
|
|
|
|
|
Committee
|
|
|
|
|
|
|
|
Total Fees
|
|
|
|
|
|
Membership
|
|
|
Committee Chair
|
|
|
Chairman
|
|
Earned or
|
Name
|
|
Board
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
|
Retainer
|
|
Paid in
Cash
|
Andersen, Robert J.
|
|
$43,750
|
|
$
|
6,250
|
|
$
|
|
|
|
|
|
$50,000
|
Auvil III, Paul R.
|
|
$25,000
|
|
$
|
10,000
|
|
$
|
|
|
$
|
12,500
|
|
$47,500
|
Black, Philip
|
|
$50,000
|
|
$
|
11,250
|
|
$
|
|
|
$
|
|
|
$61,250
|
DiNardo, Louis
|
|
$50,000
|
|
$
|
7,500
|
|
$
|
3,750
|
|
$
|
|
|
$61,250
|
Fuller, Dale L.
|
|
$50,000
|
|
$
|
7,500
|
|
$
|
|
|
$
|
|
|
$57,500
|
Krall, David A.
|
|
$50,000
|
|
$
|
10,000
|
|
$
|
7,500
|
|
$
|
|
|
$67,500
|
Powers, Gregg J.
|
|
$50,000
|
|
$
|
7,500
|
|
$
|
3,750
|
|
$
|
|
|
$61,250
|
Roberson, David E.
|
|
$50,000
|
|
$
|
22,500
|
|
$
|
12,500
|
|
$
|
|
|
$85,000
|
Smith, Jeffrey C.
|
|
$12,500
|
|
$
|
2,500
|
|
$
|
|
|
$
|
|
|
$15,000
|
____________________
(2)
|
|
On June 1, 2015, Mr. Andersen received
64,767 restricted stock units. On September 1, 2015, the Companys
non-employee directors received the following awards: Messrs. Auvil,
Black, DiNardo, Fuller, Krall, Powers, and Roberson each received an
annual award of 90,090 restricted stock units and Mr. Andersen received
22,523 restricted stock units. The value of these awards was computed in
accordance with Statement of Financial Accounting Standards Accounting
Standards Codification Topic 718, Compensation - Stock Compensation (ASC
718). Assumptions used in the calculation of the value are disclosed
under Stock Incentive Plans and Share-Based Compensation in the
Companys Annual Report on Form 10- K filed with the SEC on June 3,
2016.
|
(3)
|
|
No stock options were granted to the
non-employee directors in Fiscal 2016.
|
(4)
|
|
Outstanding equity awards held by each of
the non-employee directors as of March 31, 2016 were as
follows:
|
25
Table of Contents
|
|
|
|
|
Total Equity
|
|
Awards
|
|
Options
|
|
Awards
|
Name
|
Outstanding
|
|
Outstanding
|
|
Outstanding
|
Andersen, Robert
J.
|
76,028
|
|
|
|
|
76,028
|
|
Auvil III, Paul
R.
|
45,044
|
|
66,000
|
|
|
111,044
|
|
Black,
Philip
|
|
|
|
|
|
|
|
DiNardo,
Louis
|
45,044
|
|
|
|
|
45,044
|
|
Fuller, Dale
L.
|
72,698
|
|
|
|
|
72,698
|
|
Krall, David
A.
|
45,044
|
|
|
|
|
45,044
|
|
Powers, Gregg
J.
|
45,044
|
|
|
|
|
45,044
|
|
Roberson, David
E.
|
45,044
|
|
|
|
|
45,044
|
|
Smith, Jeffrey
C.
|
|
|
|
|
|
|
|
Leadership and
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The members of the
Companys Leadership and Compensation Committee are Mr. David A. Krall, Chair of
the committee, Mr. Louis DiNardo and Mr. David E. Roberson. No member of the
Leadership and Compensation Committee is currently, nor has any been at any time
since the formation of the Company, an officer or employee of the Company or any
of its subsidiaries. Likewise, no member of the Leadership and Compensation
Committee has entered into a transaction, or series of similar transactions, in
which they will have a direct or indirect material interest adverse to the
Company. No interlocking relationships exist between any member of the Board or
Leadership and Compensation Committee and any member of the board of directors
or compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
26
Table of Contents
PROPOSAL ONE
ELECTION
OF DIRECTORS
Nominees
The Company has nominated
seven directors for election to the Board at the Annual Meeting: Robert J.
Andersen, Paul R. Auvil III, Louis DiNardo, Jon W. Gacek, David A. Krall, Gregg
J. Powers and David E. Roberson. All nominees are standing for reelection to the
Board. All of the nominees have been approved for nomination by the Board.
The Company is not aware of
any reason that any nominee will be unable or will decline to serve as a
director. The term of office of each person elected as a director will continue
until the Next Annual Meeting or until a successor has been elected and
qualified. Other than the settlement agreements described above under
Consideration of Director Nominees - Nominees Messrs. Andersen and DiNardo
pursuant to which such nominees were initially nominated to the Board at prior
annual meetings, there are no currently effective arrangements or understandings
between any director or executive officer and any other person pursuant to which
he or she is or was to be selected as a director or officer of the Company.
Unless the authority to
vote for one or more of our director nominees has been withheld in a
stockholders proxy by voting FOR ALL EXCEPT and listing one or more nominees
or voting WITHHOLD ALL or specific instructions to vote otherwise have been
given, the persons named in the proxy as proxy holders intend to vote at the
annual meeting FOR the election of the nominees presented above. Our Board
intends to vote the proxies solicited hereby in such a manner as to provide for
the election of the maximum number of the Companys director nominees (for whom
authority is not otherwise withheld and to the extent no specific instructions
are otherwise given) as well as to prioritize the allocation of votes among our
nominees.
At the Annual Meeting,
unless you specifically instruct otherwise, the Board will instruct the proxy
holders to cast the votes as to which voting authority has been granted so as to
provide for the election of the maximum number of the Companys director
nominees, and will provide instructions as to the order of priority of our
nominees in the event that fewer than all of our nominees are elected. Except as
set forth in the prior sentence, the Board has not yet made any determination as
to the order of priority of candidates to which it will allocate votes assuming
cumulative voting applies, and expects to make this determination, if necessary,
at the Annual Meeting.
Additional Information
About Proposal One and the VIEX Solicitation
If You Wish to Support
the Company Nominees
We are nominating only
seven director nominees for a nine-member Board. As such, stockholders voting
for the election of directors at the Annual Meeting on the WHITE proxy card will
not be able to vote for the two other directors to serve on our Board of
Directors.
We are nominating only
seven individuals for election at the Annual Meeting in order to minimize the
likelihood that VIEX will obtain control of the Board at the Annual Meeting. Due
to the mechanics of cumulative voting, allocating votes to more than seven
individuals would reduce the number of votes received by each individual, and
increase the risk that those individuals would receive fewer votes than the VIEX
Nominees.
Please note that if you
submit a [color] proxy card to WITHHOLD your vote with respect to any VIEX
Nominee, that submission will not cause your shares to be counted as a vote
FOR any of our seven director nominees and will result in the revocation of
any previous proxy or voting instructions you may have submitted using the
enclosed WHITE proxy card or voting instruction card. THE BOARD URGES YOU NOT TO
SIGN OR RETURN ANY PROXY CARD OR VOTING INSTRUCTION CARD SENT TO YOU BY OR ON
BEHALF OF VIEX.
27
Table of Contents
Representation of VIEX
Nominees on the Board
Unless one or more of the
five VIEX Nominees who receives the highest number of votes refuses to serve on
our Board of Directors along with our seven director nominees, following the
Annual Meeting, at least two of the VIEX Nominees will be elected to our Board
of Directors. Because this is a contested election, directors are elected by a
plurality of the votes cast on the election of directors. Therefore, the nine
nominees for election to the Board who receive the highest number of affirmative
votes will be elected as directors. As noted above, we are nominating seven
director nominees for a nine-member Board. As a result, (i) stockholders voting
for the election of directors at the annual meeting on the WHITE proxy card will
be able to vote for only seven nominees for a nine-member Board and will not be
able to vote for the two remaining directors to serve on our Board and (ii) if
VIEX votes for its own director nominees, as we expect it would, at least two
VIEX Nominees will be elected to the Board.
Required Vote
Each stockholder voting in
the election of directors may cumulate such stockholders 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 stockholders shares are
entitled. Alternatively, a stockholder may distribute the stockholders votes on
the same principle among as many candidates as the stockholder would like,
provided that the stockholder may only return one valid proxy card. Therefore, a
stockholder using the WHITE proxy card may distribute the stockholders votes
among the Companys seven nominees.
Because the election for
directors is contested, at the Annual Meeting, directors will be elected by a
plurality of the votes cast with respect to that nominee. In this context, this
means that the nine directors receiving the most votes, after stockholders are
allowed to cumulate votes, will be elected.
THE BOARD RECOMMENDS A
VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
28
Table of Contents
PROPOSAL TWO
RATIFICATION OF
APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has
selected PricewaterhouseCoopers LLP as the Companys independent registered
public accounting firm to audit the financial statements of the Company for the
fiscal year ending March 31, 2017. The Board recommends that stockholders vote
for ratification of such appointment. Although ratification is not required by
our bylaws or otherwise, in the event of a vote against such ratification, the
Audit Committee will reconsider its selection. Even if the selection is
ratified, the Audit Committee may select a different auditor if it determines
that this would be in the best interests of the Company and our stockholders. A
representative of PricewaterhouseCoopers LLP is expected to be available at the
Annual Meeting with the opportunity to make a statement if such representative
desires to do so, and is expected to be available to respond to appropriate
questions.
Required Vote
The affirmative vote of a
majority of the votes present in person or represented by proxy and entitled to
vote at the Annual Meeting is required to ratify the appointment of
PricewaterhouseCoopers LLP.
THE BOARD RECOMMENDS A
VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING MARCH
31, 2017.
29
Table of Contents
PROPOSAL THREE
ADVISORY VOTE TO APPROVE
NAMED EXECUTIVE OFFICER COMPENSATION
At the Companys 2011
Annual Meeting of Stockholders, a majority of our stockholders voted in favor of
holding an advisory vote to approve the compensation of our named executive
officers on an annual basis. The Board of Directors considered this result and
adopted a policy to provide for an annual advisory stockholder vote to approve
the compensation of our named executive officers. Therefore, in accordance with
that policy, and pursuant to Section 14A of the Securities Exchange Act of 1934,
as amended, we are asking our stockholders to approve, on an advisory basis, the
compensation of the Companys named executive officers as disclosed pursuant to
Item 402 of Regulation S-K in the Compensation, Discussion and Analysis, the
Summary Compensation Table and the related tables, notes, and the narrative in
this Proxy Statement.
Our executive compensation
program is intended to attract, motivate, and retain our named executive
officers who are leading the business initiatives that we believe are critical
to our future success. The executive compensation program consists of (i) base
salary which is generally targeted at the market median, (ii) an annual bonus
program with bonus payments tied to the achievement of one or more financial
performance goals which require significant effort to achieve, and (iii) annual
equity awards with a value on the date of the award that is generally targeted
at the market median, but which provide actual value that is reflective of the
Companys stock price at the time of grant. As a result of the
pay-for-performance orientation of our executive compensation program, a
significant percentage of our named executive officers target total direct
compensation is tied to the achievement of one or more annual financial goals
and increasing our stock price. As discussed in the Compensation Discussion and
Analysis below, the Leadership and Compensation Committee and the Board of
Directors believe that our executive compensation program directly links
executive compensation to our Companys performance and effectively aligns the
interests of our executive officers with those of our stockholders.
We urge our stockholders to
read the Compensation Discussion and Analysis which describes our executive
compensation program in detail, including our executive compensation philosophy
and the Fiscal 2016 compensation of our named executive officers. Following are
the highlights of our Fiscal 2016 executive compensation program:
●
|
At the Companys 2015 Annual Meeting of
Stockholders, approximately 97% of the vote cast on the non-binding
advisory vote on our executive compensation program supported the
compensation of our named executive officers. In light of this result, and
after careful consideration by the Leadership and Compensation Committee
of our Board of Directors, we made no significant changes to our executive
compensation program in Fiscal 2016.
|
●
|
Ms. Breard, our Senior Vice President and Chief
Financial Officer voluntarily resigned to pursue an opportunity outside
the Company. Mr. Willis served as the Interim Senior Vice President and
Chief Financial Officer for the remainder of Fiscal 2016. Effective April
15, 2016, Mr. Fuad Ahmad joined the Company as Senior Vice President and
Chief Financial Officer.
|
●
|
The Company did not achieve the operating
income performance targets that had been established for purposes of
funding our annual bonus program. Therefore, the bonus pool was not funded
and no bonuses were allocated in Fiscal 2016.
|
●
|
Since Fiscal 2014 and including in Fiscal 2016,
the Company moved away from granting only time-based restricted stock
units toward a mix of time-based restricted stock units and
performance-based restricted stock units for the CEO. The
performance-based equity plan was designed to only award shares if the
Company met the corporate operating income and exceeded the specified
revenue target, and otherwise no shares would be earned if Companys
performance falls short of the defined performance measure. Based on
actual Fiscal 2016 results, the performance was not met and Mr. Gacek did
not earn any portion of his Fiscal 2016 performance-based
awards.
|
●
|
In Fiscal 2015 as well as Fiscal 2016, the
Company moved away from granting only time-based restricted stock units
toward a mix of time-based restricted stock units and performance-based
restricted stock units for our remaining executive officers. 40% of the
total awards granted to the remaining executive officers were
performance-based. Based on actual Fiscal 2016 results, executive officers
did not earn any of their performance-based equity
awards.
|
30
Table of Contents
●
|
In Fiscal 2016, the Company moved from a
three-year vesting schedule to four-year vesting schedule for the
time-based restricted stock units. The performance-based restricted stock
units remained on the three-year vesting schedule.
|
●
|
Except for a nominal financial counseling and
tax return preparation benefit, we do not provide any executive
perquisites or other personal benefits to our executive officers.
|
We believe that the
information provided above and within the Compensation Discussion and Analysis,
the compensation tables and the narrative discussion following the compensation
tables of this Proxy Statement demonstrate that our executive compensation
program is designed appropriately, is performance-based and is working to ensure
that the interests of our named executive officers are aligned with the
interests of our stockholders to support long-term value creation.
The advisory vote to
approve the compensation of our named executive officers occurs annually and the
next advisory vote is therefore expected to occur at the Next Annual Meeting.
Required Vote
The adoption of a
resolution approving, on an advisory basis, the compensation of our named
executive officers, requires the affirmative vote of a majority of the votes
present in person or represented by proxy and entitled to vote on the
proposal.
While this advisory vote to
approve the compensation of our named executive officers is not binding on the
Company, the Leadership and Compensation Committee or our Board of Directors, it
will provide valuable information to us regarding stockholder sentiment about
our executive compensation philosophy, policies and practices, which the
Leadership and Compensation Committee will consider when determining executive
compensation for the remainder of the current fiscal year and beyond.
THE BOARD RECOMMENDS A
VOTE FOR THE FOLLOWING RESOLUTION AT THE ANNUAL MEETING:
RESOLVED, that the
Companys stockholders approve, on an advisory basis, the compensation of the
named executive officers, as disclosed in the Companys Proxy Statement for the
Annual Meeting of Stockholders pursuant to the compensation disclosure rules of
the Securities and Exchange Commission, including the Compensation Discussion
and Analysis, the Summary Compensation table and the supporting tabular and
narrative disclosure on executive compensation.
31
Table of Contents
PROPOSAL FOUR
ADVISORY VOTE ON
FREQUENCY OF FUTURE ADVISORY VOTES ON
NAMED EXECUTIVE
COMPENSATION
As described in Proposal
Three above, our stockholders are being provided the opportunity to cast an
advisory vote on the fiscal 2016 compensation of our named executive officers
(commonly known as a Say-on-Pay vote).
Every six years, we are
required to conduct a non-binding shareholder advisory vote on the frequency of
future Say-on-Pay votes. At our 2011 Annual Meeting of Shareholders, our
shareholders cast the highest number of votes for voting on an annual basis,
compared to voting every two years or three years. In response to the expressed
opinion of our stockholders and other factors considered by our Board, we have
held such Say-on-Pay votes on an annual basis since 2011. As approximately six
years have passed, this Proposal Four provides our stockholders with a second
opportunity at the Annual Meeting to cast a non-binding advisory vote on how
often we should include a Say-on-Pay vote in its proxy materials for future
annual shareholder meetings. Under this Proposal Four, shareholders may vote to
have the Say-on-Pay vote every year, every two years or every three years.
The Board believes that
continuing to conduct Say-on-Pay votes every year (as opposed to every two years
or three years) is appropriate for, and in the best interests of, Quantum and
its stockholders, in order to continue providing shareholders with a frequent
opportunity to give immediate and direct feedback on our executive compensation
programs.
Required Vote
The option of one year, two
years or three years that receives the highest number of votes cast by
shareholders will be the frequency of future advisory votes on executive
compensation that has been selected by our shareholders. Abstentions and broker
non-votes will have no effect on the outcome of the vote.
As an advisory vote, this
proposal is nonbinding. Although the vote is nonbinding, the Board and the
Compensation Leadership and Compensation Committee value the opinions of our
stockholders and will consider the outcome of the vote when setting the
frequency of future advisory votes on executive compensation.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR EVERY 1 YEAR FOR THE ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON NAMED EXECUTIVE COMPENSATION
32
Table of Contents
PROPOSAL FIVE
APPROVAL OF AN AMENDMENT
TO THE EMPLOYEE STOCK PURCHASE PLAN
We are asking stockholders
to approve an amendment to the Employee Stock Purchase Plan (the ESPP) to
increase the number of shares made available for issuance under the ESPP by 6.5
million so that we may continue to use the ESPP to assist us in recruiting,
retaining and motivating qualified personnel who help us achieve our business
goals, including creating long-term value for stockholders. Our ESPP allows
eligible employees to purchase shares of the Companys common stock (Shares)
at a price equal to 85% of the lower of the closing price of our common stock on
the NYSE on either the opening or closing date of the respective offering
period.
The Leadership and
Compensation Committee of the Board of Directors (the Committee) has approved
the amendment to the ESPP, subject to the approval of our stockholders at the
upcoming annual meeting (Annual Meeting). The ESPP was last approved by our
stockholders at the 2014 annual meeting. Since the 2014 annual meeting, the ESPP
has not been amended in any other material way except for the proposed increase
in the number of shares available for issuance pursuant to the ESPP that is
being submitted to shareholders at the Annual Meeting. If the amendment to the
ESPP is not approved by stockholders, the ESPP will continue without any
increase to the number of shares made available for issuance under the ESPP.
However, in that case, it is likely that the shares reserved for issuance under
the ESPP may be insufficient for participants to continue to purchase shares
under the ESPP and it will be more difficult for us to meet our goals of
recruiting, retaining and motivating our employees.
●
|
As of January 31,
2017, 63,642,551 Shares have been issued since the adoption of the ESPP
and 697,050 Shares remained available for issuance. Assuming approval of
the amendment to the ESPP at the Annual Meeting to increase Shares by 6.5
million, the total number of Shares available to be issued under the ESPP
would be 7,197,050 Shares.
|
●
|
In determining to
recommend that an additional 6.5 million Shares be added to the ESPP, the
Committee considered the number of Shares purchased under the ESPP in the
past three years. The number of Shares purchased under our ESPP in each of
fiscal years 2014, 2015 and 2016, was 3,220,091, 2,789,866, and 3,272,792,
respectively.
|
●
|
Over those three
fiscal years, the Companys total (not annual) dilution from grants under
the Plan was a total 3.5%. Dilution for this purpose represents the
number of Shares purchased under the ESPP during those three years, as a
percentage of the total outstanding Shares as of March 31, 2016.
|
●
|
The actual number of
Shares that will be purchased under the ESPP in any year cannot be
predicted with certainty and will depend on a number of factors including,
for example, the number of participants, each participants contribution
rate, and our stock price.
|
●
|
Based on recent
usage, we currently expect that the increased Share reserve would meet the
Companys anticipated needs under the ESPP for a period of approximately 2
years.
|
●
|
Without stockholder
approval of this amendment, we believe our ability to attract and retain
the individuals necessary to increase long-term stockholder value will be
limited. We believe that the approval of the amendment to the ESPP is
important to our continued success. If stockholders do not approve an
increase in the number of Shares reserved for issuance under the ESPP, the
ESPPs goals of recruiting, retaining and motivating talented employees
will be more difficult to meet.
|
Description of the ESPP
The following paragraphs
provide a summary of the principal features of the ESPP and its operation.
However, this summary is not a complete description of all of the provision of
the ESPP, and is qualified in its entirety by the specific language of the ESPP.
A copy of the amendment to the ESPP is provided as Exhibit A to this Proxy
Statement.
Purpose
The purpose of the ESPP is
to provide eligible employees of the Company and its participating affiliates
with the opportunity to purchase Shares through payroll deductions or, if
payroll deductions are not permitted under local laws, through other means as
specified by the Committee. The ESPP is intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended
(Section 423). In addition, the ESPP authorizes the grant of options that do
not qualify under Section 423 pursuant to rules, procedures or sub-plans adopted
by the Companys Board of Directors that are designed to achieve desired tax or
other objectives.
33
Table of Contents
Eligibility to
Participate
Most employees of the
Company and its participating affiliates are eligible to participate in the
ESPP. However, an employee is not eligible if he or she has the right to acquire
five percent (5%) or more of the voting stock of the Company or of any
subsidiary of the Company. Also, the Committee has discretion to exclude
employees who normally are scheduled to work less than or equal to twenty hours
per week or five months per calendar year, have worked for the Company for less
than two years, or are officers or other highly compensated employees, provided
that the exclusion of employees in such categories is not prohibited under
applicable local law. As of March 31, 2016, approximately 1,139 employees were
eligible to participate in the ESPP.
Administration,
Amendment and Termination
The Committee administers
the ESPP. The members of the Committee serve at the pleasure of the Board.
Subject to the terms of the ESPP, the Committee has all discretion and authority
necessary or appropriate to control and manage the operation and administration
of the ESPP. The Committee also may establish a waiting period (not to exceed
two years) before new employees may become eligible for the ESPP. The Committee
may make whatever rules, interpretations, and computations, and take any other
actions to administer the ESPP that it considers appropriate to promote the
Companys best interests, and to ensure that the ESPP remains qualified under
Section 423 of the Internal Revenue Code. The Committee may delegate one or more
of the ministerial duties in the administration of the ESPP. All decisions of
the Committee are conclusive and binding on all persons and will be given the
maximum deference permitted by law.
The Committee or the Board
of Directors may amend or terminate the ESPP at any time and for any reason.
However, as required by Section 423 of the Internal Revenue Code, certain
material amendments must be approved by the Companys stockholders.
Number of Shares of
Common Stock Available under the ESPP
As of January 31, 2017, a
maximum of 64,339,601 Shares have been approved for issuance pursuant to the
ESPP, of which only 697,050 Shares remain available to be issued in the future.
If stockholders approve the amendment to the ESPP, the number of Shares issuable
under the ESPP would be increased by 6,500,000 Shares, bringing the total that
may be issued under the ESPP to 70,839,601 Shares, of which 7,197,050 Shares
would be available to be issued in the future. Shares sold under the ESPP may be
newly issued shares or treasury shares. In the event of any stock split, stock
dividend or other change in the capital structure of the Company that affects
shares of the Companys common stock, appropriate adjustments will be made in
the number, class and purchase price of the Shares available for purchase under
the ESPP. As of January 31, 2017, the closing price of our common stock on the
NYSE was $0.89 per share.
Enrollment and
Contributions
Eligible employees
voluntarily elect whether or not to enroll in the ESPP. Employees who join the
ESPP participate during offering periods of six months. Employees who have
joined the ESPP automatically are re-enrolled for additional rolling six month
offering periods; provided, however, that an employee may cancel his or her
enrollment at any time (subject to ESPP rules).
Employees contribute to the
ESPP through payroll deductions or, if payroll withholding is not permitted
under local laws, through such other means as specified by the Committee.
Participating employees generally may contribute up to 10% of their eligible
compensation through after-tax payroll deductions. From time to time, the
Committee may establish a different maximum permitted contribution percentage,
change the definition of eligible compensation, or change the length of the
offering periods (but in no event may such periods exceed nine months). An
employee later may increase or decrease his or her contribution percentage,
subject to ESPP rules.
34
Table of Contents
Purchase of Shares
On the last business day of
each six month offering period, the Company uses each participating employees
payroll deductions or contribution to purchase Shares for the employee. The
price of the Shares purchased will be determined under a formula established in
advance by the Committee. However, in no event may the purchase price be less
than 85% of the lower of (1) the stocks market value on the first day of the
offering period, or (2) the stock markets value on the purchase date. Market
value under the ESPP means the closing price of our common stock on the NYSE for
the day in question. In any single year, no employee may purchase more than
$25,000 of common stock (based on market value on the applicable enrollment
date(s)). Also, during any offering period, no more than 2,000,000 Shares may be
issued under the ESPP. The Committee also has discretion to set a limit on the
number of Shares that any participant may purchase on any purchase date (which
limit is 5,000 Shares unless otherwise determined by the Committee), to set a
lower (but not higher) limit on the dollar value of Shares that may be
purchased, and to change the dates on which Shares are purchased.
Termination of
Participation
Participation in the ESPP
generally terminates when a participating employees employment with the Company
or any of its designated subsidiaries that are eligible to participate in the
ESPP ceases for any reason, the employee withdraws from the ESPP, or the Company
terminates or amends the ESPP such that the employee no longer is eligible to
participate.
Number of Shares
Purchased by Certain Individuals and Groups
Given that the number of
Shares that may be purchased under the ESPP is determined, in part, by the
stocks market value on the first and last day of the offering period and given
that participation in the ESPP is voluntary on the part of employees, the actual
number of Shares that will be purchased by any individual in the future under
the ESPP is not determinable. For illustrative purposes only, the following
table sets forth (a) the number of Shares that were purchased during the
Companys 2016 fiscal year under the ESPP, and (b) the average per share
purchase price paid for such Shares.
Name
of Individual or Identity of Group and Position
|
Number of Shares
Purchased (#)
|
Weighted Average
Purchase Price Per
Share
($)
|
Jon W.
Gacek
President and Chief Executive Officer
|
|
|
Christopher S. Willis
Interim Senior Vice President and
Chief Financial Officer
|
10,000
|
$0.69
|
William
C. Britts
Senior Vice President, Worldwide Sales &
Marketing
|
10,000
|
$0.69
|
Robert
S. Clark
Senior Vice President, Product Operations
|
|
|
Geoffrey
G. Stedman
Senior Vice President, StorNext Solutions
|
10,000
|
$0.69
|
Linda M.
Breard
Former Senior Vice President and Chief Financial
Officer
|
|
|
All
current executive officers as a group
|
30,000
|
$0.69
|
All
non-employee directors as a group
(1)
|
|
|
All
other employees (including all current officers who are not executive
officers)
|
3,242,792
|
$0.67
|
____________________
(1)
Non-employee directors are not eligible to
participate in the ESPP.
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Tax Aspects
Based on managements
understanding of current U.S. federal income tax laws, the tax consequences for
U.S. taxpayers of the purchase of Shares under the ESPP are as follows.
An employee will not have
taxable income when the shares of our common stock are purchased for him or her,
but the employee generally will have taxable income when the employee sells or
otherwise disposes of stock purchased through the ESPP.
For shares that the
employee does not dispose of until more than two years after the applicable
enrollment date and more than one year after the purchase date (the holding
period), then the employee generally will recognize ordinary income in the year
of sale or disposition equal to the amount by which the fair market value of the
shares on the purchase date exceeded the purchase price paid for those shares,
and the Company will be entitled to an income tax deduction for the taxable year
in which such disposition occurs equal in amount to such excess. The amount of
this ordinary income will be added to the employees basis in the shares, and
any resulting gain or loss recognized upon the sale or disposition will be a
capital gain or loss. If the shares have been held for more than one year since
the date of purchase, the gain or loss will be long-term.
If the employee sells or
disposes of the purchased shares more than two years after the start date of the
offering period in which the shares were acquired and more than one year after
the purchase date of those shares, then the employee generally will recognize
ordinary income in the year of sale or disposition equal to the lesser of (i)
the amount by which the fair market value of the shares on the sale or
disposition date exceeded the purchase price paid for those shares, or (ii) 15
percent of the fair market value of the shares on the start date of that
offering period. Any additional gain upon the sale or disposition will be taxed
as a long-term capital gain. Alternatively, if the fair market value of the
shares on the date of the sale or disposition is less than the purchase price,
there will be no ordinary income and any loss recognized will be a long-term
capital loss. The Company will not be entitled to an income tax deduction with
respect to such disposition. The purchase date begins the period for determining
whether the gain (or loss) is short-term or long-term.
If the employee still owns
the purchased shares at the time of death, the lesser of (i) the amount by which
the fair market value of the shares on the date of death exceeds the purchase
price or (ii) 15 percent of the fair market value of the shares on the start
date of the offering period in which those shares were acquired will constitute
ordinary income in the year of death.
Required Vote
Approval of the ESPP
requires the affirmative vote of the holders of a majority of votes cast on the
proposal with abstentions counting as votes Against for this purpose. If
stockholders do not approve the ESPP, the ESPP will continue under its current
terms until it is terminated in accordance with the terms of the ESPP.
THE BOARD RECOMMENDS A
VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
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Table of Contents
PROPOSAL SIX
APPROVAL OF AN AMENDMENT
TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO
EFFECT A REVERSE STOCK SPLIT
Overview
The Board has adopted a
resolution approving, and recommending that the Companys stockholders adopt, an
amendment (the Amendment) to the Companys Amended and Restated Certificate of
Incorporation which would effect a reverse stock split of its issued and
outstanding Common Stock at a ratio of not less than one-for-three (1:3) and not
more than one-for-eight (1:8), the exact reverse stock split ratio to be
determined by the Board and publicly announced prior to the filing of the
Amendment. The primary purpose of the reverse stock split is to raise the per
share trading price of the Companys Common Stock to enable the Company to
maintain the listing of its Common Stock on the New York Stock Exchange (the
NYSE). An increase in the Companys share price may also broaden the Companys
investor base as many institutional investors and mutual funds have rules
against purchasing a stock whose price is below a certain threshold.
If the Amendment is adopted
by the stockholders, the reverse stock split will be accomplished by the filing
with the Secretary of State of the State of Delaware of the Amendment that
contains the reverse stock split ratio determined by the Board to be in the best
interests of the Company and stockholders and publicly announced prior to the
filing of the Amendment, which determination shall be made within six months
from the date of the Annual Meeting.
Except for adjustments that
may result from the treatment of fractional shares as described below, each
stockholder will hold the same percentage of Common Stock outstanding
immediately following the reverse stock split as that stockholder held
immediately before the reverse stock split.
The form of the Amendment
to accomplish the reverse stock split, is attached to this Proxy Statement as
Exhibit B. The following discussion is qualified in its entirety by the full
text of the proposed Amendment, which is hereby incorporated by reference.
Purposes of the
Reverse Stock Split
The Boards primary
objective in proposing the reverse stock split is to raise the per share trading
price of the Common Stock to enable the Company to maintain the listing of its
Common Stock on the NYSE and to attract a broader investor base. On October 2,
2015, we received notification from the NYSE informing us that we were not in
compliance with the NYSE Listed Company Rule 802.01C (the NYSE Rule) because
the average closing price of our Common Stock, calculated over 30 consecutive
trading days, did not meet the minimum $1.00 per share requirement for continued
listing. Under the NYSE Rule, the Company can regain compliance if, during the
six-month period following receipt of the NYSE notice, on the last trading-day
of any calendar month, the Common Stock has a closing price per share and a 30
trading-day average closing price per share of at least $1.00. While we may
regain compliance before the date of the Annual Meeting, the Board believes that
effecting the reverse stock split will further ensure continued compliance with
the NYSE Rule. The Board believes that the increased market price of our Common
Stock expected as a result of the reverse stock split may improve marketability
and liquidity of our Common Stock and further encourage interest and trading in
our Common Stock.
For example, the Board
believes that some institutional investors and investment funds may be reluctant
to invest, and in some cases may be prohibited from investing, in lower-priced
stocks and that brokerage firms may be reluctant to recommend lower-priced
stocks to their clients. The reverse stock split could increase our market price
to a level that would be viewed more favorably by potential investors. Further,
brokerage commissions, as a percentage of the total transaction, tend to be
higher for lower-priced stocks. As a result, certain investors may also be
dissuaded from purchasing lower-priced stock. A higher stock price after the
reverse stock split may reduce this concern.
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Table of Contents
Board of Directors
Discretion to Implement Reverse Stock Split and Determine the
Ratio
If the Amendment effecting
the reverse stock split is adopted by the stockholders, an Amendment will become
effective, if at all, only upon a determination by the Board within six months
after the annual meeting of the reverse stock ratio to be used and that the
actions contemplated by the Amendment containing such reverse stock split ratio
are in the best interests of the Company and the stockholders. Notwithstanding
approval by the stockholders, the Board may, in its sole discretion, abandon the
proposed Amendment and determine not to effect any reverse stock split. If the
Board elects not to implement the reverse stock split at this time, stockholder
approval would again be required prior to implementing any subsequent reverse
stock split.
The ratio of the reverse
stock split, if approved and implemented, will be a ratio of not less than
one-for-three (1:3) and not more than one-for-eight (1:8), as determined by the
Board in its sole discretion. In determining the reverse stock split ratio, the
Board will consider numerous factors, including:
●
|
the historical and
projected performance of our Common Stock;
|
●
|
prevailing market
conditions;
|
●
|
general economic and
other related conditions prevailing in our industry and in the
marketplace;
|
●
|
our capitalization
(including the number of shares of Common Stock issued and
outstanding);
|
●
|
the prevailing
trading price for our Common Stock and the volume level thereof;
and
|
●
|
the potential
devaluation of our market capitalization as a result of the reverse stock
split.
|
Our purpose for requesting
authorization to implement the reverse stock split at a ratio to be determined
by the Board, as opposed to a ratio that is fixed in advance, is to give the
Board the flexibility to take into account then-current market conditions and
changes in the price of our Common Stock and to respond to any other
developments that may be relevant when considering the appropriate
ratio.
The Board will determine
the exact reverse stock split ratio within the stated range prior to filing the
Amendment with the Secretary of State of the State of Delaware and such reverse
stock split ratio will be publicly announced prior to such filing.
Certain Risks
Associated with Reverse Stock Split
A reverse stock split
could result in a significant devaluation of the Companys market capitalization
and the trading price of our Common Stock.
Although the Board expects that the reverse stock
split will result in an increase in the market price of the Common Stock, it
cannot assure you that the reverse stock split, if implemented, will increase
the market price of the Common Stock in proportion to the reduction in the
number of shares of the Common Stock outstanding or result in a permanent
increase in the market price. Accordingly, the total market capitalization of
the Company after the proposed reverse stock split may be lower than the total
market capitalization before the proposed reverse stock split and, in the
future, the market price of the Common Stock following the reverse stock split
may not exceed or remain higher than the market price prior to the proposed
reverse stock split.
The effect of the
reverse stock split upon the market price of our Common Stock cannot be
predicted with any certainty, and the history of similar reverse stock splits
for companies in similar circumstances to ours is varied.
The market price of the Common Stock is dependent
on many factors, including our business and financial performance, general
market conditions, prospects for future success and other factors detailed from
time to time in the reports we file with the SEC. If the reverse stock split is
implemented and the market price of our Common Stock declines, the percentage
decline as an absolute number and as a percentage of our overall market
capitalization may be greater than would occur in the absence of the reverse
stock split.
The reverse stock split
may result in some stockholders owning odd lots that may be more difficult to
sell or require greater transaction costs per share to sell.
The reverse stock split may result in some
stockholders owning odd lots of less than 100 shares of our Common Stock on a
post-split basis. These odd lots may be more difficult to sell, or require
greater transaction costs per share to sell, than shares in round lots of even
multiples of 100 shares.
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Table of Contents
The reverse stock split
may not generate additional investor interest.
While the Board believes that a higher stock
price may help generate investor interest, there can be no assurance that the
reverse stock split will result in a per share price that will attract
institutional investors or investment funds or that such share price will
satisfy the investing guidelines of institutional investors or investment funds.
As a result, the trading liquidity of our Common Stock may not necessarily
improve.
The reduced number of
shares of Common Stock resulting from a reverse stock split could adversely
affect the liquidity of our Common Stock.
Although the Board believes that the decrease in the number of shares of
the Common Stock outstanding as a consequence of the reverse stock split and the
anticipated increase in the market price of our Common Stock could encourage
interest in our Common Stock and possibly promote greater liquidity for our
stockholders, such liquidity could also be adversely affected by the reduced
number of shares outstanding after the reverse stock split.
Anticipated Effects
of Reverse Stock Split
Effect on Authorized and
Outstanding Shares
. Currently, we
are authorized to issue up to a total of one billion twenty million
(1,020,000,000) shares, of which one billion (1,000,000,000) shares are Common
Stock and twenty million (20,000,000) million shares are Preferred Stock. Upon
effectiveness of the reverse stock split, the number of authorized shares that
are not issued or outstanding will increase because the proposed amendment will
not reduce the number of authorized shares while it will reduce the number of
outstanding shares by one-third to one-eighth, depending on the exchange ratio
selected by our Board. As of the date of this proxy statement, we do not have
any current plans, agreements, understandings, arrangements or the like with
respect to the authorized shares that will become available for issuance after
the reverse stock split has been implemented. As of December 31, 2016, there
were 271,188,235 shares of Common Stock outstanding and no shares of Preferred
Stock outstanding. The following table illustrates the effects of the reverse
stock split at certain exchange ratios within the one-for-three (1:3) and
one-for-eight (1:8) range, without giving effect to any adjustments for
fractional shares of Common Stock, on our outstanding shares of Common Stock as
of December 31, 2016:
As of
December
31, 2016
|
|
Pre-Reverse
Split
|
|
Post-1-for-3 Reverse
Split
|
|
Post-1-for-8 Reverse
Split
|
Common Stock
|
|
271,188,235
|
|
90,396,078
|
|
33,898,529
|
Shares Reserved under 2012
|
|
|
|
|
|
|
Long
Term Incentive Plan
|
|
15,984,989
|
|
5,328,330
|
|
1,998,124
|
Shares Reserved under
|
|
|
|
|
|
|
Employee Stock Purchase Plan
|
|
697,050
|
|
232,350
|
|
87,131
|
Our Common Stock is
currently registered under Section 12(b) of the Exchange Act, and the Company is
subject to the periodic reporting and other requirements of the Exchange Act.
The proposed reverse stock split will not affect the registration of our Common
Stock under the Exchange Act. If the proposed reverse stock split is
implemented, we currently expect that the Common Stock will continue to be
traded on the NYSE under the symbol QTM, provided that we meet the continued
listing requirements (although the NYSE would likely add the letter D to the
end of the trading symbol for a period of about 20 trading days to indicate that
the reverse stock split has occurred).
Effect on Existing
Stockholders.
After the effective
date of the proposed reverse stock split, each stockholder will own a reduced
number of shares of Common Stock. However, the proposed reverse stock split will
affect all stockholders uniformly and will not affect any stockholders
percentage ownership interest in the Company (except to the extent that the
reverse split would result in any of the stockholders owning a fractional share
as described below). Proportionate voting rights and other rights and
preferences of the holders of Common Stock will not be affected by the proposed
reverse stock split (except to the extent that the reverse split would result in
any stockholders owning a fractional share as described below). For example, a
holder of 2% of the voting power of the outstanding shares of Common Stock
immediately prior to the reverse stock split would continue to hold
approximately 2% of the voting power of the outstanding shares of Common Stock
immediately after the reverse stock split. The number of stockholders of record
also will not be affected by the proposed reverse stock split (except to the
extent that the reverse split would result in any stockholders owning only a
fractional share as described below).
39
Table of Contents
Eff
ect
on Outstanding Stock Awards; Stock Plans.
The reverse stock split, when
implemented, will affect outstanding restricted stock awards, restricted stock units and options to purchase our
Common Stock. The proposed reverse stock split will also reduce the number of shares of Common Stock issuable under
the Companys 2012 Long Term Incentive Plan and Employee Stock Purchase Plan, as amended. The per share exercise price
of all outstanding option awards will be increased proportionately and the number of shares of Common Stock issuable upon
the exercise of all outstanding option awards and the vesting of all unvested restricted stock will be reduced
proportionately. These adjustments will result in approximately the same aggregate exercise price being required to be paid
for all outstanding option awards upon exercise, although the aggregate number of shares issuable upon exercise of such
option awards will be reduced proportionately following the reverse stock split.
Effect on the Company.
We expect our business and
operations to continue as they are currently being conducted and the reverse
stock split is not anticipated to have any effect upon the conduct of such
business. We expect to incur expenses of approximately $65,000 to $75,000 to
effect the reverse stock split.
Accounting
Consequences
The par value per share of
our Common Stock will remain unchanged at $0.01 per share after the reverse
stock split. As a result, on the effective date of the reverse split, the stated
capital on the Companys balance sheet attributable to our Common Stock will be
reduced proportionately from its present amount, and the additional paid in
capital account shall be credited with the amount by which the stated capital is
reduced. The per share Common Stock net income or loss and net book value will
be increased because there will be fewer shares of Common Stock outstanding. The
Company does not anticipate that any other accounting consequences would arise
as a result of the reverse stock split.
Treatment of
Fractional Shares
No fractional shares of
Common Stock will be issued in connection with the reverse stock split. Upon the
proposed Amendment becoming effective pursuant to the Delaware General
Corporation Law (the Effective Time), the aggregate of all fractional shares
otherwise issuable to the record holders of shares of Common Stock prior to the
Effective Time, as applicable, will be issued to the Companys exchange agent,
as agent, for the accounts of all record holders of such shares otherwise
entitled to have fractional shares issued to them. The sale of all fractional
interests will be effected by the exchange agent as soon as practicable after
the Effective Time on the basis of prevailing market prices of the Common Stock
at the time of sale. After such sale and upon the surrender of the certificates
representing Common Stock outstanding immediately prior to the Effective Time,
the exchange agent will pay to such holders of record their pro rata share of
the net proceeds derived from the sale of the fractional interests. No
transaction costs will be assessed to stockholders for the cash payment.
Stockholders will not be entitled to receive interest for the period of time
between the Effective Date and the date payment is made for fractional shares.
After the reverse stock
split, then current stockholders will have no further interest in the Company
with respect to fractional shares. Such stockholders will only be entitled to
receive the cash payment described above. Such cash payments may reduce the
number of post-split stockholders to the extent that there are stockholders
holding fewer than that number of pre-split shares within the exchange ratio
that is determined by the Board as described above; however, this is not the
purpose of the reverse stock split.
Stockholders should be
aware that under the escheat laws of the relevant jurisdictions, cash payments
not timely claimed after the effective date of the reverse stock split may be
required to be paid to designated agents for the relevant jurisdictions, without
interest.
40
Table of Contents
Effect on Registered
Certificated Shares
Some registered
stockholders hold their shares of Common Stock in certificate form or a
combination of certificate and book-entry form. If any of your shares of Common
Stock are held in certificate form, you will receive a letter of transmittal
from the Companys exchange agent as soon as practicable after the effective
date of the reverse stock split. The letter of transmittal will contain
instructions on how to surrender your certificate(s) representing your pre-split
shares to the exchange agent. Upon receipt of your properly completed and
executed letter of transmittal and your stock certificate(s), you will be issued
the appropriate number of shares either in certificate form or electronically in
book-entry form under the direct registration system. If you are entitled to a
payment in lieu of any fractional share interest, payment will be made as
described above under Treatment of Fractional Shares. No new stock
certificates or payments in lieu of fractional shares will be issued to a
stockholder until such stockholder has surrendered such stockholders
outstanding certificate(s) to the exchange agent.
Beginning on the effective
date of the reverse stock split, each certificate representing pre-reverse stock
split shares will be deemed for all corporate purposes to evidence ownership of
post-reverse stock split shares.
STOCKHOLDERS SHOULD NOT
DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES
UNTIL THEY ARE REQUESTED TO DO SO.
Effect on Registered
Book-Entry Holders
The Companys registered
stockholders may hold some or all of their shares electronically in book-entry
form under the direct registration system for securities. These stockholders
will not have stock certificates evidencing their ownership of our Common Stock.
They are, however, provided with a statement reflecting the number of shares
registered in their accounts.
●
|
If you hold shares in
a book-entry form, you do not need to take any action to receive your
post-split shares or your cash payment in lieu of any fractional share
interest, if applicable. If you are entitled to post-split shares, a
transaction statement will automatically be sent to your address of record
indicating the number of shares you hold.
|
●
|
If you are entitled
to a payment in lieu of any fractional share interest, a check will be
mailed to you at your registered address as soon as practicable after the
Companys exchange agent completes the aggregation and sale described
above in Treatment of Fractional Shares. By signing and cashing this
check, you will warrant that you owned the shares for which you receive a
cash payment.
|
Effect on
Non-registered Stockholders
Non-registered stockholders
holding Common Stock through a bank, broker or other nominee should note that
such banks, brokers or other nominees may have different procedures for
processing the consolidation than those that would be put in place by the
Company for registered stockholders, and their procedures may result, for
example, in differences in the precise cash amounts being paid by such nominees
in lieu of a fractional share. If you hold your shares with such a bank, broker
or other nominee and if you have questions in this regard, you are encouraged to
contact your nominee.
Certain Material U.S.
Federal Income Tax Consequences of the Reverse Stock Split
The following is a general
summary of certain U.S. federal income tax consequences of the reverse stock
split to our stockholders. This summary does not purport to be a complete
discussion of all of the possible U.S. federal income tax consequences of the
reverse stock split and is included for general information only. Further, it
does not address any state, local or foreign income or other tax consequences or
any U.S. federal non-income tax consequences. Also, it does not address the tax
consequences to stockholders that are subject to special tax rules, such as
banks, insurance companies, regulated investment companies, personal holding
companies, stockholders who are not U.S. Holders (defined below),
broker-dealers, tax-exempt entities, entities or arrangements treated as
partnerships or pass-through entities for U.S. federal income tax purposes and
partners and investors therein, stockholders subject to the alternative minimum
tax or net investment income tax provisions of the Internal Revenue Code of
1986, as amended (the Code), and stockholders who hold our Common Stock as
qualified small business stock. Other stockholders may also be subject to
special tax rules, including, but not limited to, stockholders that received
Common Stock as compensation for services or pursuant to the exercise of an
employee stock option, or stockholders who have held, or will hold, stock as
part of a straddle, hedging or conversion transaction for U.S. federal income
tax purposes. This summary also assumes that you are a U.S. Holder (defined
below) who has held, and will hold, shares of Common Stock as a capital asset,
as defined in the Code, i.e., generally, property held for investment. Finally,
the following discussion does not address the tax consequences of transactions
occurring prior to or after the reverse stock split (whether or not such
transactions are in connection with the reverse stock split), including, without
limitation, the exercise of options or rights to purchase Common Stock in
anticipation of the reverse stock split.
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Table of Contents
The tax treatment of a
stockholder may vary depending upon the particular facts and circumstances of
such stockholder. You should consult with your own tax advisor with respect to
the tax consequences of the reverse stock split. As used herein, the term U.S.
Holder means a stockholder that is, for U.S. federal income tax purposes: a
citizen or resident of the United States; a corporation or other entity treated
as a corporation for U.S. federal income tax purposes created or organized in or
under the laws of the United States or any state, including the District of
Columbia; an estate the income of which is subject to U.S. federal income tax
regardless of its source; or a trust that (i) is subject to the primary
supervision of a U.S. court and the control of one of more U.S. persons or (ii)
has a valid election in effect under applicable U.S. Treasury Regulations to be
treated as a U.S. person.
The following discussion is
based on the Code, applicable Treasury Regulations, judicial authority and
administrative rulings and practice, all as of the date hereof. The Companys
view regarding the tax consequences of the reverse stock split is not binding on
the Internal Revenue Service or the courts, and either could adopt a contrary
position. In addition, future legislative, judicial or administrative changes or
interpretations could adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences described herein. No
ruling from the Internal Revenue Service or opinion of counsel has been or will
be obtained in connection with the reverse stock split.
No gain or loss should be
recognized by a U.S. Holder upon such holders exchange of pre-reverse stock
split shares of Common Stock for post-reverse stock split shares of Common Stock
pursuant to the reverse stock split, except with respect to cash, if any,
received in lieu of fractional shares, as described below. The aggregate tax
basis of the post-reverse stock split shares received in the reverse stock split
will be the same as the holders aggregate tax basis in the pre-reverse stock
split shares exchanged therefor (excluding any amount allocable to a fractional
share for which cash is received). The holders holding period for the
post-reverse stock split shares will include the period during which the
stockholder held the pre-reverse stock split shares surrendered in the reverse
stock split.
In general, the receipt of
cash by a U.S. Holder in lieu of a fractional share of post-reverse stock split
Common Stock will result in a taxable gain or loss to such U.S. Holder for U.S.
federal income tax purposes. The amount of the taxable gain or loss to the U.S.
Holder will be determined based upon the difference between the amount of cash
received by such U.S. Holder and the amount of pre-reverse stock split basis
allocable to the fractional share. The gain or loss recognized will generally
constitute capital gain or loss and will constitute long-term capital gain or
loss if the U.S. Holders holding period is greater than one year as of the
effective date of the reverse stock split. Long-term capital gains of
non-corporate holders are, under certain circumstances, taxed at lower rates
than items of ordinary income. There are limitations on the deductibility of
capital losses under the Code.
Holders of shares of
Company Common Stock who owned at least five percent (by vote or value) of the
total outstanding shares of Company stock, or owned Company stock with a tax
basis of $1 million or more, are required to attach a statement to their tax
returns for the year in which the reverse stock split occurs that contains the
information set forth in Treasury Regulations Section 1.368-3(b), including the
fair market value and tax basis of the Company Common Stock subject to the
reverse stock split, as determined immediately before the reverse stock
split.
A U.S. Holder may be
subject to information reporting with respect to the receipt of cash in lieu of
a fractional share of post-reverse stock split Common Stock. U.S. Holders who
are subject to information reporting and who do not provide a correct taxpayer
identification number and other required information (generally by submitting a
properly completed IRS Form W-9, or, if appropriate, another withholding form)
may also be subject to backup withholding, currently at a rate of 28%, and may
be subject to additional penalties imposed by the Internal Revenue Service. Any
amount withheld under such rules is not an additional tax and may be refunded or
credited against your U.S. federal income tax liability, provided that the
required information is properly furnished in a timely manner to the Internal
Revenue Service.
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No Dissenters
Rights
The holders of shares of
Common Stock will have no dissenters rights of appraisal under Delaware law,
the Amended and Restated Certificate of Incorporation or the Bylaws with respect
to the proposed Amendment to accomplish the reverse stock split.
Approval
Required
The affirmative vote of a
majority of the shares of Common Stock of the Company outstanding and entitled
to vote thereon is required to adopt the Amendment to accomplish a reverse stock
split of our Common Stock. The effect of an abstention, broker non-vote or any
failure to vote is the same as that of a vote against the proposal.
THE BOARD RECOMMENDS
THAT YOU VOTE FOR ADOPTION OF THE AMENDMENT TO OUR AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANYS
COMMON STOCK.
43
Table of Contents
COMPENSATION DISCUSSION
AND ANALYSIS
This Compensation
Discussion and Analysis (CD&A) describes the overall philosophy, material
elements and actual compensation provided to the executive officers of the
Company who served as our principal executive officer and principal financial
officer during Fiscal 2016, as well as the three executive officers who were the
next most highly-compensated executive officers as of the end of Fiscal 2016.
Our named executive officers for Fiscal 2016 are:
●
|
Jon W. Gacek,
President and Chief Executive Officer (our CEO);
|
●
|
Christopher S.
Willis, Interim Senior Vice President and Chief Financial Officer (our
"CFO");
|
●
|
William C. Britts,
Senior Vice President, Worldwide Sales and Marketing;
|
●
|
Robert S. Clark,
Senior Vice President, Product Operations;
|
●
|
Geoffrey G. Stedman,
Senior Vice President, StorNext Solutions; and
|
●
|
Linda M. Breard,
Former Senior Vice President and Chief Financial Officer (our former
CFO);
|
Effective January 26, 2016,
Ms. Breard voluntarily resigned as Senior Vice President and Chief Financial
Officer to pursue another opportunity outside of our company. Mr. Willis, Vice
President, Financial Planning and Analysis, served as Interim Senior Vice
President and Chief Financial Officer for the rest of Fiscal 2016. Effective
April 15, 2016, Mr. Fuad Ahmad joined the Company as Senior Vice President and
Chief Financial Officer. Mr. Stedman was a newly named executive in Fiscal 2016.
Executive Summary -
Overview of Fiscal 2016
We are a leading expert in
scale-out storage, archive and data protection, providing solutions for
capturing, sharing, managing and preserving digital assets over the entire data
lifecycle. Our customers, ranging from small businesses to large/multi-national
enterprises, trust us to address their most demanding data workflow challenges.
Our end-to-end tiered storage solutions enable users to maximize the value of
their data by making it accessible whenever and wherever needed, retaining it
indefinitely and reducing total cost and complexity. We work closely with a
broad network of distributors, value-added resellers (VARs), direct marketing
resellers (DMRs), original equipment manufacturers (OEMs) and other
suppliers to meet customers evolving needs.
Business and Financial
Highlights for Fiscal 2016
Our goal for Fiscal 2016 is
to increase stockholder value by growing our scale-out storage revenue and
investing to drive future scale-out growth while also delivering on our
operating profit goals. We continued to focus on building our momentum in three
main broad categories of scale-out storage: media and entertainment,
intelligence and surveillance and technical applications. Outside of scale-out
storage, our strategy continued to include leveraging our technology leadership,
our extensive customer base and our channel and technology partnerships to
generate profits and cash from our offerings.
During Fiscal 2016, our
data protection revenues were impacted by overall weakness in general storage
market. We took a series of actions to reduce our cost structure without
impacting our scale-out revenue growth. During the third quarter of Fiscal 2016,
we added Xcellis
TM
workflow storage in our scale-out storage
portfolio, which is a high performance storage solution engineered to optimize
demanding workflows and accelerate time to insight. We also expanded Q-Cloud®
offerings with the launch of Q-Cloud Vault, a new service that enables users to
take advantage of secure, low-cost public cloud storage for long-term retention
of digital assets. We began offering LTO-7 to our tiered storage portfolio, more
than doubling the capacity over previous generations and enabling low-cost,
energy-efficient and secure storage for protecting and retaining data.
44
Table of Contents
Some of our financial
highlights in Fiscal 2016 included:
●
|
We had total revenue
of $476.0 million in Fiscal 2016, a $77.1 million decrease from Fiscal
2015, primarily due to decreased revenue from data protection tape
automation systems, disk backup systems, media and service, partially
offset by an increase in revenue from scale-out storage solutions.
|
●
|
Revenue from branded
scale-out storage solutions generally increased in Fiscal 2016 compared to
Fiscal 2015 in North America.
|
●
|
Our gross margin
percentage decreased 160 basis points from Fiscal 2015 to 42.7%* primarily
due to a combination of lower revenue and a decrease in material margin
related to changes in our overall revenue mix. Higher margin service
revenue decreased and lower margin products comprised a higher portion of
our product revenue. In addition, we are experiencing overall pricing
pressure in the storage market, which has resulted in increased
discounting.
|
●
|
Our operating
expenses increased $40.1 million, or 17.4%, from Fiscal 2015 as a result
of a $55.6 million goodwill impairment charge. The increase in operating
expense was offset by a decrease in compensation and benefits largely
attributable to recognition of a profit sharing bonus in Fiscal 2015 which
was not repeated in Fiscal 2016, a decrease in commission expense on lower
branded revenue and a decrease in intangible amortization expense due to
certain intangibles becoming fully amortized during Fiscal 2015.
|
●
|
We had a $76.1*
million net loss in Fiscal 2016 compared to a $17.1
*
million net income in Fiscal
2015, which included a gain of $13.6 million resulting from the sale of
our investment in a privately held company in Fiscal
2015.
|
●
|
We repaid $83.7
million remaining balance of our 3.50% convertible subordinated notes due
November 15, 2015 for $85.2 million, which included $1.1 million of
accrued interest. We used a combination of $68.9 million of proceeds from
our credit agreement with Wells Fargo and $16.3 million of cash to fund
the purchases and pay the accrued interest. In connection with the
purchases, we recorded a loss on debt extinguishment of $0.4 million
comprised of a loss of $0.3 million from the notes purchased and $0.1
million of unamortized debt issuance costs related to the purchased
notes.
|
____________________
*In connection with the
preparation of our condensed consolidated financial statements for the quarter
ended December 31, 2016, we identified an error related to the manner in which
we had previously recognized costs for certain third party maintenance
contracts. Specifically, we had historically expensed such costs in the period
the contracts were entered into rather than recognizing them ratably over the
contract period. The Company also revised the previously issued financial
statements to correct a known out of period reduction of costs of product
revenues of $0.3 million in the nine month period ended December 31, 2015. We
evaluated the errors and determined that the related impact was not material to
our results of operations or financial position for any prior annual or interim
periods. The results of the revision are reflected in the reported amounts for
gross margin percentages, net loss for Fiscal 2016, and net income for Fiscal
2015.
45
Table of Contents
Executive Compensation
Highlights for Fiscal 2016
We are committed to
responsible and effective executive compensation practices that aim to enhance
stockholder value. We seek to balance the need to compensate our executive
officers fairly and competitively based on their importance to the growth and
success of our business and their individual contributions with our objective of
ensuring that their compensation reflects Company performance that rewards for
both short-term and long-term financial success. Our executive compensation
program aims to (i) enhance stockholder value by designing appropriate
leadership and compensation programs to enable the successful execution of the
Companys corporate strategy and objectives, (ii) facilitate competitiveness by
attracting and retaining the best talent and (iii) promote meritocracy by
recognizing individual contributions. During Fiscal 2016 we took the following
actions with respect to the compensation of our named executive officers:
●
|
We reviewed the
salary of our executive officers in comparison to the market and the
performance of each executive. As a result of this review, we determined
not to increase Mr. Gaceks or Mr. Britts salaries, but provided
increases to both Ms. Breard and Mr. Clark of 3%-8% to reflect their
individual contributions for the prior fiscal year as well as to better
align their base salaries with the market for comparable executive
positions.
|
●
|
Ms. Breard, our
Senior Vice President and Chief Financial Officer voluntarily resigned to
pursue an opportunity outside the Company. Mr. Willis served as the
Interim Senior Vice President and Chief Financial Officer for the
remainder of Fiscal 2016. Effective April 15, 2016, Mr. Fuad Ahmad joined
the Company as Senior Vice President and Chief Financial
Officer.
|
●
|
The Company did not
achieve the operating income performance targets that had been established
for purposes of funding our annual bonus program, therefore the bonus pool
was not funded and no bonuses were allocated in Fiscal
2016.
|
●
|
Since Fiscal 2014 and
including in Fiscal 2016, the Company moved away from granting only
time-based restricted stock units toward a mix of time-based restricted
stock units and performance-based restricted stock units for the CEO. The
performance-based equity plan was designed to only award shares if the
Company met the corporate operating income and exceeded the specified
revenue targets, otherwise no shares would be earned if Companys
performance falls short of the defined performance measure. Based on
actual Fiscal 2016 results, the performance was not met and Mr. Gacek did
not earn any portion of his Fiscal 2016 performance-based
awards.
|
●
|
Since Fiscal 2015 and
including in Fiscal 2016, the Company moved away from granting only
time-based restricted stock units toward a mix of time-based restricted
stock units and performance-based restricted stock units for our remaining
executive officers. 40% of the total awards granted to the remaining
executive officers were performance-based. Based on actual Fiscal 2016
results, executive officers did not earn any of their performance-based
equity awards.
|
●
|
In Fiscal 2016, the
Company moved from a three-year vesting schedule to four-year vesting
schedule for the time-based restricted stock units. The performance stock
units remained on the three-year vesting schedule.
|
●
|
We continue to
maintain responsible compensation practices including having stock
ownership guidelines for our CEO, an anti-pledging/anti-hedging policy, no
tax gross-ups and no excessive executive
perquisites.
|
46
Table of Contents
Executive Compensation
Philosophy
Pay for Performance
Compensation Philosophy and Objectives
The Executive compensation
program is intended to encourage and reward the executives for significant
contributions to the Companys success and for the creation of stockholder
value. To that end, the Company has established and maintains a strong
pay-for-performance Executive compensation program. The Committee believes that
our executive compensation program should:
●
|
provide a strong link
between pay and performance on both an individual and Company level and
encourage and reward executives for significant contributions to the
Companys success;
|
●
|
ensure that the
interests of all executives are aligned with the success of the Company
and the interests of the Companys
stockholders;
|
●
|
promote the
achievement of the Company's short-term and long-term strategic
objectives;
|
●
|
provide compensation
opportunities that will attract, motivate and retain the most qualified
executive talent to accomplish these
objectives;
|
●
|
provide executives
with a total compensation package that strikes an appropriate balance
between fixed and variable pay and between short-term and long-term
incentives;
|
●
|
take into account
relevant economic and market considerations;
and
|
●
|
ensure that the total
compensation levels of executives are externally competitive and
internally consistent and fair.
|
Our executive compensation
program is designed to offer target cash and equity compensation opportunities
at market-competitive levels and to reward superior Company and individual
performance with above-market compensation. Company performance, as measured by
pre-established corporate performance metrics and share price, together with
individual performance, as measured through the Companys annual performance
evaluation process, greatly affect annual and long-term compensation levels. Actual annual executive compensation is expected to be, and will be, below
targeted market median levels if the Company and/or the executive officer do not
achieve the designated Company and individual performance objectives, as has
been the case in recent years, including Fiscal 2016. The Committee believes
that this program aligns the interests of our executive officers with those of
our stockholders in promoting the creation of long-term stockholder value.
Competitive
Positioning
Market competitiveness is
an important element of our executive compensation program. The Committee has
established that market competitiveness for this purpose generally means the
market median and has determined to generally target the market median with
respect to each component of our executive compensation program. In assessing
the market competitiveness of our executive compensation program, the individual
elements, as well as the aggregate total compensation of each executive officer
(which includes base salary, target annual bonus opportunity and annual equity
awards), are compared to the corresponding market median for executive officers
holding similar positions or who have similar levels of responsibility in
technology companies of similar size. Nevertheless, although our compensation
philosophy is to generally target the market median for competitiveness
purposes, the actual compensation paid to our executive officers may be above or
below the competitive market based on individual and Company performance.
As its sources of data for
identifying and establishing market median compensation levels, the Committee
utilizes applicable compensation data from the Companys Peer Group (as defined
and discussed below), as well as from the Radford Global Technology and Radford
Global Sales surveys (the Radford Surveys) of technology companies with annual
revenue between $500M and $999.9M (collectively, the Market Data). In the case
of our CEO, the Committee utilizes the data from our Peer Group for competitive
benchmarking purposes as the Committee believes this data, given the composition
of the Peer Group and the fact that each public company is required to disclose
the compensation of its CEO, is the best source of competitive CEO compensation.
In the case of our other executive officers, for Fiscal 2016, the Committee
referenced Peer Group data provided by our independent compensation consultant.
The positions of our executive officers for Fiscal 2016 were found to be
directly comparable to those found in our Peer Group specific to technology
companies that are comparable in size to the Company in terms of revenue.
47
Table of Contents
Peer
Group
The Committee has
established a Peer Group of companies that are reasonably comparable to the
Company in terms of industry and financial characteristics so as to provide
relevant compensation information to support compensation decision making. The
Committee reviews the Peer Group on an annual basis. For purposes of Fiscal
2016, the Committee established the following criteria for purposes of
conducting its annual review and update of the Peer Group:
●
|
Technology hardware
and equipment companies;
|
●
|
Inclusion of some
companies with a hardware/software mix or systems/software orientation
based on the Companys strategic business
direction;
|
●
|
Comparability to the
Company in terms of revenue (~0.5x - 2.0x) and market capitalization
(~0.5x - 5.0x); and
|
●
|
Other factors,
including, geography, revenue growth, profitability, valuation, number of
employees, and enterprise value.
|
In November 2014, the
Committee, with the assistance of the Company's independent compensation
consultant, Compensia, Inc. (Compensia), reviewed and updated its compensation
Peer Group. Based on the above criteria, Compensia recommended, and the
Committee approved, the following group of peer companies for Fiscal 2016 (the
Peer Group) (with annual revenue and market capitalization shown based on the
latest available public filings with the SEC at the time the Peer Group was
established):
Company
|
|
Annual
Revenue
($MM)
|
|
Market
Capitalization
($MM)
|
Black Box Corporation
|
|
$
|
970
|
|
$
|
365
|
Calix, Inc.
|
|
$
|
381
|
|
$
|
533
|
Checkpoint Systems, Inc.
|
|
$
|
688
|
|
$
|
571
|
Cray
Inc.
|
|
$
|
502
|
|
$
|
1,178
|
Datalink Corporation
|
|
$
|
612
|
|
$
|
280
|
Electronics for Imaging
|
|
$
|
758
|
|
$
|
2,093
|
Emulex
|
|
$
|
447
|
|
$
|
457
|
Extreme Networks
|
|
$
|
525
|
|
$
|
508
|
Harmonic Inc.
|
|
$
|
461
|
|
$
|
605
|
Imation Corp.
|
|
$
|
782
|
|
$
|
142
|
Integrated Device Technology, Inc.
|
|
$
|
493
|
|
$
|
2,429
|
Polycom
|
|
$
|
1,345
|
|
$
|
1,823
|
QLogic Corporation
|
|
$
|
467
|
|
$
|
796
|
Riverbed Technology
|
|
$
|
1,074
|
|
$
|
3,007
|
ShoreTel, Inc.
|
|
$
|
340
|
|
$
|
419
|
Silicon Graphics International Corp.
|
|
$
|
530
|
|
$
|
336
|
SuperMicro Computer
|
|
$
|
1,467
|
|
$
|
1,202
|
|
|
|
|
|
|
|
Median
|
|
$
|
530
|
|
$
|
571
|
Quantum (November 2014)
|
|
$
|
533
|
|
$
|
314
|
For Fiscal 2016, Fusion-io
was removed due to acquisition and was replaced by Cray Inc. whose revenue and
market capitalization fell within our established parameters. The Committee
concluded that the above Peer Group of 17 companies was sufficient and
representative in terms of number and size of companies for competitive
executive compensation purposes.
In October 2015, the
Committee approved additional changes for fiscal year 2017. Two peers (Emulex
and Riverbed Technology) have been removed because both companies were acquired
in 2015 and two additional peers (Polycom and Super Micro Computer) were removed
because their revenue size exceeded that of our established Peer Group
parameters. To ensure a large enough number of companies in the Peer Group, the
Committee approved five additional peers (Avid Technology, Barracuda Networks,
Infinera, Nimble Storage, and Sonus Networks) bringing the Peer Group total for
Fiscal 2017 to 18 companies. Avid Technology was formerly in the Peer Group
before being removed for Fiscal 2015 due to the potential of delisting.
48
Table of Contents
Executive Compensation
Process and Decision-Making
Role of the Leadership
and Compensation Committee and the Board of Directors
- The Committee oversees and approves all
compensation and benefit arrangements for our executive officers, other than for
our CEO. In the case of the compensation of our CEO, the independent members of
the Board of Directors, based on the recommendations of the Committee, review
and approve his compensation. A substantial portion of the Committees work
involves an annual review of our executive compensation program, including
determining total compensation levels for our executive officers and evaluating
Company and individual executive officer performance. The Committee considers a
variety of factors when determining our executive compensation program and total
compensation levels. These factors include the Companys financial performance
for the most recent fiscal year, the recommendations of our CEO for all
executive officers, other than for himself, the input of Compensia, and the
results of competitive studies and analyses prepared by Compensia and Company
management, the outcome of our annual say-on-pay vote, input we receive from
stockholders as well as the individual performance of each executive.
Role of Compensation
Consultant
- During Fiscal 2016,
the Committee consulted with Compensia on a range of issues relating to
executive compensation and engaged Compensia to review the results of executive
compensation studies and analyses conducted by Company management. Compensia
serves at the discretion of the Committee and provides services only to the
Committee. Compensia regularly meets with the Committee both with and without
management present. The Committee regularly reviews its advisers independence
status against the specific independence factors contained in the rules of the
Securities and Exchange Commission and the related New York Stock Exchange
corporate governance listing standards and has determined that no relationship
or conflict of interest exists that would preclude Compensia from independently
advising the Committee.
Role of
Management
- The Committee
reviews recommendations made by the CEO on various executive compensation
matters, including executive compensation program design, annual corporate
performance metrics, bonus funding target levels, and evaluations of corporate
and executive officer performance. Other members of the Companys management
team provide the Committee with the Market Data as well as data and information
relating to various executive compensation matters. In addition, our CEO makes
individual compensation recommendations to the Committee for our executive
officers, other than for himself. While the Committee considers all
recommendations made by the CEO, ultimate authority for all compensation
decisions regarding our executive officers, other than for our CEO, rests with
the Committee and, in the case of our CEO, rests with the independent members of
the Board of Directors. Certain members of the Companys executive management
team, including our CEO and CFO, attend Committee meetings and participate in
the Committees discussions and deliberations. However, these individuals are
not present when the Committee or the independent members of the Board of
Directors discusses and determines their compensation. At each meeting, the
Committee also may choose to meet in an executive session without members of
management present and may meet without any members of management present at any
time.
Say on
Pay
- At the Companys 2015
Annual Meeting of Stockholders, approximately 97% of the vote cast on the
non-binding advisory vote on our executive compensation program supported the
compensation of our named executive officers. In light of this voting result,
and after careful consideration by the Committee, we made no significant changes
to our executive compensation program in Fiscal 2016.
Performance Evaluation
Process
Our executive compensation
program is guided by and reflects a pay-for-performance philosophy. For Fiscal
2016, we followed our established and formal annual performance review and
evaluation process under which the individual performance of our executive
officers is reviewed by our CEO with the Committee. Each executive officer is
evaluated by our CEO based on demonstrated leadership skills, individual
contributions to the success of the Company during the fiscal year and results
against any pre-established annual performance objectives. Our CEO then prepares
performance evaluations for each of our executive officers detailing their
performance for the prior fiscal year. Upon the completion of the evaluation
process, typically in June, our CEO meets with the Committee to review and
discuss his evaluation of executive officer performance which is then taken into
account in connection with compensation decisions with respect to such
executives as described further below.
49
Table of Contents
Executive Compensation
Review and Approval Process
As part of the annual
performance evaluation process, the Committee evaluates the recommendations of
our CEO for our executive officers, including base salary adjustments, bonus
awards and equity awards. In making these recommendations, our CEO takes into
account the following factors:
●
|
The median
compensation levels from the Market Data for each element of direct
compensation (i.e., salary, bonus and equity awards) for each of our
executive officers;
|
●
|
The annual
performance of each executive officer based on our CEOs assessment of his
or her contributions to our overall performance, including the ability of
the executive officer to successfully lead his or her functional
organization and to work effectively across the entire organization;
|
●
|
The scope of each
executive officers role and the assumption of any additional duties and
responsibilities by the executive officer during the fiscal year;
|
●
|
Internal compensation
equity among our executive officers;
|
●
|
Our Company
performance against the performance goals and objectives established by
the Committee and the Board of Directors for the fiscal year; and
|
●
|
Our Company
performance for the fiscal year against the Peer Group.
|
In making his compensation
recommendations to the Committee, our CEO considers each of the above factors
and no single factor is determinative.
Through the performance
evaluation and executive compensation review process, the Committee reviews the
performance evaluations, discusses the individual performance of each executive
officer, reviews the compensation recommendations of our CEO and approves the
compensation for our executive officers.
CEO Performance
Evaluation
With respect to the
performance evaluation and compensation review process for our CEO, the
independent members of the Board of Directors conduct a review of our CEOs
performance against his objectives for the fiscal year that were previously
reviewed and approved by the Committee and the independent members of the Board.
The CEO generally provides a summary of his results against objectives and the
Committee is also provided with data regarding the Companys performance as
compared to the performance of the Peer Group. The Committee and the independent
members of the Board of Directors then review the CEOs performance results
against his objectives and consider the CEOs compensation in light of that
performance evaluation.
Compensation of the
Chief Executive Officer
The Committee recognizes
that special scrutiny is applied to the compensation of the Chief Executive
Officer, as the most highly compensated of the named executive officers and the
primary leader of the company. The Committee believes that the total
compensation opportunity for Mr. Gacek, our Chief Executive Officer, was both
appropriate and performance-based in Fiscal 2016.
In Fiscal 2016, due to
factors including stock price and revenue declines, the total realizable
compensation actually paid to Mr. Gacek was less than his total target
compensation. For purposes of this CD&A, total realizable pay is defined as
the sum of the base salary, actual earned short-term cash incentive payments,
actual time-based equity awards granted, and actual equity awards that become
eligible to vest based on performance (as measured based on the value of such
awards as of March 31, 2016). Total target compensation is defined as the sum of
the base salary, target short-term cash incentives, and target equity awards
that could become eligible to vest based on service or performance (as measured
based on the grant date value of such awards) during the fiscal year.
50
Table of Contents
Of Mr. Gacek's total 2016
compensation opportunity, 50% is tied to both performance-based equity and
short-term cash incentives. Due to the company financial performance previously
described, Mr. Gacek did not receive any portion of his performance-based
compensation in Fiscal 2016. The following graph further illustrates that Mr.
Gaceks Fiscal 2016 Total Realizable Compensation was 32.4% of his Fiscal 2016
Total Target Compensation.
Elements of Compensation
Consistent with our
compensation philosophy and objectives, the Company provides a mix of
compensation elements that emphasizes annual cash incentives and long-term
equity incentives. Our executive compensation program consists of base salary,
an annual bonus opportunity, equity awards with both time and performance-based
vesting, minimal perquisites and certain other benefits including health and
welfare benefits and change of control and severance protection.
Base
Salary
Overview
Base salaries are set
competitively to attract and retain executive talent while compensating our
named executive officers for their day-to-day responsibilities. The base
salaries are typically reviewed annually in June and may be adjusted in
accordance with individual performance, market alignment, company performance,
promotions or an increased level of responsibility. As in previous years, the
Committee continues to generally position the base salaries of our Chief
Executive Officer and other executive officers at market median based on the
Peer Group data and other benchmark data from other compensation surveys.
Base Salary Adjustments
Made in Fiscal 2016
Named Executive
Officer
|
|
Title
|
|
Fiscal 2015 Salary
|
|
Increase
%
|
|
Fiscal 2016 Salary
|
Jon
W. Gacek
|
|
President & CEO
|
|
$600,000
|
|
%
|
|
$600,000
|
Christopher S. Willis
(1)
|
|
Interim SVP & CFO
|
|
$
|
|
%
|
|
$237,505
|
William C. Britts
|
|
SVP, WW Sales & Marketing
|
|
$370,004
|
|
%
|
|
$370,004
|
Robert S. Clark
|
|
SVP, Product Operations
|
|
$370,000
|
|
8.11%
|
|
$400,000
|
Geoffrey G. Stedman
(1)
|
|
SVP, StorNext Solutions
|
|
$
|
|
%
|
|
$295,000
|
Linda M. Breard
|
|
Former SVP & CFO
|
|
$360,000
|
|
3.61%
|
|
$373,000
|
(1)
Mr. Willis
and Mr. Stedman were not among the named executive officers in 2015.
51
Table of Contents
The Committee agreed that
Mr. Gaceks base salary was aligned with the median base salary of the Companys
Peer Group; therefore Mr. Gacek did not receive a base salary increase in Fiscal
2016.
The Committee evaluated the
recommendation of Mr. Gacek to increase base salaries for Mr. Clark and Ms.
Breard. The recommendation of Mr. Gacek to raise the base salaries of these
named executive officers was based on the following considerations: (i) this
increase brings the base salary of each of these named executive officers to a
level that is approximately at the market median for comparable executive
officer positions, (ii) is reflective of the role and contribution of each
within the Company, (iii) provides each with a competitive base salary that will
assist the Company in retaining executive talent, and (iv) maintains internal
equity for comparable executive positions. The Committee determined that a base
salary increase for Mr. Clark of 8.11% and Ms. Breard of 3.61% was appropriate.
Mr. Gacek reviewed the base salary for Mr. Britts in comparison to the Companys
Peer Group. Mr. Gacek recommended and the Committee agreed that Mr. Britts base
salary was aligned with the median base salary and therefore made no further
recommendations for a Fiscal 2016 adjustment.
For purposes of Fiscal 2016
compensation, Mr. Gacek reviewed the base salaries for Mr. Willis, prior to his
position as interim SVP & CFO, and Mr. Stedman based on a combination of
market data and end of year performance. The Committee agreed to the Fiscal 2016
salaries for Mr. Willis and Mr. Stedman as recommended by Mr. Gacek.
Annual Incentive
Plan
Overview of Annual
Incentive Plan
All employees of the
Company participate in the Companys annual incentive plan (the Company Bonus
Plan). The annual incentive target is set as a percentage of the employee's
base salary and earned only when pre-established corporate metrics are achieved.
As part of the Company Bonus Plan, our executive officers are eligible to earn
annual incentives through the Companys Executive Officer Incentive Plan (the
Executive Officer Incentive Plan) which was reapproved by our stockholders at
the Companys 2012 annual stockholders meeting. In addition to the Executive
Officer Incentive Plan and as of August 2013, in connection with his assumption
of the role as Senior Vice President, Worldwide Sales and Marketing, Mr. Britts
also participates in the Companys Sales Compensation Plan which provides him
with the opportunity to earn sales commissions based on the Companys revenue.
The purpose of Mr. Britts' participation in this plan is drive increased revenue
growth and directly linking a portion of Mr. Britts target total cash to the
Company's financial performance.
The Executive Officer
Incentive Plan is structured to support our strategic business plan and reflects
the Companys underlying business conditions. The Executive Officer Incentive
Plan is intended to provide competitive annual incentive compensation
opportunities to our executive officers while supporting our pay-for-performance
philosophy by directly tying annual cash incentive compensation levels to both
corporate and individual performance.
The Executive Officer
Incentive Plan provides for the funding of an annual incentive pool based upon
the achievement of one or more pre-established financial or operational
performance objectives. If the minimum level of performance is achieved under
the Company Bonus Plan, and the Company Bonus Plan pool is funded, the Executive
Officer Incentive Plan is also funded based on the proportion of the total
funded amount of the Company Bonus Plan allocated to the participants in the
Executive Officer Incentive Plan. Our executive officers are eligible to receive
discretionary incentive awards based on a combination of the level of Executive
Officer Incentive Plan funding, their individual target annual incentive award
opportunity and their individual performance for the fiscal year.
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Target Annual Incentive
Award Opportunity
Each executive officer has
a target annual incentive award opportunity under the Executive Officer
Incentive Plan that is expressed as a percentage of his or her base salary.
Target annual incentive awards are reviewed, set, and approved annually as part
of our executive compensation review. Annual incentive targets are compared to
market data including the Peer Group and set approximately at market median;
including with respect to the Fiscal 2016 target annual incentive award
opportunity for each named executive officer. In addition to the annual
incentive, Mr. Britts has a targeted sales commission opportunity approved by
the Committee and deemed to be market competitive.
Named Executive Officer
|
|
Title
|
|
Fiscal 2015 Target
|
|
Fiscal 2016 Target
|
Jon
W. Gacek
|
|
President & CEO
|
|
100%
|
|
100%
|
Christopher S. Willis
|
|
Interim SVP & CFO
|
|
%
|
|
35%
|
William C. Britts
(1)
|
|
SVP, WW Sales &
Marketing
|
|
50%
|
|
50%
|
Robert S. Clark
|
|
SVP, Product Operations
|
|
50%
|
|
50%
|
Geoffrey G. Stedman
|
|
SVP, StorNext Solutions
|
|
%
|
|
50%
|
Linda M. Breard
|
|
Former SVP & CFO
|
|
50%
|
|
50%
|
|
(1)
|
In
addition to the target annual incentive award opportunity under the
Executive Officer Incentive Plan, in August, 2013, the Committee approved
a $200,000 annual commission target for Mr. Britts (described further
below).
|
The Committee determined
that the target annual incentive award opportunities for all of the named
executive officers were generally aligned with the market median. The Fiscal
2016 incentive targets for Mr. Willis and Mr. Stedman as recommended by Mr.
Gacek and approved by the Committee were consistent with market median. Although
each named executive officer has an annual incentive target opportunity, actual
incentive awards for our executive officers under the Executive Officer
Incentive Plan may be above or below the established target annual incentive
award opportunities, and may be eliminated entirely, depending on actual Company
and individual performance, as determined by the Committee, in its discretion;
provided, however, that in no event may an award to any executive officer under
the Executive Officer Incentive Plan exceed 150% of the executive officers
annual incentive target opportunity.
Performance Metrics and
Targets Under Executive Officer Incentive Plan for Fiscal 2016
For Fiscal 2016, as in
Fiscal 2015, the Committee approved the use of one financial performance metric,
non-GAAP operating income for the Company Bonus Plan, including under the
Executive Officer Incentive Plan. While the plan has a single metric, the focus
on operating income in the bonus plan is balanced by a focus on revenue growth
in the long term incentive plan and is a critical measure of success for the
fiscal year. The Committee continues to believe that non-GAAP operating income
is an appropriate measure of our financial performance, as it reflects the level
of growth resulting from the successful execution of our annual operating plan
consistent with producing an appropriate return for our stockholders and
satisfying our obligations to our debt holders. (For purposes of the Company
Bonus Plan, non-GAAP operating income is defined as operating income reduced
by acquisition expenses, amortization of intangibles, Crossroads patent
litigation costs, goodwill impairment, outsourcing transition costs, proxy
contest and related costs, restructuring charges, share-based compensation
charges and Symform expenses, net.)
The Company Bonus Plan
provides for the funding of a single pool for all employees based upon the
achievement of pre-established non-GAAP operating income target performance
levels. The target performance levels for Fiscal 2016 were set at the beginning
of the fiscal year in conjunction with the approval of our annual operating
plan. The annual operating plan is considered and discussed extensively by our
Board and senior management before it is approved by the Board. The annual
non-GAAP operating income target performance level for Fiscal 2016 was set at
$38.0 million. Based on actual Fiscal 2015 non-GAAP operating income of $37.7
million, the Committee believed that the achievement of this target level of
operating income was consistent with the Companys continuing evolution in
becoming a market leader in scale-out storage, archive and data protection and
achievement of this target level would require a high level of performance by
our CEO, executive officers and all other employees.
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Table of Contents
Funding of Executive
Officer Incentive Plan
For Fiscal 2016, the
Committee agreed to fund the Company Bonus Plan based on the achievement of
certain levels of non-GAAP operating income performance. The Committee provided
that no funding for incentives would occur unless and until non-GAAP operating
income exceeded $47.0 million. If this target level of performance was achieved,
total funding under the Company Bonus Plan would equal $5.0 million. The
Committee also determined that as the Companys performance increased above the
operating income performance target level, the Company would fund the incentive
pool with approximately $0.45 of every $1.00 of non-GAAP operating income earned
above $47.0 million. Provided an incentive pool is funded for the Company Bonus
Plan, actual bonuses would be paid at 30% of target once the pool is funded at
$5.0 million and continue to increase on a linear basis as non-GAAP operating
income increases. While all bonuses are capped at 150% of target, this requires
significant over achievement of company performance. Our CEO approves incentive
awards for our executive officers (other than himself) under the Executive
Officer Incentive Plan, based on the total level of incentive funding, the
individual target annual incentive award opportunities and on his assessment of
their individual performance for the fiscal year. The Committee ultimately
approves all incentive awards to our executive officers under the Executive
Officer Incentive Plan and is not bound by the recommendations of our CEO. The
independent members of the Board of Directors determine the incentive award, if
any, payable to our CEO under the Executive Officer Incentive Plan from the
funded incentive pool.
Following the completion of
Fiscal 2016, the Committee compared our actual non-GAAP operating income results
to the annual target performance levels. Because our reported Fiscal 2016
non-GAAP operating income of $5.6 million did not exceed the minimum performance
levels necessary to begin funding the incentive pool, the Committee concluded
that an incentive pool would not be funded under the Company Bonus Plan for
Fiscal 2016. As a result, no annual incentives were paid to executives or any
other employees under Executive Officer Incentive Plan including the Company
Bonus Plan for Fiscal 2016.
Sales Compensation Plan
for Fiscal 2016
Beginning August 2013, when
assuming the role of Senior Vice President, Worldwide Sales and Marketing, Mr.
Britts participated in the Companys Sales Compensation Plan. The Sales
Compensation Plan is a standard commission plan in which all of the Companys
commissioned employees participate and which provides for commission payments
based upon sales of the Companys products and the attainment of specified
individual quotas. Commission payments for Mr. Britts are based on the sale of
the Companys branded products and branded service. Mr. Britts quota for Fiscal
2016 was $509.0 million. During Fiscal 2016, Mr. Britts earned total commissions
of $30,814 which was below his annual commission target of $200,000. Quota and
commission targets for Mr. Britts were based on weightings between various
strategic product groups and other revenue.
Clawback Policy
In April 2015, the
Committee approved and the Company adopted a clawback policy for cash
incentive/bonus compensation to executive officers if the Company is required to
provide a material restatement of its financial statements for any of the prior
three fiscal years due to fraud or misconduct by an executive officer. This
policy and per Item 402(b)(2)(viii) of Regulation S-K, entitles the Company to
recover excess compensation paid to an Executive Officer as determined by the
Board. This policy will be reviewed and modified, if necessary, once the SEC
adopts final rules implementing the requirement of Section 954 of the Dodd-Frank
Act.
Equity
Awards
Overview of Annual
Equity Award Program
Historically, the cash
compensation of our executive officers has been supplemented with equity awards
under the Companys long-term incentive plan that tie their overall compensation
to the performance of the Companys Common Stock over a period of time. Equity
awards are granted to our executive officers to (i) provide at-risk equity
compensation consistent with our pay-for-performance philosophy and (ii) align
the interests of our executive officers with those of our stockholders
by providing them with
significant equity stakes in the Company. The Committee determines, on a
discretionary basis, whether an equity award should be granted, the form of any
equity award and the number of shares of the Companys Common Stock subject to
the equity award.
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Table of Contents
Establishment of Stock
Pool for Annual Equity Awards
Each fiscal year, as part
of the development and approval of the Companys annual compensation program,
management recommends, and the Committee approves, a stock pool for the purpose
of granting annual equity awards to our executive officers and other eligible
employees. In establishing the size of this stock pool, the following factors
are considered:
●
|
The Market Data
regarding the size of competitive equity pools;
|
●
|
The Market Data
regarding the competitive size and fair value of equity awards provided to
similar executive officers and other employees;
|
●
|
The resulting impact
the stock pool would have on our annual and three-year average burn rates
(burn rate is defined as the number of shares of the Companys Common
Stock subject to stock options granted during the fiscal year plus the
number of shares of the Companys Common Stock subject to restricted stock
unit awards granted during the fiscal year, with the number of restricted
stock units multiplied by the appropriate ISS burn-rate multiplier,
divided by the average number of shares of the Companys Common Stock
outstanding during the fiscal year); and
|
●
|
The impact of the
stock pool on the remaining shares of stock available for grant under the
Companys stockholder-approved long-term incentive
plan.
|
Form of Annual Equity
Awards
For the past several years,
in an on-going effort to reduce the dilution, burn rate, overhang and financial
accounting compensation expense resulting from the use of equity awards, the
Committee has been granting equity awards in the form of restricted stock units.
Additionally, to support the Companys efforts to retain its top executive
talent, the Committee has favored granting restricted stock units with
service-based vesting because restricted stock units have some financial value
regardless of stock price performance and therefore serve as a valuable
retention vehicle.
In Fiscal 2014, the
Committee reviewed market and industry-wide best practices and determined that a
portion of the CEO equity awards should be more directly tied to Company
performance and achievement of specified performance targets. To strengthen this
alignment, more than 50% of the equity awards granted to Mr. Gacek were
performance-based restricted stock units that would vest only if defined
performance measures were achieved. In Fiscal 2015, the Committee expanded the
use of performance-based restricted stock units to all vice-presidents and
executive officers and this practice continued for Fiscal 2016. The Committee
believes this strategy of granting equity awards in the form of both
service-based and performance-based restricted stock units serves the purposes
of retaining executive officers and, consistent with our pay-for-performance
philosophy, incenting and rewarding them for performance, and that it also
aligns the interests of our executive officers with those of its stockholders.
Vesting
In Fiscal 2016, as a
further effort to reduce dilution, burn rate and overhang, and to align with
market best practices, the Committee agreed to move the vesting schedule of the
time-based RSUs from a three-year vesting schedule to a four-year vesting
duration. As a result, any time-based equity awards granted in Fiscal 2016 to
our CEO, named executive officers, or other equity recipients, other than our
Directors, are subject to vest in equal increments over four-years.
Performance-based equity awards continue to vest annually over a three-year
vesting schedule contingent upon the Company achieving pre-established
performance goals in Fiscal 2016.
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Table of Contents
Size/Value of Annual
Equity Awards
In determining the size of
the annual equity awards to be granted individually to our executive officers,
the Committee does not establish specific target equity award levels for them.
Instead, the Company develops annual equity award grant guidelines for the
individual grants. The equity award grant guidelines are developed based on the
number of shares of the Companys Common Stock that are available for the
granting of equity awards to our executive officers and incorporate a range that
permits variation in the individual grants based on different levels of
individual performance. Using these guidelines, the Committee reviews the
recommendations by the CEO regarding the size of the equity award to be granted
to each of our executive officers (other than with respect to his own award).
The recommendations regarding the size of the equity award for each individual
executive officer may vary within the established guidelines based on the
following factors:
●
|
Individual
performance of each executive officer for the prior fiscal
year;
|
●
|
Company financial
performance for the prior fiscal year;
|
●
|
The grant date fair
value of equity awards granted to executive officers in similar positions
in technology companies of similar size (the grant date fair value is
equal to the number of restricted stock unit awards multiplied by the
market price of the Companys Common Stock on the date of
grant;
|
●
|
Internal consistency
and comparability in terms of the size of the equity awards among the
executive officers; and
|
●
|
The number, type and
current retentive value of the outstanding equity awards held individually
by each of the executive officers.
|
Although our philosophy is
to generally target the market median equity award value for our annual equity
awards, based on the Market Data, when making equity awards to our executive
officers, the value of the resulting equity awards may be above or below the
market median award value depending upon the factors noted above as well as the
Companys stock price at the time the awards are granted.
The Committee reviews the
recommendations of our CEO, including the application of the aforementioned
factors to each of our executive officers and ultimately approves the equity
awards for the executive officers. The independent members of the Board of
Directors apply the same factors in determining the size and form of the equity
award for our CEO.
Fiscal 2016 Annual
Equity Awards
Using the factors
established for purposes of determining the size of individual equity awards, as
noted above, the Committee approved the following annual equity awards to the
named executive officers in Fiscal 2016 (with the number of performance-based
restricted stock units shown at target levels):
Executive Officer
|
|
Title
|
|
Restricted Stock Units
Awarded
|
|
Performance-based
Restricted Stock
Units
Granted
|
Jon
W. Gacek
|
|
President & CEO
|
|
445,000
|
|
500,000
|
Christopher S. Willis
|
|
Interim SVP & CFO
|
|
45,000
|
|
19,286
|
William C. Britts
|
|
SVP, WW Sales &
Marketing
|
|
160,000
|
|
106,667
|
Robert S. Clark
|
|
SVP, Product Operations
|
|
160,000
|
|
106,667
|
Geoffrey G. Stedman
|
|
SVP, StorNext Solutions
|
|
160,000
|
|
106,667
|
Linda M. Breard
|
|
Former SVP & CFO
|
|
100,000*
|
|
66,667*
|
*Ms. Breards fiscal 2016
equity awards were forfeited upon her departure from Quantum in January
2016.
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Table of Contents
Mr.
Gacek
In determining the equity
award for Mr. Gacek for Fiscal 2016, the Committee reviewed the median grant
date fair value of equity awards and mix of performance-based and
non-performance-based equity from the Companys Peer Group. Based on a
combination of factors including market data on equity mix for Peer Group CEOs,
the degree of difficulty in earning target awards, and the level of
equity compensation being considered, the Committee decided to grant Mr. Gacek
more equity in the form of performance-based RSUs to try and maintain the same
total equity value from Fiscal 2015 and in recognition of Mr. Gacek's strong
Fiscal 2015 results. To that end, the Committee decided that a 53/47 mix for
Fiscal 2016 consisting of 500,000 performance-based and 445,000 time-based RSUs
was appropriate. At the time the Committee approved the grants, the Companys
stock price was approximately $1.69. The equity grants had a total potential
value of approximately $1.6 million based on a stock price of $1.69 per share,
which was near the 50
th
percentile of the Peer Group for target
performance. For Fiscal 2016, Mr. Gacek could earn a minimum of 50% of the
target performance-based RSUs with a maximum award of 150% of target; however,
consistent with the Companys plan, overachievement of performance must have
been met before performance-based equity could become eligible to vest.
The service-based
restricted stock unit award is scheduled to vest in equal annual installments
over four years on each anniversary of the grant date of July 1, 2015, subject
to continued employment. The performance-based RSUs are earned based on the
achievement of two goals, (i) non-GAAP operating income of $38.0M and (ii) an
internal revenue target. Upon attainment of these goals, 50% of target
performance-based RSUs are granted. Scaling on a linear basis from 50%,
additional shares are granted as revenue performance increases until a maximum
of 150% of target performance-based RSUs have been granted. The revenue target,
an internal target under the Companys target operating model, was related to
individual product lines that the Company does not disclose publicly and
believes would be competitively harmful to disclose. For Mr. Gacek, 50% target
performance-based RSUs, or 250,000 shares grant upon the achievement of both
financial metrics with a maximum grant of 150% or 750,000 shares. Based on the
Companys financial results as of March 31, 2016, the company did not achieve
the corporate operating income necessary for the performance-based RSUs to be
awarded. Mr. Gacek did not receive any portion of his target performance-based
equity for Fiscal 2016.
Other Named Executive
Officers
The Committee reviewed
recommendations made by Mr. Gacek and approved equity awards during Fiscal 2016
of 100,000 service-based restricted stock units to Ms. Breard (all of which were
forfeited upon termination) and 160,000 service-based restricted stock units to
each of Mr. Britts, Mr. Clark and Mr. Stedman. Mr. Willis was granted 45,000
service-based restricted stock units prior to his role as Interim SVP & CFO.
The grant guidelines established by the Company for the executive officers for
Fiscal 2016 ranged from 100,000 to 160,000 restricted stock units which will
vest in equal installments over four-years on each anniversary of the grant date
of July 1, 2015, subject to continued employment. Additionally, Mr. Gacek
recommended and the Committee approved 66,667 performance-based restricted stock
units to Ms. Breard (all of which were forfeited upon termination) and 106,667
performance-based restricted stock units to each of Mr. Britts, Mr. Clark, and
Mr. Stedman. Mr. Willis was granted 19,286 performance-based restricted stock
units as part of the annual equity grant as recommended by Mr. Gacek. These
grants represent an equity mix of 60% service-based awards and 40%
performance-based awards. At the time the grant guidelines were established and
the equity awards approved, the Companys stock price was approximately $1.69.
Although the equity awards would have a combined value at grant ranging from
approximately $280,000 to $450,000 (for the named executive officers not in an
interim position), the realized value was expected to be substantially less as
the Company would need to significantly over-perform in order to earn awards at
target.
The Company performance
goals for all other executive officers are identical to that described for Mr.
Gacek. Based on the attainment of the financial goals all executive officers are
granted 50% of target performance-based RSUs with a maximum grant of 150% of
target. Based on the Companys financial results as of March 31, 2016, the
corporate operating income target was not achieved and therefore no
performance-based restricted stock units became eligible to vest.
Mr. Gacek provided the
Committee with target annual equity awards for the other named executive
officers, which took into account (i) the leadership position of each named
executive officer, (ii) the named executive officers level of individual
performance, (iii) the role of each named executive officer and the scope of
their responsibilities, (iv) the Companys financial performance for the prior
fiscal year, and (v) the current equity holdings of each named executive
officer.
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Table of Contents
The Committee reviewed the
recommendations from Mr. Gacek for the executive officers in combination with
market data that compared the size of the internal equity awards to that of
comparable positions in companies of similar size. While it is always the
intention to keep the target value of internal equity comparable to market and
Peer Group medians, the Committee took into consideration other factors
including anticipated stock price growth, the financial performance of the
Company for the prior year. The Committee noted that the realized value was
expected to be below market median as the Company would need to significantly
over-perform in Fiscal 2016 in order for the performance-based restricted stock
units to reach target levels. The service-based restricted stock units granted
will vest in equal annual installments over four years while any
performance-based restricted stock units that are earned by the named executive
officers will vest in equal annual installments over three years.
Timing & Pricing of
Equity Awards
We do not have an
established schedule for the granting of equity awards. Instead, the Committee
makes awards from time to time as necessary. The Committee has instituted a
policy that all equity awards will be approved either at a regularly scheduled
Committee meeting, with the annual schedule of such meetings established prior
to the beginning of the fiscal year, or by unanimous written consent on the
first day of each month, or as close as reasonably possible to the first day of
the month. The actual grant date for equity awards under this policy is the
later to occur of the first day of the month or the day the last member of the
Committee executes a written consent approving in writing the equity award
grant.
As required by the
Companys long-term incentive plan, the exercise price for any stock option
grants is set at not less than the closing market price of our Common Stock on
the date of grant or, if the date of grant falls on a weekend or holiday, the
closing price on the immediately preceding business day.
Perquisites and Other
Benefits
Perquisites
- We offer
Company-paid financial counseling and tax preparation services to our executive
officers and non-executive vice presidents. Our executive officers are entitled
to receive up to $6,000 in their initial year of participation, and an
additional $3,500 per year thereafter to reimburse them for the cost of such
services. The Committee considers this expense to be minimal and appropriate
given the level of the executive officers responsibilities. Other than this
perquisite and the non-qualified deferred compensation plan discussed below, we
do not provide any other perquisites or personal benefits to our executive
officers that are not available to all other full time employees.
Employee Stock Purchase
Plan
- We offer all employees,
including our executive officers, the ability to acquire shares of the Companys
Common Stock through a tax-qualified employee stock purchase plan. This plan
allows employees to purchase shares of the Companys Common Stock at a 15%
discount relative to the market price. The Committee believes that the ESPP is a
cost efficient method of encouraging employee stock ownership.
Health and Welfare
Benefits
- We offer health,
welfare, and other benefit programs to substantially all full-time employees. We
share the cost of health and welfare benefits with our employees, the cost of
which is dependent on the level of coverage an employee elects. The health and
welfare benefits offered to our executive officers are identical to those
offered to other full time employees.
Qualified Retirement
Benefits
- All U.S.-based
employees, including our executive officers, are eligible to participate in the
Companys tax-qualified 401(k) Savings Plan. Participants may defer cash
compensation up to statutory IRS limits and may receive a discretionary matching
Company contribution. The matching contribution for our executive officers is
reported in a footnote to the Summary Compensation Table. Participants direct
their own investments in the Companys tax-qualified 401(k) Savings Plan, which
does not include an opportunity to invest in shares of the Companys Common
Stock.
Non-Qualified Deferred
Compensation Plan
- We maintain a
non-qualified deferred compensation plan which allows select employees,
including our executive officers, to contribute a portion of their base salary
and annual bonus payouts to an irrevocable trust for the purpose of deferring
federal and state income taxes. Participants direct the deemed investment of
their deferred accounts among a pre-selected group of investment funds, which
does not include shares of the Companys Common Stock. The deemed investment
accounts mirror the investment options available under the Companys 401(k)
Savings Plan. Participants deferred accounts are credited with interest based
on their deemed investment selections. Participants may change their investment
elections on a daily basis, the same as they may under the Companys 401(k)
Savings Plan. We do not make employer or matching contributions to the deferred
accounts under the non-qualified deferred compensation plan. We offer the
non-qualified deferred compensation plan as a competitive practice to enable us
to attract and retain top talent. During Fiscal 2016, none of our executive
officers participated in the non-qualified deferred compensation
plan.
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Table of Contents
Change of Control
Severance Policy, Employment Agreements and Severance Agreements
Change of Control
Agreements
In the third quarter of
Fiscal Year 2016, we entered into amended and restated change of control
agreements with our executive officers, whereby in the event of a change of
control of the Company, which is defined to include, among other things, a
merger or sale of all or substantially all of the assets of the Company or a
change in the composition of the Board of Directors occurring within a 24 month
period as a result of which fewer than a majority of the directors are Incumbent
Directors (as defined in the Change of Control Agreement), and, within 12 months
of the change of control, there is an Involuntary Termination of such
executive officers employment, then the executive officer is entitled to
specified payments and benefits, subject to the executive officers execution of
a release of claims in favor of the Company. The agreements define an
Involuntary Termination to include, among other things, any termination of
employment of the executive officer by the Company without cause or a
significant reduction of the executive officers duties without his or her
express written consent. The change of control agreements do not provide for the
payment of any tax gross-up to offset any excise tax incurred as a result of any
payment under the agreements.
The change of control
agreements also provide that, in the event an executive officer brings an action
to enforce or effect his or her rights under the agreement, then Quantum will
advance all reasonable attorneys fees incurred by the executive officer in
connection with the action. The arbitrator in the action will determine whether
or not the executive officer is the prevailing party. If Quantum is the
prevailing party, the arbitrator will determine whether any portion of the
advanced payments will be required to be repaid by the executive officer to
Quantum.
The purpose of these change
of control agreements is to ensure that we will have the continued dedication of
our executive officers by providing such individuals with compensation
arrangements that are competitive with those of the executives of the companies
in our Peer Group, to provide sufficient incentive to the individuals to remain
employed with us, to enhance their financial security, as well as protect them
against unwarranted termination in the event of a change of control of the
Company. The Board of Directors believes that this policy serves the best
interests of stockholders because it eliminates managements self-interest
considerations during a potential change of control at a cost that is both
appropriate and reasonable.
In January 2015, each named
executive officer, except for Mr. Gacek, entered into an agreement with Quantum
providing that, in the event the executive officer brings an action to enforce
or effect his or her rights under a written agreement relating to his or her
employment then Quantum will advance all reasonable attorneys fees incurred by
the executive officer in connection with the action. These agreements were
superseded by the Q3 FY 2016 amended and restated change of control agreements
to the extent they relate to the subject matter of those agreements, but remain
in effect with respect to other employment-related agreements. Our board of
directors and the Committee believed that these agreements for the advanced
payments were appropriate in order to provide the executives with additional
assurances that the benefits intended to be provided under employment agreements
would not be unduly denied upon a qualifying event thereunder.
The payments to each of our
named executive officers in the event of a triggering event as of the last day
of our fiscal year 2016 are set forth below under Potential Payments Upon
Termination or Change of Control.
Employment Offer
Letters
Except for the offer
letters with Mr. Gacek and Mr. Britts described below, we do not have employment
agreements with any of our named executive officers. Each of our named executive
officers employment is at will and the named executive officer may be
terminated at any time and for any reason, with or without notice.
We entered into an offer
letter with Mr. Gacek, effective April 1, 2011, in connection with his
appointment as President and CEO. This offer letter replaces the offer letter we
entered into with Mr. Gacek at the time Mr. Gacek was originally hired by the
Company in 2006. This offer letter provides for severance benefits in the event
of an involuntary termination of employment without cause (as defined in Mr.
Gaceks change of control agreement) that is not associated with a change of
control of the Company, subject to his execution of a separation agreement and
general release.
59
Table of Contents
We entered into an offer
letter with Mr. Britts at the time of his initial employment with Quantum. This
offer letter
provides for certain
severance benefits in the event of a qualifying termination of employment that
is not associated with a change of control of the Company, subject to Mr.
Britts execution of a separation agreement and general release.
The purpose of the
severance benefits provided in these offer letters is to ensure that the Company
will have the continued dedication of Mr. Gacek and Mr. Britts by providing
sufficient incentive to them to remain with us and to enhance their financial
security. The Board of Directors believes that these offer letters serve the
best interests of stockholders because it enables us to secure the services of
Mr. Gacek and Mr. Britts at a cost that is both appropriate and reasonable.
Stock Ownership
Guidelines
We maintain stock ownership
guidelines for our CEO and for our non-employee directors. For our President and
CEO, these stock ownership guidelines require him to acquire and hold shares of
the Companys Common Stock with a value at least equal to three times his annual
base salary. For our non-employee directors, these stock ownership guidelines
require them to acquire and hold shares of the Companys Common Stock with a
value at least equal to three times the directors annual retainer. The
measurement date for compliance with the stock ownership guidelines is the last
day of each fiscal year. The stock ownership guidelines are required to be met
by the later of five years from (i) the date the guidelines were adopted or (ii)
the date an individual first becomes subject to the guidelines. As of the last
day of Fiscal 2016, Mr. Gacek, who was appointed our President and CEO on the
first day of Fiscal 2012, and Mr. Fuller, who was first appointed to the Board
of Directors during Fiscal 2015, had not yet met the applicable stock ownership
guidelines. However, in each case, these individuals have several years in which
to reach the ownership requirement. While the Committee encourages executive
share ownership for our other executive officers, we do not currently require
those executive officers to own shares of our stock with a minimum stated value.
Anti-Hedging and
Anti-Pledging Policy
We maintain an insider
trading policy which expressly prohibits buying Company shares on margin or
using or pledging owned shares as collateral for loans and engaging in
transactions in publicly-traded options, such as puts and calls, and other
derivative securities with respect to the Companys securities. This extends to
any hedging or similar transaction designed to decrease the risks associated
with holding Company securities. All of our executive officers are subject to
the Companys insider trading policy.
Tax and Accounting
Considerations
Section 162(m) of the
Internal Revenue Code
Section 162(m) of the
Internal Revenue Code (Section 162(m)) imposes limitations on the
deductibility for federal income tax purposes of remuneration in excess of $1
million paid to certain executive officers in a taxable year. Generally,
remuneration in excess of $1 million may only be deducted if it is
performance-based compensation within the meaning of the Internal Revenue
Code.
The Executive Officer
Incentive Plan allows the Committee to pay compensation that qualifies as
performance-based compensation under Section 162(m). While we currently seek to
preserve deductibility of compensation paid to our executive officers under
Section 162(m), flexibility to provide compensation arrangements necessary to
recruit and retain outstanding executives is maintained. In particular, full
preservation of tax deductibility may not be possible if non-performance-based
restricted stock units continue to play a role in our executive compensation
program since such restricted stock units are not deemed to be performance-based
under Section 162(m). With respect to our executive officers, no portion of
their compensation in Fiscal 2016 was determined to be non-deductible under
Section 162(m).
60
Table of Contents
Section 409A of the
Internal Revenue Code
Section 409A of the
Internal Revenue Code (Section 409A) imposes additional significant taxes in
the event that an executive officer, director or other service provider receives
deferred compensation that does not meet the requirements of Section 409A. Section 409A
applies to traditional nonqualified deferred compensation plans, certain
severance arrangements, and certain equity awards. As described above, we
maintain a non-qualified deferred compensation plan, have entered into severance
and change of control agreements with our executive officers and grant equity
awards. However, to assist in the prevention of adverse tax consequences under
Section 409A, we structure our equity awards in a manner intended to comply with
or be exempt from the applicable requirements of Section 409A. With respect to
our non-qualified deferred compensation plan and the severance and change of
control agreements, we have determined that the plan and such agreements are in
compliance with or are exempt from Section 409A.
Accounting
Considerations
We follow the applicable
accounting rules for our equity-based compensation. The applicable accounting
rules require companies to calculate the grant date fair value of equity-based
awards. This calculation is performed for accounting purposes and reported in
the compensation tables, even though the equity award recipients may never
realize any value from their awards. The applicable accounting rules also
require companies to recognize the compensation cost of their equity-based
awards in their income statements over the period that a recipient is required
to render service in exchange for the equity award. Compensation cost for
equity-based awards with performance conditions is recognized only when it is
probable that the performance conditions will be achieved.
REPORT OF THE LEADERSHIP
AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
1
We, the Leadership and
Compensation Committee of the Board of Directors, have reviewed and discussed
the Compensation Discussion and Analysis (CD&A) within this Proxy
Statement with the management of the Company. Based on such review and
discussion, we have recommended to the Board of Directors that the CD&A be
included as part of this Proxy Statement.
Submitted by the Leadership
and Compensation Committee of the Board of Directors:
|
MEMBERS OF THE
LEADERSHIP AND
COMPENSATION COMMITTEE
David A. Krall,
Chair
Louis DiNardo
David E.
Roberson
|
____________________
(1)
|
|
This report of the
Leadership and Compensation Committee of the Board of Directors shall not
be deemed soliciting material, nor is it to be deemed filed with the
SEC, nor incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
|
RISKS RELATED TO
COMPENSATION POLICIES AND PRACTICES
Annually, we conduct a risk
assessment of our compensation policies and practices for our employees,
including those relating to our executive compensation program, and discuss the
findings of this risk assessment with the Committee. The Committee directed
Compensia to conduct this assessment for us. Our risk assessment includes a
detailed analysis of our compensation programs in which employees at all levels
of the organization may participate, including our executive officers. We
believe that our compensation programs have been appropriately designed to
attract and retain talent and properly reward our employees. Generally, our
programs are designed to pay for performance and, thus, provide incentive-based
compensation that encourages appropriate risk-taking. These programs contain
various mitigating features, however, to ensure our employees, including our
executive officers, are not encouraged to take excessive or unnecessary risks in
managing our business. These features include:
●
|
Independent oversight of the compensation
programs by the Committee;
|
●
|
Discretion provided to the Committee to set
targets, monitor performance and determine final
payouts;
|
61
Table of Contents
●
|
Additional oversight of the compensation
programs by a broad-based group of functions within the Company, including
Human Resources, Finance and Legal and at multiple levels within the
Company;
|
●
|
A balanced mix of compensation programs that
focus our employees on achieving both short and long-term objectives, that
include both performance-based and non performance-based pay, and that
provide a balanced mix of cash and equity compensation;
|
●
|
An annual review by the Committee of target
compensation levels for our executive officers, including a review of the
alignment of executive compensation with performance;
|
●
|
Caps on the maximum funding under the Companys
annual bonus program, including the Executive Officer Incentive Plan and
the Quantum Incentive Plan;
|
●
|
An insider trading policy which expressly
prohibits buying Company shares on margin or using or pledging owned
shares as collateral for loans and engaging in transactions in
publicly-traded options, such as puts and calls, and other derivative
securities with respect to the Companys securities. This extends to any
hedging or similar transaction designed to decrease the risks associated
with holding Company securities;
|
●
|
Incentives focused on the use of reportable and
broad-based internal financial metrics (non-GAAP operating income and
revenue);
|
●
|
Pay positioning targeted at the market median
based on a reasonable competitive peer group and published
surveys;
|
●
|
Multi-year service-based vesting requirements
with respect to equity awards; and
|
●
|
Risk mitigators, including stock ownership
guidelines for the CEO and Board of Directors and stock pledging policies
are in place.
|
Based on the assessment
conducted for Fiscal 2016, we believe that our compensation programs are not
likely to create excessive risks that might adversely affect the Company.
62
Table of Contents
EXECUTIVE COMPENSATION
The following table lists
the compensation for our named executive officers for Fiscal 2016.
Summary Compensation
Table for Fiscal Years 2016, 2015 and 2014
Name
and
Principal Position
|
|
Year
|
|
Salary
(1)
|
|
Bonus
(2)
|
|
Stock
Awards
(3)
|
|
Option
Awards
|
|
Non-Equity
Incentive
Plan
Compensation
(4)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
(5)
|
|
All
Other
Compensation
(6)
|
|
Total
|
Jon W. Gacek
President and Chief Executive
Officer
|
|
2016
|
|
$
|
600,000
|
|
$
|
|
752,050
|
|
$
|
|
$
|
|
|
$
|
|
$
|
2,769
|
|
$
|
1,354,819
|
|
2015
|
|
$
|
600,000
|
|
$
|
|
1,224,375
|
|
$
|
|
$
|
301,210
|
|
$
|
|
$
|
11,031
|
|
$
|
2,136,616
|
|
2014
|
|
$
|
600,000
|
|
$
|
|
1,900,208
|
|
$
|
|
$
|
|
|
$
|
|
$
|
3,500
|
|
$
|
2,503,708
|
|
Christopher S. Willis
Interim Senior Vice President &
CFO
(7)
|
|
2016
|
|
$
|
234,813
|
|
$
|
|
76,050
|
|
$
|
|
$
|
|
|
$
|
|
$
|
1,575
|
|
$
|
312,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Britts
Senior Vice President, WW Sales and
Mktg
|
|
2016
|
|
$
|
370,004
|
|
$
|
|
270,400
|
|
$
|
|
$
|
30,814
|
|
$
|
|
$
|
4,474
|
|
$
|
675,692
|
|
2015
|
|
$
|
370,004
|
|
$
|
|
376,250
|
|
$
|
|
$
|
271,988
|
|
$
|
|
$
|
7,687
|
|
$
|
1,025,929
|
|
2014
|
|
$
|
364,619
|
|
$
|
|
312,750
|
|
$
|
|
$
|
62,000
|
|
$
|
|
$
|
8,412
|
|
$
|
747,781
|
|
Robert S. Clark
Senior Vice President, Product
Operations
|
|
2016
|
|
$
|
391,923
|
|
$
|
|
270,400
|
|
$
|
|
$
|
|
|
$
|
|
$
|
6,262
|
|
$
|
668,585
|
|
2015
|
|
$
|
365,962
|
|
$
|
|
376,250
|
|
$
|
|
$
|
92,873
|
|
$
|
|
$
|
12,769
|
|
$
|
847,854
|
|
2014
|
|
$
|
350,962
|
|
$
|
|
312,750
|
|
$
|
|
$
|
|
|
$
|
|
$
|
7,771
|
|
$
|
671,483
|
|
Geoffrey G. Stedman
Senior Vice President, StorNext
Solutions
(7)
|
|
2016
|
|
$
|
289,615
|
|
$
|
|
270,400
|
|
$
|
|
$
|
|
|
$
|
|
$
|
1,428
|
|
$
|
561,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda M. Breard
Former Senior Vice President &
CFO
|
|
2016
|
|
$
|
317,854
|
|
$
|
|
169,000
|
|
$
|
|
$
|
|
|
$
|
|
$
|
37,897
|
|
$
|
524,751
|
|
2015
|
|
$
|
357,308
|
|
$
|
|
301,000
|
|
$
|
|
$
|
90,363
|
|
$
|
|
$
|
8,000
|
|
$
|
756,671
|
|
2014
|
|
$
|
347,308
|
|
$
|
|
278,000
|
|
$
|
|
$
|
|
|
$
|
|
$
|
7,327
|
|
$
|
632,635
|
____________________
(1)
|
|
The amounts reported in the Salary column
for Fiscal 2016 represent the dollar value of the cash base salaries
earned in Fiscal 2016.
|
(2)
|
|
No bonuses were paid to our named executive
officers with respect to Fiscal 2016. Bonuses were last paid for
performance achieved in Fiscal 2015.
|
(3)
|
|
The amounts reported represent the fair
value, calculated in accordance with ASC Topic 718 for share-based payment
transactions and exclude the impact of estimated and actual forfeitures
related to service-based vesting conditions. The assumptions used in the
calculation of the value are disclosed under Note 9: Stock Incentive
Plans and Share-Based Compensation in the Companys Annual Report on Form
10-K filed with the SEC on June 3, 2016. The fair value of
performance-based restricted units is based on the actual shares earned
after the close of the fiscal year. For Fiscal 2016, company performance
was not met and no performance-based restricted units were earned for any
officers including Mr. Gacek.
|
(4)
|
|
The amounts reported in this column
represent performance-based cash incentive payments paid pursuant to
Quantums Executive Officer Incentive Plan and may include amounts earned
in a given fiscal year but not paid until the subsequent year. For Mr.
Britts, the total amount reported includes a total cash commission payment
of $30,814 under the Fiscal 2016 Sales Compensation Plan.
|
(5)
|
|
There is no Change in Pension Value and no
Non-Qualified Deferred Compensation Earnings reportable as the Company
does not maintain a defined benefit or actuarial pension plan nor was
there any compensation that was deferred.
|
63
Table of Contents
(6)
|
|
The amounts listed in
All Other Compensation column of the Summary Compensation Table for Fiscal
2016 consist of the following:
|
Name
|
|
401(k)
Matching
Contributions
(a)
|
|
Severance
Payments
|
|
Financial
Planning
(b)
|
|
Vacation Paid upon
Termination
(c)
|
|
Other
Comp
(d)
|
Jon W. Gacek
|
|
$2,769
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
Christopher S. Willis
|
|
$1,575
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
William C. Britts
|
|
$4,474
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
Robert S. Clark
|
|
$2,562
|
|
$0
|
|
$3,500
|
|
$0
|
|
$200
|
Geoffrey G. Stedman
|
|
$1,428
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
Linda M. Breard
|
|
$2,077
|
|
$0
|
|
$2,183
|
|
$33,437
|
|
$200
|
____________________
|
(a)
|
|
401(k) matching
contributions were made for the first quarter of FY2016 only
.
|
|
(b)
|
|
Payments include
reimbursement for financial counseling and tax preparation
services.
|
|
(c)
|
|
Payments include
accrued vacation time paid out upon termination.
|
|
(d)
|
|
Payments include $200
reimbursement for fitness center membership.
|
(7)
|
|
Mr. Willis and Mr. Stedman were not named
executive officers in fiscal years 2014 or
2015.
|
64
Table of Contents
Grants of Plan-Based
Awards for Fiscal Year 2016
The following table
presents information on plan-based awards granted to our named executive
officers during Fiscal 2016.
|
|
|
|
|
|
|
|
All
Other
Stock
Awards:
Number
of Shares
of
Stock
or Units
(#)
(3)
|
|
All Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
|
Exercise
or Base
Price
of
Option
Awards
($/Sh)
|
|
Grant
Date Fair
Value of
Stock
and
Option
Awards
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
(1)
|
|
Estimated Future Payouts Under
Equity Incentive Plan
Awards
(2)
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
(5)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
Jon W. Gacek
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
445,000
|
|
|
|
|
|
$
|
752,050
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
250,000
|
|
500,000
|
|
750,000
|
|
|
|
|
|
|
|
$
|
845,000
|
|
|
|
|
|
$
|
600,000
|
|
$
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher S. Willis
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
$
|
76,050
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
9,643
|
|
19,286
|
|
28,929
|
|
|
|
|
|
|
|
$
|
32,593
|
|
|
|
|
|
$
|
83,127
|
|
$
|
124,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William C. Britts
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000
|
|
|
|
|
|
$
|
270,400
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
53,334
|
|
106,667
|
|
160,000
|
|
|
|
|
|
|
|
$
|
180,267
|
|
|
|
|
|
$
|
185,002
|
|
$
|
277,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
200,000
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert S. Clark
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000
|
|
|
|
|
|
$
|
270,400
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
53,334
|
|
106,667
|
|
160,000
|
|
|
|
|
|
|
|
$
|
180,267
|
|
|
|
|
|
$
|
200,000
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey G. Stedman
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000
|
|
|
|
|
|
$
|
270,400
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
53,334
|
|
106,667
|
|
160,000
|
|
|
|
|
|
|
|
$
|
180,267
|
|
|
|
|
|
$
|
147,500
|
|
$
|
221,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda M. Breard
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
$
|
169,000
|
|
07/01/15
|
|
|
|
|
|
|
|
|
|
333,334
|
|
66,667
|
|
100,000
|
|
|
|
|
|
|
|
$
|
112,667
|
|
|
|
|
|
$
|
186,500
|
|
$
|
279,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)
|
|
The amounts reported reflect payout at
target and maximum with a cap of 150% of target.
|
(2)
|
|
Performance-based Restricted Stock Units are
earned only if the Company exceeds certain revenue and operating income
targets as of March 31, 2016. For Fiscal 2016, the Company had to have
achieved significant performance for the performance-based restricted
stock units to be granted at threshold, target or maximum levels resulting
in 50%, 100% or 150% awards respectively. Performance was not achieved for
Fiscal 2016 and no performance-based shares were earned for executives or
any other employees.
|
(3)
|
|
Restricted Stock Units will vest (based on
continued employment) in equal installments annually over four years on
each anniversary of the award's grant date.
|
(4)
|
|
The amounts reported were computed in
accordance with ASC 718, excluding the effect of estimated and actual
forfeitures. See Note 9: Stock Incentive Plans and Share-Based
Compensation in the Companys Annual Report on Form 10-K filed on June 3,
2016, regarding assumptions underlying the valuation of equity awards. For
performance-based restricted stock units, the report Grant Date Fair Value
of the shares is based on the value of the shares granted on July 1,
2015.
|
(5)
|
|
The Company's Executive Officer Incentive
Plan provides that no executive officer's actual award under the plan may,
for any period of three consecutive fiscal years, exceed $15 million.
These awards are subject to an annual payout cap of 150% of the executive
officer's annual bonus payment target.
|
(6)
|
|
Amount reflects sales commissions target
payments pursuant to the Fiscal Year 2016 Sales Compensation Plan based on
the sale of the Companys branded products and branded services. The
applicable quota for Fiscal 2016 was $509.0
million.
|
65
Table of Contents
Outstanding Equity
Awards at Fiscal Year End 2016
The following table
provides information with respect to outstanding stock options and restricted
stock unit awards held by our named executive officers as of March 31, 2016.
|
|
Option
Awards
|
|
Stock
Awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units of
Stock
That Have
Not
Vested
(#)
|
|
Market
Value of
Shares or
Units
of
Stock
That
Have Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units, or
Other
Rights
That
Have
Not Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units, or
Other
Rights
That
Have
Not Vested
($)
|
Jon W. Gacek
|
|
1,300,000
|
(1)
|
|
|
|
|
|
$2.52
|
|
4/1/2018
|
|
216,666
|
(3)
|
|
$
|
132,166
|
|
400,000
(6)
|
|
$
|
244,000
|
|
500,000
|
(2)
|
|
|
|
|
|
$0.98
|
|
7/1/2016
|
|
500,000
|
(4)
|
|
$
|
305,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
445,000
|
(10)
|
|
$
|
271,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,000
|
(5)
|
|
$
|
93,330
|
|
|
|
|
|
Christopher S. Willis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
(2)
|
|
|
|
|
|
$0.98
|
|
7/1/2016
|
|
16,666
|
(7)
|
|
$
|
10,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
(4)
|
|
$
|
20,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
(10)
|
|
$
|
27,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,371
|
(5)
|
|
$
|
2,666
|
|
|
|
|
|
William C. Britts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
(2)
|
|
|
|
|
|
$0.98
|
|
7/1/2016
|
|
75,000
|
(7)
|
|
$
|
45,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,666
|
(4)
|
|
$
|
101,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000
|
(10)
|
|
$
|
97,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,000
|
(5)
|
|
$
|
20,740
|
|
|
|
|
|
Robert S. Clark
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(8)
|
|
|
|
|
|
$2.59
|
|
4/1/2017
|
|
75,000
|
(7)
|
|
$
|
45,750
|
|
|
|
|
|
|
37,500
|
(2)
|
|
|
|
|
|
$0.98
|
|
7/1/2016
|
|
166,666
|
(4)
|
|
$
|
101,666
|
|
|
|
|
|
|
14,584
|
(9)
|
|
|
|
|
|
$0.77
|
|
4/1/2016
|
|
160,000
|
(10)
|
|
$
|
97,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,000
|
(5)
|
|
$
|
20,740
|
|
|
|
|
|
Geoffrey G. Stedman
|
|
|
|
|
|
|
|
|
|
|
|
|
83,000
|
(11)
|
|
$
|
50,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,000
|
(10)
|
|
$
|
97,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,000
|
(5)
|
|
$
|
20,740
|
|
|
|
|
|
Linda M. Breard
|
|
187,500
|
(2)
|
|
|
|
|
|
$0.98
|
|
4/28/2016
|
|
|
|
|
|
|
|
|
|
|
|
____________________
(1)
|
|
Granted 4/1/11; 25% vested on 4/1/12, and
remainder will vest 1/48th monthly, subject to continued
employment.
|
(2)
|
|
Granted 7/1/09; 25% vested on 7/1/10, 50%
vested on 7/1/11, 25% vested on 7/1/12.
|
(3)
|
|
Granted 9/1/13; vest annually over three
years beginning 9/1/13, subject to continued employment.
|
(4)
|
|
Granted on 7/1/14; vest annually over three
years beginning 7/1/14, subject to continued employment.
|
(5)
|
|
Granted on 7/1/14; Shares earned on 3/31/15
as performance condition threshold was satisfied. Vest annually over three
years beginning 7/1/14, subject to continued
employment.
|
66
Table of Contents
(6)
|
Granted on 9/1/13;
Vesting is dependent on Quantums common stock achieving certain 60-day
average stock price targets as of specified dates, which vest immediately
to two years after the specified dates, subject to continued employment.
200,000 shares canceled on each of 7/1/14 and 7/1/15 as performance
condition for first two performance periods had not been
satisfied.
|
(7)
|
Granted 7/1/13; vest
annually over three years beginning 7/1/13, subject to continued
employment.
|
(8)
|
Granted 4/1/10; 25%
vested on 4/1/11, and remainder will vest 1/48th monthly, subject to
continued employment.
|
(9)
|
Granted 4/1/09; 25%
vested on 3/1/10, and remainder will vest 1/48th monthly, subject to
continued employment.
|
(10)
|
Granted 7/1/15; vest
annually over four years beginning 7/1/15, subject to continued
employment.
|
(11)
|
Granted 4/1/14; vest
annually over three years beginning 4/1/14, subject to continued
employment.
|
Note: The table above uses
a price of $0.61 per share, the market price of the Companys Common Stock as of
March 31, 2016, to calculate the market value of shares or units that have not
vested.
Option Exercises and
Stock Vested in Fiscal 2016
The following table
provides information on stock option exercises and restricted stock and
restricted stock unit vesting for our named executive officers during Fiscal
2016.
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Shares
Acquired on
Exercise (#)
|
|
Value Realized
on
Exercise ($)
|
|
Number
of
Shares
Acquired on
Vesting (#)
|
|
Value Realized
on
Vesting ($)
(1)
|
|
Jon W. Gacek
|
|
|
|
|
|
543,167
|
|
$
|
917,952
|
|
Christopher S. Willis
|
|
|
|
|
|
48,853
|
|
$
|
82,562
|
|
William C. Britts
|
|
|
|
|
|
225,334
|
|
$
|
380,814
|
|
Robert S. Clark
|
|
|
|
|
|
242,000
|
|
$
|
408,980
|
|
Geoffrey G. Stedman
|
|
|
|
|
|
100,000
|
|
$
|
70,238
|
|
Linda M. Breard
|
|
|
|
|
|
196,934
|
|
$
|
332,818
|
____________________
(1)
|
The amount reported
is calculated by multiplying the number of shares that vested by the
market price of the underlying shares of the Companys Common Stock on the
vesting date.
|
Non-qualified Deferred
Compensation
The Companys Non-qualified
Deferred Compensation Plan is discussed under the section entitled Compensation
Discussion and Analysis - Perquisites and Other Benefits
-
Non-Qualified Deferred Compensation Plan. In Fiscal 2016, no named
executive officers elected to defer compensation under this plan, and no named
executive officer maintains a balance in this plan.
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE OF CONTROL
We have entered into change
of control agreements with our executive officers, whereby in the event of a
change of control of the Company, which is defined to include, among other
things, a merger or sale of all or substantially all of the assets of the
Company or a change in the composition of the Board of Directors occurring
within a 24 month period as a result of which fewer than a majority of the
directors are Incumbent Directors (as defined in the Change of Control
Agreement), and, within 12 months of the change of control, there is an
Involuntary Termination of such executive officers employment, then the
executive officer is entitled to specified payments and benefits, subject to the
executive officers execution of a release of claims in favor of the Company.
The agreements define an Involuntary Termination to include, among other
things, any termination of employment of the executive officer by the Company
without cause or a significant reduction of the executive officers duties
without his or her express written consent. The change of control agreements do
not provide for the payment of any tax gross-up to offset any excise tax
incurred as a result of any payment under the agreements.
67
Table of Contents
The benefits that would be
provided to Mr. Gacek, as President and CEO, in the event of both a change of
control of the Company and a qualifying termination of employment would be:
●
|
a lump sum payment
equal to 200% of his then established base compensation;
|
●
|
a lump sum payment
equal to 200% of his target annual bonus;
|
●
|
payment of COBRA
premiums for twelve (12) months; and
|
●
|
vesting of any
unvested equity-based compensation award then held by
him.
|
The benefits that would be
provided to our other executive officers (except for Mr. Willis who would
receive lump sum payments as set forth below equal to 100% instead of 150%) in
the event of both a change of control of the Company and a qualifying
termination of employment would be:
●
|
a lump sum payment
equal to 150% of the executive officers then established base
compensation;
|
●
|
a lump sum payment
equal to 150% of the executive officers target annual bonus;
|
●
|
payment of COBRA
premiums for twelve (12) months; and
|
●
|
vesting of any
unvested equity-based compensation award then held by the executive
officer.
|
Mr. Gaceks offer letter
provides for the lump sum payment of severance benefits equivalent to twelve
months of base salary and health benefits coverage for twelve months in the
event of an involuntary termination of employment without cause (as defined in
Mr. Gaceks change of control agreement) that is not associated with a change of
control of Quantum, subject to his execution of a separation agreement and
general release. Mr. Britts offer letter provides for the lump sum payment of
severance benefits of 52 weeks of base salary in the event of a qualifying
termination of employment that is not associated with a change of control of the
Company, subject to his execution of a separation agreement and general release.
68
Table of Contents
The following table
provides information concerning the estimated payments and benefits that would
be provided in the circumstances described above and under the agreements as
they existed on the last day of Fiscal 2016 for our named executive officers.
Payments and benefits are estimated assuming that the triggering event took
place on the last business day of Fiscal 2016 (March 31, 2016), outstanding
equity awards were not assumed or substituted for in connection with a change of
control of the Company, and the price per share of the Companys Common Stock is
the closing price on the NYSE as of that date ($0.61). There can be no
assurance that a triggering event would produce the same or similar results as
those estimated below if such event occurs on any other date or at any other
price, or if any other assumption used to estimate potential payments and
benefits differs with respect to such triggering event. Due to the number of
factors that affect the nature and amount of any potential payments or benefits,
any actual payments and benefits may be substantially different.
|
|
|
|
Potential Payments
Upon:
|
Name
|
|
Type of
Benefit
|
|
Involuntary
Termination
within 12
Months After a
Change of Control
|
|
Involuntary
Termination
Not Associated with a
Change of Control
|
Jon W. Gacek
|
|
Cash Severance Payments
|
|
$2,400,000
|
|
$600,000
|
|
|
Vesting Acceleration
(1)
|
|
$801,946
|
|
$0
|
|
|
Continued Coverage of
|
|
|
|
|
|
|
Employee
Benefits
(2)
|
|
$12,969
|
|
$12,969
|
|
|
Total
Termination Benefits:
|
|
$3,214,915
|
|
$612,969
|
|
Christopher S. Willis
|
|
Cash
Severance Payments
|
|
$320,632
|
|
$0
|
|
|
Vesting Acceleration
(1)
|
|
$60,615
|
|
$0
|
|
|
Continued Coverage
of
|
|
|
|
|
|
|
Employee
Benefits
(2)
|
|
$23,282
|
|
$0
|
|
|
Total
Termination Benefits:
|
|
$404,529
|
|
$0
|
|
William C. Britts
|
|
Cash Severance Payments
|
|
$832,509
|
|
$370,004
|
|
|
Vesting Acceleration
(1)
|
|
$265,756
|
|
$0
|
|
|
Continued Coverage
of
|
|
|
|
|
|
|
Employee
Benefits
(2)
|
|
$23,054
|
|
$0
|
|
|
Total
Termination Benefits:
|
|
$1,121,319
|
|
$370,004
|
|
Robert S. Clark
|
|
Cash
Severance Payments
|
|
$900,000
|
|
$0
|
|
|
Vesting Acceleration
(1)
|
|
$265,756
|
|
$0
|
|
|
Continued Coverage
of
|
|
|
|
|
|
|
Employee
Benefits
(2)
|
|
$13,045
|
|
$0
|
|
|
Total
Termination Benefits:
|
|
$1,178,801
|
|
$0
|
|
Geoffrey G. Stedman
|
|
Cash Severance Payments
|
|
$663,750
|
|
$0
|
|
|
Vesting Acceleration
(1)
|
|
$168,970
|
|
$0
|
|
|
Continued Coverage
of
|
|
|
|
|
|
|
Employee
Benefits
(2)
|
|
$14,722
|
|
$0
|
|
|
Total
Termination Benefits:
|
|
$847,442
|
|
$0
|
|
Linda M. Breard
|
|
Cash
Severance Payments
|
|
$559,500
|
|
$0
|
|
|
Vesting Acceleration
(1)
|
|
$199,591
|
|
$0
|
|
|
Continued Coverage
of
|
|
|
|
|
|
|
Employee
Benefits
(2)
|
|
$23,232
|
|
$0
|
|
|
Total
Termination Benefits
(3)
:
|
|
$782,323
|
|
$0
|
____________________
(1)
|
|
Reflects the
aggregate market value of outstanding and unvested stock option grants and
restricted stock unit awards. For unvested stock options, the aggregate
market value is computed by multiplying (i) the difference between $0.61
and the exercise price of the option, by (ii) the number of shares of the
Companys Common Stock underlying the unvested stock options at March 31,
2016. For unvested restricted stock unit awards, the aggregate market
value is computed by multiplying (i) $0.61, by (ii) the number of unvested
restricted stock unit awards outstanding at March 31, 2016. In the event
of vesting acceleration or other modifications of share-based awards, we
account for such modifications in accordance with ASC 718.
|
(2)
|
|
Assumes continued
coverage of employee benefits at the Fiscal 2016 COBRA premium rate for
health, dental, and vision coverage.
|
(3)
|
|
Ms. Breard
voluntarily terminated employment effective January 26, 2016, and while
the total termination benefits reflect the potential payments she would
have received as an employee during a change of control, Ms. Breard did
not receive any actual severance payments in association with her
resignation.
|
69
Table of Contents
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the
Exchange Act requires the Companys Section 16 officers, directors and persons
who own more than ten percent (10%) of a registered class of the Companys
equity securities to file reports of ownership and changes in ownership with the
SEC. Such executive officers, directors and greater than ten-percent
stockholders are also required by SEC rules to furnish the Company with copies
of all forms that they file pursuant to Section 16(a). Based solely on its
review of the copies of such reports received by the Company and on written
representations from certain reporting persons, the Company believes that all
required filings were timely made during the fiscal year ended March 31, 2016
(Fiscal 2016), except for one filing for Mr. Stedman reporting the
surrendering of shares to satisfy tax withholding obligations upon the vesting
of restricted stock units, which was late due to an administrative error.
REPORT OF THE AUDIT
COMMITTEE OF THE BOARD OF DIRECTORS
1
The Audit Committee was
established primarily to: (i) provide oversight of Quantums accounting and
financial reporting processes and the audit of Quantums financial statements;
and (ii) assist the Board of Directors in the oversight of: (a) the integrity of
Quantums financial statements; (b) Quantums compliance with legal and
regulatory requirements; (c) the independent registered public accounting firms
performance, qualifications and independence; and (d) the performance of
Quantums internal audit function.
The Audit Committee, after
appropriate review and discussion, determined that it had fulfilled its
responsibilities under its charter during Fiscal 2016. The Audit Committee has
reviewed and discussed the Consolidated Financial Statements for Fiscal 2016
with management and the Companys independent registered public accounting firm;
and management represented to the Audit Committee that Quantums Consolidated
Financial Statements were prepared in accordance with generally accepted
accounting principles. This review included a discussion with management of the
quality, not merely the acceptability, of Quantums accounting principles, the
reasonableness of significant estimates and judgments, and the clarity of
disclosure in Quantums Consolidated Financial Statements. The Audit Committee
discussed with the Companys independent registered public accounting firm
matters required to be discussed by Public Company Accounting Oversight Board
Auditing Standard No. 16, Communications with Audit Committees. The Audit
Committee received from the independent registered public accounting firm the
written disclosures and the letter from the auditors required by the applicable
requirements of the Public Company Accounting Oversight Board regarding the
independent accountants communications with the audit committee concerning
independence, and discussed with the independent registered public accounting
firm the independent accountants independence. In reliance on these views and
discussions, and the report of the Companys independent registered public
accounting firm, the Audit Committee has recommended to the Board, and the Board
has approved, the inclusion of the audited Consolidated Financial Statements in
Quantums Annual Report on Form 10-K for the year ended March 31, 2016 for
filing with the SEC.
Submitted by the Audit
Committee of the Board of Directors:
MEMBERS OF THE AUDIT
COMMITTEE
David E. Roberson, Chair
Robert J. Andersen
Paul R. Auvil III
____________________
(1)
|
This report of the
Audit Committee of the Board of Directors shall not be deemed soliciting
material, nor is it to be deemed filed with the SEC, nor incorporated by
reference in any filing of the Company under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
|
70
Table of Contents
AUDIT AND AUDIT-RELATED
FEES
The following table shows
the fees billed for various professional services by PricewaterhouseCoopers LLP
for Fiscal 2016 and Fiscal 2015:
Amounts in thousands
|
|
|
|
|
|
|
|
|
2016 Total
|
|
2015
Total
|
Audit Fees (1)
|
|
$
|
1,518
|
|
$
|
1,300
|
Audit-related Fees
|
|
|
|
|
|
20
|
Tax Fees (2)
|
|
|
154
|
|
|
92
|
All
Other Fees
|
|
|
|
|
|
|
Total
|
|
$
|
1,672
|
|
$
|
1,412
|
____________________
|
(1)
|
Audit fees include
the audit of Quantums annual financial statements, review of financial
statements included in Quantums Quarterly Reports on Form 10-Q and
services that are normally provided by the independent registered public
accounting firm in connection with foreign statutory and regulatory
filings or engagements for those fiscal years and include services in
connection with assisting the Company in its compliance with its
obligations under Section 404 of the Sarbanes-Oxley Act and related
regulations. Audit fees also include advice on audit and accounting
matters that arose during, or as a result of, the audit or the review of
interim financial statements, including the application of proposed
accounting rules, statutory audits required by non-U.S. jurisdictions and
discussions on internal control matters.
|
|
|
|
(2)
|
This category
consists of professional services rendered by PricewaterhouseCoopers LLP
for tax compliance and tax consulting. The tax compliance services
principally include preparation and/or review of various tax returns,
assistance with tax return supporting documentation and tax return audit
assistance. The tax consulting services principally include advice
regarding mergers and acquisitions, international tax structure and other
strategic tax planning opportunities. All such services were approved by
the Audit Committee.
|
In accordance with Audit
Committee policy and the requirements of law, all services to be provided by the
Companys independent registered public accounting firm are pre-approved by the
Audit Committee. This is to avoid potential conflicts of interest that could
arise if the Company received specified non-audit services from its auditing
firm. Annually, the Audit Committee pre-approves appropriate audit,
audit-related and tax services which are listed on a general approval schedule
that the Companys independent registered public accounting firm may perform for
the Company. Where such services are expected to require more than ten hours of
such firms billable senior partner or the equivalent time, the Company must
notify the Audit Committee of the auditing firms performance of such services.
For all services to be performed by the Companys independent registered public
accounting firm that are not specified in the general pre-approval schedule, the
Company must obtain specific engagement approval from the Audit Committee for
such services in advance. The Audit Committee receives all notifications and
requests relating to the independent registered public accounting firms
performance of services for the Company. The Audit Committee will review and
make changes to the services listed under the general approval schedule on an
annual basis and otherwise from time to time as necessary.
In Fiscal 2016, the
Companys independent registered public accounting firm attended all meetings of
the Audit Committee. The Audit Committee believes that the provision of services
by the Companys independent registered public accounting firm described above
is compatible with maintaining such firms independence from the Company.
71
Table of Contents
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets
forth as of January 31, 2017 certain information with respect to the beneficial
ownership of the Companys Common Stock by (i) each person known by the Company
to be the beneficial owner of more than five percent of the outstanding shares
of Common Stock, (ii) each of the Companys directors, (iii) each of the named
executive officers and (iv) all current directors and executive officers as a
group. Unless otherwise indicated, the business address for the beneficial
owners listed below is 224 Airport Parkway, Suite 550, San Jose, CA 95110.
Name
|
|
|
Number of
Shares
Beneficially Owned(1)
|
|
Approximate
Percentage
of
Class(2)
|
5% or Greater Stockholders:
|
|
|
|
|
|
|
|
Private Capital Management LLC
|
|
15,236,735
|
(3)
|
|
5.62
|
%
|
8889 Pelican Bay
Boulevard, Suite 500
|
|
|
|
|
|
|
Naples, FL
34108
|
|
|
|
|
|
|
Starboard Value LP
|
|
29,103,694
|
(4)
|
|
10.73
|
%
|
777 Third Avenue, 18th
Floor
|
|
|
|
|
|
|
New York, NY
10017
|
|
|
|
|
|
|
Soros Fund Management LLC
|
|
14,025,220
|
(5)
|
|
5.17
|
%
|
250 West 55th Street,
Floor 27
|
|
|
|
|
|
|
New York, NY
10019
|
|
|
|
|
|
|
VIEX Capital Advisors, LLC
|
|
29,531,722
|
(6)
|
|
10.88
|
%
|
825 Third Avenue 33rd
Floor
|
|
|
|
|
|
|
New York, NY
10022
|
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
Robert J. Andersen
|
|
54,907
|
(7)
|
|
|
*
|
Paul R. Auvil III
|
|
554,030
|
(8)
|
|
|
*
|
Linda M. Breard
|
|
581,667
|
(9)
|
|
|
*
|
William C. Britts
|
|
994,442
|
(10)
|
|
|
*
|
Robert S. Clark
|
|
595,296
|
(11)
|
|
|
*
|
Louis DiNardo
|
|
315,392
|
(12)
|
|
|
*
|
Dale L. Fuller
|
|
233,890
|
(13)
|
|
|
*
|
Jon W. Gacek
|
|
3,026,628
|
(14)
|
|
1.22
|
%
|
David A. Krall
|
|
364,875
|
(15)
|
|
|
*
|
Gregg J. Powers
|
|
15,236,735
|
(16)
|
|
5.62
|
%
|
Clifford Press
|
|
|
(17)
|
|
|
*
|
David E. Roberson
|
|
351,784
|
(18)
|
|
|
*
|
Geoff G. Stedman
|
|
194,435
|
(19)
|
|
|
*
|
Christopher S. Willis
|
|
256,547
|
(20)
|
|
|
*
|
All current directors and executive officers
as a group (15 persons)
|
|
23,001,672
|
(21)
|
|
8.48
|
%
|
____________________
(*)
|
|
Less than
1%.
|
(1)
|
|
Except pursuant to
applicable community property laws or as indicated in the footnotes to
this table, to the Companys knowledge, each stockholder identified in the
table possesses sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by such
stockholder.
|
(2)
|
|
Applicable percentage
ownership is based on 271,322,956 shares of Common Stock outstanding as of
January 31, 2017. Beneficial ownership is determined in accordance with
the rules of the SEC, based on factors including voting and investment
power with respect to shares. Shares of Common Stock subject to options
currently exercisable, or exercisable within 60 days after January 31,
2017, are considered beneficially owned by the holder, but such shares are
not deemed outstanding for the purposes of computing the percentage
ownership of any other person.
|
(3)
|
|
Information is based
on a Schedule 13F as of September 30, 2016 filed with the Securities and
Exchange Commission by Private Capital Management, LLC, a Delaware limited
liability corporation (PCM). PCM holds 14,384,843 shares and has shared
voting and dispositive power with respect to these shares. Mr. Powers, the
CEO and Portfolio Manager of PCM, owns 586,500 shares. In addition, as
compensation for Mr. Powers services on Quantums board of directors,
Quantum granted to Pelican Bay Holdings LLC 242,871 shares of Common Stock
and 22,521 restricted stock units that will vest at January 31, 2017, or
within sixty (60) days thereafter. Mr. Powers is the sole member of
Pelican Bay Holdings LLC.
|
72
Table of Contents
|
(4)
|
|
Information is based
on Schedules 13D/A filed with the Securities and Exchange Commission on
January 26, 2016, April 6, 2016 and December 7, 2016 and on Forms 4 filed
with the Securities and Exchange Commission on January 22, January 25,
March 16, March 18, December 5 and December 7, 2016, respectively by
Starboard Value LP and its affiliates. Starboard Value and Opportunity
Master Fund Ltd. (Starboard V&O Fund) beneficially owns and has sole
voting and dispositive power with respect to 18,069,036 shares, which
includes 13,791,742 shares issuable upon the conversion of Quantum
Corporations 4.50% convertible senior notes due November 2017 (the
Notes). Starboard Value and Opportunity S LLC (Starboard LLC)
beneficially owns and has sole voting and dispositive power with respect
to 3,809,394 shares, which includes 2,850,637 shares issuable upon the
conversion of the Notes. Starboard Value and Opportunity C LP (Starboard
Value C LP) beneficially owns and has sole voting and dispositive power
with respect to 1,265,467 shares, which includes 482,696 shares issuable
upon the conversion of the Notes. Starboard Value R LP (Starboard R LP),
as the general partner of Starboard C LP, and Starboard Value R GP LLC, as
the general partner of Starboard R LP, may each be deemed to beneficially
own and have sole voting and dispositive power with respect to the shares
owned by Starboard C LP. 5,959,797 shares are held in an account managed
by Starboard Value LP (the Starboard Value LP Account), which includes
4,459,623 shares issuable upon the conversion of the Notes. Each of
Starboard Value LP, as the investment manager of Starboard V&O Fund,
Starboard C LP and the Starboard Value LP Account, and as the manager of
Starboard LLC, Starboard Value GP LLC (Starboard Value GP), as the
general partner of Starboard Value LP, Starboard Principal Co LP
(Principal Co), as a member of Starboard Value GP, and Starboard
Principal Co GP LLC (Principal GP), as the general partner of Principal
Co, may be deemed to beneficially own and have sole voting and dispositive
power with respect to the aggregate of 29,103,694 shares owned by
Starboard V&O Fund, Starboard LLC, Starboard C LP and held in the
Starboard Value LP Account. Each of Messrs. Jeffrey C. Smith, Mark R.
Mitchell and Peter A. Feld, as members of Principal GP and as members of
each of the Management Committee of Starboard Value GP and the Management
Committee of Principal GP, may be deemed to beneficially own and have
shared voting and dispositive power with respect to the aggregate of
29,103,694 shares owned by Starboard V&O Fund, Starboard LLC,
Starboard C LP and held in the Starboard Value LP Account. In addition,
Mr. Smith beneficially owns 137,565 shares of Common Stock, granted to him
as compensation for his services on Quantums board of
directors.
|
|
(5)
|
|
Information is based
on Schedules 13G filed with the Securities and Exchange Commission on July
29, 2016 by Soros Fund Management LLC (SFM LLC), a Delaware limited
liability company, George Soros and Robert Soros. The shares are held for
the account of Quantum Partners LP, a Cayman Islands exempted limited
partnership (Quantum Partners). SFM LLC serves as principal investment
manager to Quantum Partners. As such, SFM LLC has been granted investment
discretion over portfolio investments, including the reported shares, held
for the account of Quantum Partners. George Soros serves as Chairman of
SFM LLC and Robert Soros serves as President and Deputy Chairman of SFM
LLC. SFM LLC has sole voting and dispositive power and Messrs. Soros have
shared voting and dispositive power with respect to the reported
shares.
|
|
(6)
|
|
Information is based
on Schedules 13D and 13D/A filed with the Securities and Exchange
Commission on December 28, 2015, January 21, 2016, February 2, 2016, April
28, 2016, June 2, 2016, June 7, 2016, September 27, 2016 and December 6,
2016 by VIEX Capital Advisors, LLC ("VIEX Capital"), VIEX Special
Opportunities Fund III, LP ("VSO III") and their affiliates. VIEX
Opportunities Fund, LP - Series One ("VIEX Series One") beneficially owns
and has shared voting and dispositive power with respect to 7,407,865
shares. VIEX Opportunities Fund, LP - Series Two (VIEX Series Two")
beneficially owns and has shared voting and dispositive power with respect
to 1,413,191 shares. Each of VSO III and VIEX Special Opportunities GP III
LLC, as the general partner of VSO III, beneficially own and have shared
voting and dispositive power with respect to 20,710,666 shares. VIEX GP,
LLC ("VIEX GP"), as the general partner of VIEX Series One and VIEX Series
Two beneficially owns and has shared voting and dispositive power with
respect to 8,821,056 shares. Each of VIEX Capital, as the investment
manager of VIEX Series One and VIEX Series Two, and Eric Singer, as the
managing member of VIEX GP and VIEX Capital, beneficially own and have
shared voting and dispositive power with respect to 29,531,722 shares,
which constitutes the shares owned by VIEX Series One, VIEX Series Two and
VSO III. VSO III and its affiliates disclaim the beneficial ownership of
the reported shares except to the extent of their pecuniary interest
therein.
|
|
(7)
|
|
Represents 49,277
shares of Common Stock and 5,630 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days thereafter.
|
|
(8)
|
|
Represents 531,509
shares of Common Stock and 22,521 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days thereafter.
|
|
(9)
|
|
Represents shares of
Common Stock.
|
|
(10)
|
|
Represents shares of
Common Stock.
|
|
(11)
|
|
Represents 495,296
shares of Common Stock, and 100,000 shares subject to Common Stock options
exercisable at January 31, 2017, or within sixty (60) days
thereafter.
|
|
(12)
|
|
Represents shares of
292,871 Common Stock and 22,521 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days thereafter.
|
|
(13)
|
|
Represents 197,542
shares of Common Stock and 36,348 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days thereafter.
|
|
(14)
|
|
Represents 1,726,628
shares of Common Stock, and 1,300,000 shares subject to Common Stock
options exercisable at January 31, 2017, or within sixty (60) days
thereafter.
|
|
(15)
|
|
Represents 342,354
shares of Common Stock and 22,521 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days thereafter.
|
|
(16)
|
|
As compensation for
Mr. Powers services on Quantums board of directors, Quantum granted to
Pelican Bay Holdings LLC 242,871 shares of Common Stock and 22,521
restricted stock units that will vest at January 31, 2017, or within sixty
(60) days thereafter. Mr. Powers is the sole member of Pelican Bay
Holdings LLC. Mr. Powers also owns 586,500 shares. In addition, Mr.
Powers, the CEO and Portfolio Manager of PCM, holds shared voting and
dispositive power with respect to 14,384,843 shares held in PCM managed
accounts. Mr. Powers disclaims beneficial ownership for these shares, and
PCM and Mr. Powers disclaim the existence of a group with respect to any
third party.
|
73
Table of Contents
|
(17)
|
|
Mr. Clifford was
appointed to Quantums board of directors on April 1, 2016. None of his
restricted stock units are vested at January 31, 2017, or within sixty
(60) days thereafter.
|
|
(18)
|
|
Represents 329,263
shares of Common Stock and 22,521 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days thereafter.
|
|
(19)
|
|
Represents shares of
Common Stock.
|
|
(20)
|
|
Represents shares of
Common Stock.
|
|
(21)
|
|
Represents 21,247,089
shares of Common Stock, and 1,400,000 shares subject to Common Stock
options vested or exercisable at January 31, 2017, or within sixty (60)
days thereafter and 354,583 restricted stock units that will vest at
January 31, 2017, or within sixty (60) days
thereafter.
|
TRANSACTIONS WITH RELATED
PERSONS
The Company has entered
into indemnification agreements with its executive officers, directors and
certain significant employees containing provisions that are in some respects
broader than the specific indemnification provisions contained in the General
Corporation Law of the State of Delaware. These agreements provide, among other
things, for indemnification of the executive officers, directors and certain
significant employees in proceedings brought by third parties and in stockholder
derivative suits. Each agreement also provides for advancement of expenses to
the indemnified party.
The Company has entered
into a change of control agreement and an agreement to advance legal fees with
Shawn D. Hall, Senior Vice President, General Counsel and Secretary and Donald
E. Martella, SVP, Engineering. The material terms of these agreements are the
same as for the Companys named executive officers and are described above in
the section entitled Compensation Discussion and Analysis - Change of Control
Severance Policy, Employment Agreements and Severance Agreements.
The Company has entered
into agreements with its non-employee directors whereby in the event that 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 all or substantially all of the
assets of the Company or a reconstitution of the Companys Board) and, on or
within 12 months of the change of control, the non-employee directors
performance of services as a Board member terminates other than as a result of
death or Disability (as defined in the Agreement), then, to the extent that any
portion of any equity-based compensation awards held by such Director is not
vested at the time of termination, all such unvested awards will automatically
vest.
Procedures for Reviewing
and Approving Related Party Transactions
In accordance with the
charter for the Audit Committee and with the Companys restated and amended
related party transaction policy, which was approved by the Board on August 9,
2016, our Audit Committee reviews and approves any proposed related party
transactions. Any related party transaction will be disclosed in the applicable
SEC filing as required by the rules of the SEC. For purposes of these
procedures, related party and related party transaction have the meanings
set forth in the Companys related party transaction policy.
In addition, the Companys
Code of Business Conduct and Ethics (the Code) requires that the Companys
employees, officers and directors avoid conducting Company business with a
relative or significant other, or with a business in which a relative or
significant other is associated in any significant role unless disclosed to the
Companys ethics committee (which includes the General Counsel and the Vice
President, Corporate Controller (the Ethics Committee)) and approved in
advance by the Ethics Committee or the Audit Committee, as applicable.
74
Table of Contents
COMMUNICATING WITH THE
COMPANY
We have from time-to-time
received calls from stockholders inquiring about the available means of
communication with the Company. If you would like to receive information about
the Company, without charge, you may use one of these convenient methods:
●
|
To view the Companys
website on the Internet, use the Companys Internet address located at
www.quantum.com. The Companys website includes product, corporate and
financial data, job listings, recent earnings releases, a delayed stock
price quote, and electronic files of this Proxy Statement and the
Companys Form 10-Ks, Form 10-Qs, and Annual Reports to Stockholders.
Internet access has the advantage of providing you with recent information
about the Company throughout the year. The Companys Code of Business
Conduct and Ethics and the Companys Corporate Governance Principles can
also be found on the Companys website at http://www.quantum.com, by
clicking About Us from the home page, selecting Investor Relations and
then Governance Documents. Requests to receive by mail a free copy of
printed financials and of the Companys Code of Business Conduct and
Ethics and its Corporate Governance Principles can also be submitted by
contacting the Companys Investor Relation Department at the address
stated below.
|
|
|
●
|
To reach Quantum
Investor Relations, please call or send correspondence to:
Brinlea Johnson or
Allise Furlani
Investor Relations
The Blueshirt Group
(212)
331-8433
ir@quantum.com
|
CERTAIN INFORMATION
REGARDING PARTICIPANTS IN THE SOLICITATION OF PROXIES
Under applicable SEC rules
and regulations, the members of the Board of Directors and certain executive
officers of the Company are participants with respect to the Companys
solicitation of proxies in connection with the Annual Meeting. Certain required
information regarding these participants is set forth in Annex A to this Proxy
Statement.
IT IS IMPORTANT THAT ALL
PROXIES BE RETURNED PROMPTLY. THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND
RETURN THE ENCLOSED WHITE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR
VOTE VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS PROVIDED ON
THE ENCLOSED WHITE PROXY CARD. YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR
SMALL YOUR HOLDINGS OF SHARES OF COMMON STOCK.
75
Table of Contents
OTHER MATTERS
The Company knows of no
other matters to be submitted at the Annual Meeting. Any proposal that a
stockholder intends to submit for consideration at the Annual Meeting must be
received by the Secretary of the Company within the timeframes specified in the
Companys Bylaws and must include the information specified in the Bylaws. 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.
|
By
Order of the Board of Directors,
|
|
|
|
/s/
Shawn D. Hall
|
San
Jose, California
|
Shawn D. Hall
|
_________, 2017
|
Senior Vice President, General Counsel and
Secretary
|
76
Table of Contents
ANNEX A
INFORMATION CONCERNING
PARTICIPANTS IN THE SOLICITATION OF PROXIES
Under applicable SEC rules
and regulations, members of the Board of Directors and certain officers of the
Company are participants with respect to the Companys solicitation of proxies
in connection with the Annual Meeting. The following sets forth certain
information about the persons who are participants.
Directors and Nominees
The following table sets
forth the names and business addresses of certain of the Companys directors
(each of whom is also a nominee for director), as well as the names and
principal business addresses of the corporation or other organization in which
the principal occupations or employment of the directors is carried on. The
principal occupations or employment of the Companys directors are set forth
under the caption Proposal OneElection of Directors in this Proxy
Statement.
Name
|
|
Business name and Address
|
Andersen, Robert J.
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
Auvill III, Paul R.
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
DiNardo, Louis
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
Gacek, Jon
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
Krall, David A.
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
Powers, Gregg J.
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
Roberson, David E.
|
|
c/o
Quantum Corporation
|
|
|
224
Airport Parkway, Suite 550
|
|
|
San
Jose, CA 95110
|
Certain Officers
The following table sets
forth the name and principal occupation of the Companys officers who are
participants. The principal business address of each such person is c/o
Quantum Corporation 224 Airport Parkway, Suite 550, San Jose, CA 95110.
Name
|
Principal Occupation
|
Fuad
Ahmad
|
Senior Vice President, Chief Financial
Officer
|
77
Table of Contents
Information Regarding
Ownership of the Companys Securities by the Participants
Except as described in this
Annex A or in this Proxy Statement, none of the persons listed above under the
captions Directors and Nominees or Certain Officers owns any securities of
the Company of record that they do not own beneficially. The number of
securities of the Company beneficially owned by directors and executive officers
who are participants as of January 31, 2017 is set forth under the caption
Security Ownership of Certain Beneficial Owners and Management in this Proxy
Statement.
Information Regarding
Transactions in the Securities of the Company by the Participants
The following table sets
forth purchases and sales of the securities of the Company during the past two
years by the persons listed above under the captions Directors and Nominees
and Certain Officers. None of the purchase price or market value of the
securities listed below is represented by funds borrowed or otherwise obtained
for the purpose of acquiring or holding such securities.
Company Securities
Purchased or Sold (1/31/15 through 1/31/17)
|
|
Date
|
|
Purchases (Sales)
|
Paul
R. Auvil III
|
|
November 5, 2015
|
|
20,000
|
Gregg J. Powers
|
|
November 4, 2015
|
|
50,000
|
|
|
December 3, 2014
|
|
50,000
|
Jon
Gacek
|
|
November 3, 2015
|
|
45,000
|
Below is a listing of
restricted stock units and performance rights granted from January 31, 2015
through January 31, 2017. All such awards are subject to vesting.
|
|
Date
|
|
Purchases
(Sales)
|
|
Robert J. Andersen
|
|
September 1, 2015
|
|
90,090 RSUs
|
|
|
|
June
1, 2015
|
|
64,767 RSUs
|
|
Paul
R. Auvil III
|
|
September 1, 2015
|
|
90,090 RSUs
|
|
Louis DiNardo
|
|
September 1, 2015
|
|
90,090 RSUs
|
|
Jon
Gacek
|
|
July
1, 2016
|
|
450,000 RSUs
|
|
|
|
July
1, 2015
|
|
445,000 RSUs
|
|
|
|
July
1, 2015
|
|
229,500 PSUs
|
|
David A. Krall
|
|
September 1, 2015
|
|
90,090 RSUs
|
|
Gregg J. Powers
|
|
September 1, 2015
|
|
90,090 RSUs
|
|
David E. Roberson
|
|
September 1, 2015
|
|
90,090 RSUs
|
|
Fuad
Ahmad
|
|
May
1, 2016
|
|
800,000 RSUs
|
|
___________________
(1)
|
|
Mr. Powers is the CEO
and Portfolio manager of Private Capital Management, L.P., a Delaware
limited partnership (PCM). Please see information with respect to the
holdings of PCM in the proxy statement in the Section entitled Security
Ownership of Certain Beneficial Owners and Management. Since Mr. Powers
election to the Board, PCM has only purchased or sold Quantum securities
at the direction of the beneficial holders.
|
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Miscellaneous
Information Concerning Participants
Except as described in this
Annex A or in this Proxy Statement, no participant or any of their respective
associates or affiliates (together, the Participant Affiliates) is either a
party to any transaction or series of transactions since March 31, 2015, or has
knowledge of any current proposed transaction or series of proposed
transactions, (i) to which the Company or any of its subsidiaries was or is to
be a participant; (ii) in which the amount involved exceeds $120,000; and (iii)
in which any participant or Participant Affiliate had, or will have, a direct or
indirect material interest. Furthermore, except as described in this Annex A or
in this Proxy Statement, (i) no participant or Participant Affiliate, directly
or indirectly, beneficially owns any securities of the Company, any parent of
the Company or any subsidiary of the Company; and (ii) no participant owns any
securities of the Company of record but not beneficially.
Except as described in this
Annex A or in this Proxy Statement, no participant or Participant Affiliate has
entered into any agreement or understanding with any person with respect to any
future employment by the Company or any of its affiliates or any future
transactions to which the Company or any of its affiliates will or may be a
party.
Except as described in this
Annex A or in this Proxy Statement, none of the participants or Participant
Affiliates is, or within the past year was, a party to any contract, arrangement
or understanding with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies.
Except as described in this
Annex A or in this Proxy Statement, and excluding any director or executive
officer of the Company acting solely in that capacity, no person who is a party
to an arrangement or understanding pursuant to which a nominee for election as
director is proposed to be elected has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be acted upon at
the Annual Meeting.
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Exhibit A
QUANTUM CORPORATION
EMPLOYEE STOCK PURCHASE
PLAN
(As Amended and Restated
March 31, 2017)
The following constitute
the provisions of the Employee Stock Purchase Plan (herein called the Plan) of
Quantum Corporation (herein called the Company).
1.
Purpose
. The purpose of the Plan is to provide Employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions or other contributions. It is the
intention of the Company to have the Plan qualify as an Employee Stock Purchase
Plan under Section 423 of the Code, although the Company makes no undertaking
or representation to maintain such qualification. The provisions of the Plan
shall, accordingly, be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code. In
addition, this Plan document authorizes the purchase of Common Stock under a
Non-423(b) Component, pursuant to rules, procedures or sub-plans adopted by the
Board or a committee appointed by the Board and designed to achieve tax,
securities law or other objectives.
2.
Definitions
.
(a)
Board
shall mean the Board of Directors of the Company.
(b)
Code
shall mean the Internal Revenue Code of 1986, as amended. Any reference
to a section of the Code herein will be a reference to any successor or amended
section of the Code.
(c)
Code Section 423(b) Plan
shall mean an employee stock purchase plan which
is designed to meet the requirements set forth in Section 423(b) of the Code, as
amended. The provisions of the Code Section 423(b) Plan should be construed,
administered and enforced in accordance with Section 423(b) of the Code.
(d)
Common Stock
shall mean the common stock of the Company.
(e)
Company
shall mean Quantum Corporation, a Delaware corporation.
(f)
Compensation
shall mean all regular straight time earnings,
payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses and commissions (except to the extent that the exclusion of
any such items for all participants is specifically directed by the Board or a
committee appointed by the Board). The Board or a committee appointed by the
Board shall have the power and discretion to (i) change the definition of
Compensation for future Offering Periods, and (ii) determine what constitutes
Compensation for Employees outside of the United States.
(g)
Continuous Status as an Employee
shall mean the absence of any interruption or
termination of service as an Employee. Continuous Status as an Employee shall
not be considered interrupted in the case of: (i) a leave of absence agreed to
in writing by the Company, provided that such leave is for a period of not more
than three (3) months or re-employment upon the expiration of such leave is
guaranteed by contract or statute; or (ii) notification by the Company of
termination under a reduction-in-force. Termination of participation in the Plan
in the case of a reduction-in-force shall be considered to have occurred upon
the earlier of (x) the end of the employees continuation period, or (y) the first (1st) day after the three (3) month period immediately following the cessation of his or her employment services with the Company, provided, in each case, that he or she will not be entitled to participate in any Offering Period for which the Enrollment Date occurs after the cessation of his or her employment services with the Company.
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(h)
Designated Subsidiaries
shall mean the Subsidiaries which have been
designated by the Board or a committee appointed by the Board from time to time
in its sole discretion as eligible to participate in the Plan.
(i)
Employee
shall mean any person, including an officer, who is employed by the
Company or one of its Designated Subsidiaries. The Board or a committee
appointed by the Board, in its discretion, from time to time may, prior to an
Enrollment Date for all options to be granted on such Enrollment Date, determine
(on a uniform and nondiscriminatory basis or as otherwise permitted by Treasury
Regulation Section 1.423-2(f)) that the definition of Employee under the Plan
or with respect to an Offering will or will not include an individual if he or
she: (i) has not completed at least two (2) years of service since his or her
last hire date (or such lesser period of time as may be determined by the Board
or a committee appointed by the Board in its discretion), (ii) customarily works
not more than twenty (20) hours per week or not more than five (5) months per
calendar year (or such lesser period of time as may be determined by the Board
or a committee appointed by the Board in its discretion), or (iii) is a highly
compensated employee under Section 414(q) of the Code.
(j)
Enrollment Date
shall mean the first Trading Day on or after
every February 6 and August 6 of each year.
(k)
Exercise Date
shall mean the date approximately six months
after the Enrollment Date of an Offering Period and shall be one Trading Day
prior to an Enrollment Date of the immediately following Offering Period.
(l)
Fair Market Value
shall mean, as of any date, the closing sales
price of the Common Stock (or the closing bid, if no sales were reported) as
quoted on the stock exchange with the greatest volume of trading in Common Stock
on the last market trading day prior to the date of determination, as reported
in
The Wall Street
Journal
or such other source as
the Board or a committee appointed by the Board deems reliable.
(m)
New Exercise Date
shall mean a new Exercise Date if the Board or a
committee appointed by the Board shortens any Offering Period then in progress.
(n)
Non-423(b) Component
shall mean the grant of an option under the Plan
which is not intended to meet the requirements set forth in Section 423(b) of
the Code, as amended.
(o)
Offering
shall mean an offer of an option under the Plan that may be exercised
during an Offering Period. For purposes of the Plan, the Board or a committee
appointed by the Board may designate separate Offerings under the Plan in which
Employees of one or more employers will participate, even if the dates of the
applicable Offering Periods of each such Offering are identical and the
provisions of the Plan will apply separately to each Offering. To the extent
permitted by Treasury Regulations Section 1.432-2(a)(1), the terms of each
Offering need not be identical provided that the terms of the Plan and an
Offering together satisfy Treasury Regulation Sections 1.423-2(a)(2) and
(a)(3).
(p)
Offering Period
shall mean a period commencing on an Enrollment
Date and ending on the Exercise Date, approximately six (6) months later, or as
otherwise set forth in Section 4 hereof.
(q)
Parent
shall mean a parent corporation, whether now or hereafter existing,
as defined in Section 424(e) of the Code.
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(r)
Plan
shall mean this Employee Stock Purchase Plan, which includes a Code
Section 423(b) Plan and a Non-423(b) Component.
(s)
Purchase Price
shall have the meaning as set forth in Section
7(b).
(t)
Subsidiary
shall mean a corporation, domestic or foreign, of which not less than
50% of the voting shares are held by the Company or a Subsidiary, whether or not
such corporation now exists or is hereafter organized or acquired by the Company
or a Subsidiary.
(u)
Trading Day
shall mean a day on which the New York Stock Exchange is open for
trading.
3.
Eligibility
(a) Any Employee (as
defined in Section 2) who shall be employed by the Company or one of its
Designated Subsidiaries on the date his or her participation in the Plan is
effective shall be eligible to participate in the Plan, unless the Company, in
its discretion, decides that such participation would infringe any U.S. or
foreign law, rules or regulations.
(b) Any provisions of the
Plan to the contrary notwithstanding, no Employee shall be granted an option
under the Plan (i) if, immediately, after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own shares and/or hold outstanding options to purchase
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Subsidiary, or (ii) which
permits his or her rights to purchase shares under all employee stock purchase
plans (as defined in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
(US$25,000) of the fair market value of the shares (determined at the time such
option is granted) for each calendar year in which such option is outstanding at
any time.
(c) No employee of the
Company or a Designated Subsidiary shall be eligible to participate in the
Non-423(b) Component of the Plan if he or she is an officer or director of the
Company subject to the requirements of Section 16 of the U.S. Securities
Exchange Act of 1934, as amended (the Act).
(d) Employees who are
citizens or residents of a non-U.S. jurisdiction (without regard to whether they
also are citizens or residents of the U.S. or resident aliens of the U.S.
(within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from
participation in the Plan or an Offering if the participation of such Employees
is prohibited under the laws of the applicable jurisdiction or if complying with
the laws of the applicable jurisdiction would cause the Plan or an Offering to
violate Code Section 423. In the case of the Non-423 Component, Employees may be
excluded from participation in the Plan or an Offering if the Board or a
committee appointed by the Board has determined that participation of such
Employees is not advisable or practicable.
4.
Offering Dates
. The Plan shall be implemented by consecutive
Offering Periods with a new Offering
Period commencing on an
Enrollment Date, and shall continue thereafter until terminated in accordance
with Section 19 hereof. The Board or a committee appointed by the Board shall
have the power to change the duration of Offering Periods with respect to future
Offerings. In no event shall the duration of an Offering Period exceed nine (9)
months. Notwithstanding the foregoing, no offers hereunder shall be made until
compliance with all applicable securities law has been obtained.
5.
Participation
.
(a) An eligible Employee
may become a participant in the Plan by completing a subscription agreement
authorizing payroll deductions in the form and manner determined by the Company
in its discretion from time to time. The Company, in
its discretion, may decide that all participants in a specified Offering may
submit contributions to the Plan by means other than payroll deductions.
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(b) Payroll deductions to
the Plan for a participant shall commence on the first payroll following the
Enrollment Date and shall end on the last payroll date in the Offering Period to
which such authorization is applicable, unless sooner terminated by the
participant as provided in Section 10. If participants are permitted or required
to contribute to the Plan by other means, the Company, in its discretion, will
determine the procedure for providing the contributions prior to the Exercise
Date.
6.
Payroll Deductions/Contributions
.
(a) At the time a
participant files his or her subscription agreement, he or she shall elect to
contribute to the Plan (in the form of payroll deductions or otherwise) on each
payday during the Offering Period at a rate not exceeding ten percent (10%) of
the Compensation which he or she received on such payday, and the aggregate of
such payroll deductions pursuant to the Plan during the Offering Period shall
not exceed ten percent (10%) of his or her aggregate Compensation during said
Offering Period. A participants subscription agreement shall remain in effect
for successive Offering Periods unless terminated as provided in Section 10
hereof.
(b) All contributions made
for a participant shall be credited to his or her account under the Plan.
(c) A participant may
discontinue participation in the Plan as provided in Section 10, or may change
the rate of payroll deductions or other contributions by submitting written
notice to the Company in the form and manner prescribed by the Board or a
committee appointed by the Board (or its designee) authorizing a change in the
participants payroll deduction or contribution rate. The change rate shall be
effective (i) in the case of a decrease in rate, with the first payroll period
following the Companys receipt of the notice of rate change, and (ii) in the
case of an increase in rate at the beginning of the next Offering Period
following the Companys receipt of the notice of rate change. If a participant
has not followed the procedures prescribed by the Board or a committee appointed
by the Board (or its designee) to change the rate of payroll deductions or other
contributions, the rate of his or her payroll deductions or other contributions
will continue at the originally elected rate throughout the Offering Period and
future Offering Periods (unless terminated as provided in Section 10). The Board
or a committee appointed by the Board may, in its sole discretion, limit the
nature and/or number of payroll deduction or contribution rate changes that may
be made by participants during any Offering Period.
7.
Grant of Option
.
(a) On the Enrollment Date
of each Offering Period, each eligible Employee participating in such Offering
Period shall be granted an option to purchase on the Exercise Date during such
Offering Period up to a number of shares of the Companys Common Stock
determined by dividing such Employees contributions to the Plan accumulated
during the Offering Period ending on such Exercise Date by the lower of (i)
eighty-five percent (85%) of the Fair Market Value of a share of the Companys
Common Stock on the Enrollment Date, or (ii) eighty-five (85%) of the Fair
Market Value of a share of the Companys Common Stock on the Exercise Date;
provided that in no event shall an Employee be permitted to purchase in one
calendar year more than a number of shares determined by dividing US$25,000 by
the Fair Market Value of a share of the Companys Common Stock (determined at
the time such option is granted), and provided further that such purchase shall
be subject to the limitations set forth in Sections 3(b) and 12 hereof. The
option shall be automatically exercised on the Exercise Date during the Offering
Period, unless the participant has withdrawn pursuant to Section 10, and shall
expire on the last day of the Offering Period.
(b) 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
on the Enrollment Date; or (ii) 85% of the Fair Market
Value of a share of the Common Stock of the Company on the Exercise Date (such
price, the Purchase Price).
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(c) Notwithstanding the
foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code
and Section 3(b) herein, a participants contributions may be decreased to 0% at
such time during any Offering Period which is scheduled to end during the
current calendar year that the aggregate of all contributions accumulated with
respect to such Offering Period and any other Offering Period ending within the
same calendar year equal $21,250. Contributions shall recommence at the rate
provided in such participants subscription scheduled to end in the following
calendar year, unless terminated by the participant as provided in Section 10.
(d) If the Board or a
committee appointed by the Board determines, in its sole discretion, that the
exercise of an option or the disposition of Common Stock issued under the Plan
will result in tax liability for which the Company or a Designated Subsidiary
will have an obligation to withhold, the participant must make adequate
provision for the payment of such federal, state, local and foreign income,
social insurance, employment and any other applicable taxes. At any time, the
Company or the Designated Subsidiary may, but will not be obligated to, withhold
from the participants compensation the amount necessary for the Company or the
Designated Subsidiary to meet applicable withholding obligations, including any
withholding required to make available to the Company or the Designated
Subsidiary any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by the eligible Employee.
8.
Exercise of Option
. The participants option for the purchase of
shares will be exercised automatically on each Exercise Date of each Offering
Period and the maximum number of full shares subject to the option will be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions or other contributions in his or her account
unless prior to such Exercise Date the participant has withdrawn from the
Offering Period as provided in Section 10 or unless any of the limitations under
Sections 3, 7 or 12 would be exceeded. During a participants lifetime, a
participants option to purchase shares hereunder is exercisable only by the
participant. No fractional shares shall be purchased; any payroll deductions or
other contributions accumulated in a participants account which are not
sufficient to purchase a full share, or which would cause the limitations under
Sections 3, 7 or 12 hereof to be exceeded, shall be returned to the participant
after the Exercise Date.
9.
Delivery
. As promptly as practicable after each Exercise Date, the Company shall
arrange the delivery to each participant, as appropriate, the shares of Common
Stock purchased upon exercise of the option. The Company may permit or require
that shares be deposited directly with a broker designated by the Company or to
a designated agent of the Company, and the Company may utilize electronic or
automated methods of share transfer. The Company may require that shares be
retained with such broker or agent for a designated period of time and/or may
establish other procedures to permit tracking of disqualifying dispositions of
such shares. No participant will have any voting, dividend, or other stockholder
rights with respect to shares of Common Stock subject to any option granted
under the Plan until such shares have been purchased and delivered to the
participant as provided in this Section 9.
10.
Withdrawal; Termination of
Employment
.
(a) A participant may
withdraw all but not less than all the contributions credited to his or her
account under the Plan at any time prior to the end of the Offering Period by
giving written notice to the Company in the form and manner prescribed by the
Board or a committee appointed by the Board for such purpose. All of the
participants contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current Offering Period will be automatically terminated, and no
further contributions for the purchase of shares will be made during the
Offering Period. If a participant withdraws from an Offering Period,
contributions may not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.
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(b) Upon termination of the
participants employment prior to the end of the Offering Period for any reason,
including retirement or death, the contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated; provided that if an Employee shall take a leave of
absence approved by the Company in accordance with Section 2(g) of this Plan
during an Offering Period in which the Employee is a participant, the
participant will be deemed to have his or her contributions reduced to 0% during
such leave of absence, but he or she shall continue to be a participant in the
applicable Offering Period and upon his or her return to employment with the
Company shall be eligible to participate fully in any remaining portion of the
applicable Offering Period. If the participant fails to return to employment
with the Company at the end of such authorized leave of absence, or if his or
her employment is otherwise terminated earlier, he or she shall be deemed to
have withdrawn from participation in the Plan.
(c) A participants
withdrawal from an Offering Period will not have any effect upon his or her
eligibility to participate in any similar plan which may hereafter be adopted by
the Company or in succeeding Offering Periods.
(d) A participant whose
employment transfers between entities through a termination with an immediate
rehire (with no break in service) by the Company or a Designated Subsidiary will
not be treated as terminated under the Plan; however, if a participant transfers
from an Offering under the 423 Component to the Non-423 Component, the exercise
of the option will be qualified under the 423 Component only to the extent it
complies with Code Section 423.
11.
Interest
. No interest shall accrue on the contributions of a participant in the
Plan, unless required by applicable law, as determined by the Company, and if so
required by the laws of a particular jurisdiction, will apply to all
participants in the relevant Offering under the 423 Component, except to the
extent otherwise permitted by U.S. Treasury Regulation Section 1.423-2(f).
12.
Stock
.
(a) The maximum number of
shares of the Companys Common Stock which shall be made available for sale
under the Plan shall be 70,839,601, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18. In addition, in no
event shall more than 2,000,000 shares of the Companys Common Stock (subject to
adjustment upon changes in capitalization of the Company as provided in Section
18) be made available for sale under the Plan in any one Offering Period.
Furthermore, the Company, in its discretion, may decide to impose a limit on the
number of shares of the Companys Common Stock that each participant may
purchase during any one Offering Period. If the total number of shares which
would otherwise be subject to options granted pursuant to Section 7(a) hereof at
the beginning of an Offering Period exceeds the number of shares then available
under the Plan (after deduction of all shares for which options have been
exercised or are then outstanding) or the 2,000,000 share limit for any Offering
Period, the Company shall make a pro rata allocation of the shares remaining
available for option grant in as uniform a manner as shall be practicable and as
it shall determine to be equitable. In such event, the Company shall give
written notice of such reduction of the number of shares subject to the option
to each Employee affected thereby and shall similarly reduce the rate of
contributions, if necessary.
(b) Until the shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized exchange agent of the Company), a participant will only have
the rights of an unsecured creditor with respect to such shares, and no right to vote or receive dividends or any other rights as a stockholder will exist with respect to such shares.
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(c) Shares to be delivered
to a participant under the Plan will be registered in the name of the
participant or in the name of the participant and his or her spouse, or as
otherwise directed by the participant.
13.
Administration
. The Plan shall be administered by the Board or a
committee appointed by the Board. The Board or a committee appointed by the
Board will have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to designate separate Offerings under
the Plan, to determine eligibility, to adjudicate all disputed claims filed
under the Plan and to establish such procedures that it deems necessary for the
administration of the Plan (including, without limitation, to adopt such
procedures and sub-plans as are necessary or appropriate to permit the
participation in the Plan by employees who are foreign nationals or employed
outside the U.S., the terms of which sub-plans may take precedence over other
provisions of this Plan, with the exception of Section 12(a), but unless
otherwise superseded by the terms of such sub-plan, the provisions of this Plan
shall govern the operation of such sub-plan). Unless otherwise determined by the
Board or a committee appointed by the Board, the Employees eligible to
participate in each sub-plan will participate in a separate Offering. Without
limiting the generality of the foregoing, the Board or a committee appointed by
the Board is specifically authorized (in its discretion) to adopt rules and
procedures regarding eligibility to participate, the form and manner for making
elections under the Plan, the definition of Compensation, handling of
Contributions, making of Contributions to the Plan (including, without
limitation, in forms other than payroll deductions), establishment of bank or
trust accounts to hold Contributions, payment of interest (if any), conversion
of local currency, obligations to pay payroll tax, determination of beneficiary
designation requirements and withholding procedures and handling of stock
certificates that vary with applicable local requirements. The Board of a
committee appointed by the Board also is authorized to determine that, to the
extent permitted by U.S. Treasury Regulation Section 1.423-2(f), the terms of
an option granted under the Plan or an Offering to citizens or residents of a
non-U.S. jurisdiction will be less favorable than the terms of options granted
under the Plan or the same Offering to employees resident solely in the U.S.
Every finding, decision, interpretation and determination made by the Board of a
committee appointed by the Board will, to the full extent permitted by law, be
final and binding upon all parties.
14.
Designation of Beneficiary
.
(a) Unless otherwise
determined by the Company, a participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participants account under the Plan in the event of such participants death
subsequent to the end of the Offering Period but prior to delivery to him or her
of such shares and cash. In addition, unless otherwise determined by the
Company, a participant may file a written designation of a beneficiary who is to
receive any cash from the participants account under the Plan in the event of
such participants death prior to the end of the Offering Period.
(b) Unless otherwise
determined by the Company, such designation of beneficiary may be changed by the
participant at any time by written notice to the Company in the form and manner
prescribed by the Board or a committee appointed by the Board for such purpose.
In the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participants death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate or determine to be the appropriate
recipients of the shares and/or cash under applicable law.
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(c) All beneficiary designations will be in such form and manner as the
Board or a committee appointed by the Board may prescribe from time to time.
15.
Transferability
. Neither
contributions credited to a participants account nor any rights with regard to
the exercise of an option or to receive shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution or as provided in Section 14 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Section 10.
16.
Use of
Funds
. All contributions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
contributions, except under Offerings or for participants in the Non-423
Component for which applicable laws require that contributions to the Plan by
participants be segregated from the Companys general corporate funds and/or
deposited with an independent third party. Until shares of Common Stock are
issued, participants will only have the rights of an unsecured creditor with
respect to such shares.
17.
Reports
. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually as promptly as practically feasible following an
Exercise Date, which statements will set forth the amounts of contributions, the
per share Purchase Price, the number of shares purchased and the remaining cash
balance, if any.
18.
Adjustments Upon
Changes in Capitalization
. In the
event that any dividend or other distribution (whether in the form of cash,
shares of Common Stock, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of shares of Common
Stock or other securities of the Company, or other change in the corporate
structure of the Company that affects the shares of Common Stock, then the Board
or a committee appointed by the Board shall, in such manner as it may deem
equitable, adjust the number and class of shares of Common Stock (or other
securities, property or cash) that may be delivered under the Plan, and the
number, class, and price of shares of Common Stock subject to any option under
the Plan which has not yet been exercised, as determined by the Board or a
committee appointed by the Board (in its sole discretion) to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan.
19.
Amendment or
Termination
.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 18 hereof, no such termination can affect
options previously granted, provided that an Offering Period may be terminated
by the Board or a committee appointed by the Board on an Exercise Date if the
Board or its committee, as applicable, determines that the termination of the
Offering Period or the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 18 and this Section 19 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
applicable law, regulation or stock exchange rule), the Company shall obtain
shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding or contributing to
the Plan in excess of the amount designated by a participant in order to adjust
for delays or mistakes in the Companys processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participants Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
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(c) In the event the Board or a committee appointed by the Board
determines that the ongoing operation of the Plan may result in unfavorable
financial accounting consequences, the Board or a committee appointed by the
Board may, in its discretion and, to the extent necessary or desirable, modify,
amend or terminate the Plan to reduce or eliminate such accounting consequence
including, but not limited to:
(i) amending the Plan to conform with the safe harbor definition under
the Financial Accounting Standards Board Accounting Standards Codification Topic
718 (or any successor thereto), including with respect to an Offering Period
underway at the time;
(ii) altering the Purchase Price for any Offering Period including an
Offering Period underway at the time of the change in Purchase Price;
(iii) shortening any Offering Period by setting a New Exercise Date,
including an Offering Period underway at the time of the action by the Board or
a committee appointed by the Board;
(iv) reducing the maximum percentage of Compensation a Participant may
elect to set aside as payroll deductions or other contributions; and
(v) reducing the maximum number of shares of Common Stock a Participant
may purchase during any Offering Period.
Such modifications or amendments shall not require stockholder approval
or the consent of any Plan participants.
20.
Notices
. All notices or other communications by a
participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.
21.
Stockholder
Approval
. If required by Section
19, any amendment to the Plan shall be subject to approval by the stockholders
of the Company within twelve months before or after the date such amendment is
adopted. If such stockholder approval is obtained at a duly held stockholders
meeting, it may be obtained by the affirmative vote of the holders of a majority
of the outstanding shares of the Company present or represented and entitled to
vote thereon, which approval shall be:
(a) solicited substantially in accordance with Section 14(a) of the Act
and the rules and regulations promulgated thereunder, or solicited after the
Company has furnished in writing to the holders entitled to vote substantially
the same information concerning the Plan as that which would be required by the
rules and regulations in effect under Section 14(a) of the Act at the time such
information is furnished; and
(b) obtained at or prior to the first annual meeting of stockholders held
subsequent to the later of (i) the first registration of Common Stock under
Section 12 of the Act, or (ii) the acquisition of an equity security for which
exemption is claimed.
In the case of approval by written consent, it must be obtained in
accordance with applicable state law.
22.
Conditions Upon
Issuance of Shares
. Shares shall
not be issued with respect to an option unless the exercise of such option and
the issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the U.S. Securities Act of 1933, as amended, the Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
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As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23.
Dissolution or
Liquidation
. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a New Exercise Date, and shall terminate
immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board or a committee appointed by
the Board. The New Exercise Date shall be before the date of the Companys
proposed dissolution or liquidation. The Board or a committee appointed by the
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participants
option has been changed to the New Exercise Date and that the participants
option shall be exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering Period as provided
in Section 10 hereof.
24.
Merger or Asset
Sale
. In the event of a merger of
the Company with or into another corporation or the sale of substantially all of
the assets of the Company, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a New Exercise Date and such
Offering Period shall end on the New Exercise Date. The New Exercise Date shall
be before the date of the Companys proposed merger or asset sale. The Board or
a committee appointed by the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participants option has been changed to the New Exercise Date and
that the participants option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
25.
Code Section
409A
. The Code Section 423(b)
Plan is exempt from the application of Section 409A of the Code. The Non-423(b)
Component is intended to be exempt from Section 409A of the Code under the
short-term deferral exception and any ambiguities shall be construed and
interpreted in accordance with such intent. In the case of a participant who
would otherwise be subject to Section 409A of the Code, to the extent an option
to purchase shares of Common Stock or the payment, settlement or deferral
thereof is subject to Section 409A of the Code, the option to purchase shares of
Common Stock shall be granted, paid, exercised, settled or deferred in a manner
that will comply with Section 409A of the Code, including the final regulations
and other guidance issued with respect thereto, except as otherwise determined
by the Board or a committee appointed by the Board. Notwithstanding the
foregoing, the Company shall have no liability to a participant or any other
party if the option to purchase Common Stock under the Plan that is intended to
be exempt from or compliant with Section 409A of the Code is not so exempt or
compliant or for any action taken by the Board or a committee appointed by the
Board with respect thereto.
26.
No Right to
Employment
. Participation in the
Plan by a participant will not be construed as giving a participant the right to
be retained as an employee of the Company or a Subsidiary, as applicable.
Further, the Company or a Subsidiary may dismiss a participant from employment
at any time, free from any liability or any claim under the Plan.
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27.
Severability
. If any
provision of the Plan is or becomes or is deemed to be invalid, illegal, or
unenforceable for any reason in any jurisdiction or as to any participant, such
invalidity, illegality or unenforceability will not affect the remaining parts
of the Plan, and the Plan will be construed and enforced as to such jurisdiction
or participant as if the invalid, illegal or unenforceable provision had not
been included.
28.
Compliance with
Applicable Laws
. The terms of
this Plan are intended to comply with all applicable laws and will be construed
accordingly.
29.
Governing
Law
. Except to the extent that
provisions of this Plan are governed by applicable provisions of the Code or any
other substantive provision of federal law, this Plan shall be construed in
accordance with, and shall be governed by, the substantive laws of the State of
California without regard to any provisions of California law relating to the
conflict of laws.
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Exhibit B
FORM OF CERTIFICATE OF
AMENDMENT
CERTIFICATE OF AMENDMENT
TO THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF QUANTUM CORPORATION
A Delaware
Corporation
Quantum Corporation, a
corporation organized and existing under the laws of the State of Delaware (the
Corporation
), hereby certifies that:
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1.
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The name
of this Corporation is Quantum Corporation.
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2.
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The date
of filing of this Corporations original Certificate of Incorporation with
the Secretary of State of Delaware was January 28, 1987. The most recent
Amended and Restated Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on August 8,
2007.
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3.
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Pursuant
to Section 242 of the Delaware General Corporation Law, this Certificate
of Amendment hereby amends the provisions of the Corporations Amended and
Restated Certificate of Incorporation by deleting the first paragraph of
Article IV and substituting therefor the two paragraphs set forth
below:
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This
Corporation is authorized to issue two classes of shares to be designated,
respectively, Common Stock and Preferred Stock. The total number of shares
of Common Stock that this Corporation is authorized to issue is
1,000,000,000
, with
a par value of $0.01 per share, and the total number of shares of
Preferred Stock that this Corporation is authorized to issue is
20,000,000
, with a par value of $0.01 per share. Upon
this Certificate of Amendment becoming effective pursuant to the Delaware
General Corporation Law (the Effective Time), the shares of Common Stock
issued and outstanding immediately prior to the Effective Time and the
shares of Common Stock held in the treasury of the Corporation immediately
prior to the Effective Time shall be reclassified as, and shall be
combined and changed into, a smaller number of shares such that each
[three (3) to eight (8), inclusive**] shares of issued Common Stock
immediately prior to the Effective Time shall be reclassified into and
become one (1) share of Common Stock. No fractional shares shall be issued
in connection with such reverse stock split. From and after the Effective
Time, certificates or book entry positions representing Common Stock
outstanding immediately prior to the Effective Time shall represent the
number of whole shares of Common Stock into which the Common Stock shall
have been reclassified pursuant to the foregoing provisions.
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The Board
of Directors of the corporation, subject to any restrictions contained in
Delaware law, the Bylaws, any preferences and relative, participating,
optional or other special rights of any outstanding class or series of
preferred stock of the Corporation and any qualification or restrictions
on the Common Stock created thereby, may declare and pay dividends upon
the shares of its capital stock. The directors of the Corporation may set
apart out of any of the funds of the Corporation available for dividends a
reserve or reserves for any proper purpose and may abolish any such
reserve.
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4.
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This
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation has been duly adopted by the stockholders of the Corporation
in accordance with the provisions of Section 242 of the Delaware General
Corporation Law.
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____________________
*
*
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These amendments
approve the combination of any whole number of shares of Common Stock
between and including three (3) and eight (8) into one (1) share of Common
Stock. By these amendments, the stockholders would approve each of the six
(6) amendments proposed by the Board of Directors. The Certificate of
Amendment filed with the Secretary of State of the State of Delaware will
include only that amendment determined by the Board of Directors (or a
duly authorized committee thereof) to be in the best interests of the
Corporation and its stockholders. The other five (5) proposed amendments
will be abandoned pursuant to Section 242(c) of the Delaware General
Corporation Law. The Board of Directors (or a duly authorized committee
thereof) may also elect not to do any reverse split in which case all six
(6) proposed amendments will be abandoned. In accordance with the
resolutions to be adopted by the stockholders, the Board of Directors will
not implement any amendment providing for a different split ratio.
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IN WITNESS WHEREOF, Quantum
Corporation has caused this Certificate of Amendment to the Amended and Restated
Certificate of Incorporation to be signed by Shawn D. Hall its Secretary and
General Counsel, this ____ day of , 2017.
QUANTUM CORPORATION
/s/ Shawn D. Hall
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Shawn D. Hall
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Secretary and General
Counsel
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PRELIMINARY PROXY CARDSUBJECT TO COMPLETION
QUANTUM
CORPORATION
224 AIRPORT PARKWAY,
SUITE 550
SAN JOSE, CA 95110
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to
transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY
OF FUTURE PROXY MATERIALS
If you would like to
reduce the costs incurred by our company in mailing proxy materials, you can
consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand
when you call and then follow the instructions.
VOTE BY
MAIL
Mark, sign and date
your proxy card and return it in the postage-paid envelope we have
provided.
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR
RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION
ONLY
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White Proxy
Card
QUANTUM
CORPORATION
The Board of Directors
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Recommends a Vote "For" each of the Nominees named in Proposal
1
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For
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Withhold
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For All
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All
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All
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Except
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☐
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☐
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☐
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Vote on Directors
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1.
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Proposal to elect to the Board of Directors.
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01)
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Robert J. Anderson
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02)
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Paul
R. Auvil III
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03)
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Louis
DiNardo
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04)
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Jon W.
Gacek
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05)
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David A.
Krall
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06)
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Gregg J.
Powers
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07)
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David E.
Roberson
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To withhold authority
to vote for any individual nominee(s), mark For All Except and write the
number(s) of the nominee(s) on the line below.
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The Board of Directors Recommends
a
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Vote "For" Proposals 2, 3, 5 and 6 and every
1 YEAR
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For
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Against
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Abstain
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on Proposal 4
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2.
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Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
the independent registered public accounting firm of the Company for the
fiscal year ending March 31, 2017.
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□
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□
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□
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3.
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Proposal to adopt a resolution approving, on an advisory basis, the
compensation of the Company's named executive officers.
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□
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□
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□
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4.
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Advisory vote on the Frequency of Future Advisory Votes on Named
Executive Officer Compensation
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1 Year
□
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2 Years
□
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3 Years
□
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Abstain
□
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For
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Against
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Abstain
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5.
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Proposal to approve and ratify an amendment
to the Company's Employee Stock Purchase Plan.
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□
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□
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□
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6.
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Proposal to adopt an amendment to the Companys Amended and
Restated Certificate of Incorporation to effectuate a reverse stock split
of our issued and outstanding shares of Common Stock at a ratio of between
1-for-3 and 1-for-8, inclusive, which ratio will be selected at the sole
discretion of our Board of Directors at any whole number in the above
range (the Reverse Stock Split), with cash paid for any fractional
shares that would otherwise be issued as a result of the reverse stock
split; provided, that our Board of Directors may abandon the Reverse Stock
Split in its sole discretion;
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□
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□
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□
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Unless otherwise specified, this proxy authorizes the proxies named
on the reverse side to cumulate votes that the undersigned is entitled to
cast at the annual meeting in connection with the election of directors
and allocate them among director nominees for which you do not withhold
authority to vote by voting For All Except and naming such nominee or
Withhold All. To provide specific directions with regard to cumulative
voting, including to direct that the proxy holders cumulate votes with
respect to a specific board nominee or nominees as explained in the proxy
statement or to withhold authority to cumulate votes, mark the box to the
right and write your instructions. If you wish to direct that the proxy
holders cumulate votes with respect to a specific Board nominee or
nominees, please indicate the name(s) and number of votes to be given to
such Board nominee.
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□
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CUMULATE
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The shares represented by
this proxy, when properly executed, will be voted in the manner directed herein
by the undersigned Stockholder(s).
If no direction is made, this proxy will be voted FOR each of the
nominees named in proposal 1, FOR proposals 2, 3, 5 and 6 and every 1 year for
proposal 4.
If any other matters
properly come before the meeting or any adjournment thereof, the persons named
in this proxy are authorized to vote in their discretion.
Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor, administrator, or
other fiduciary, please give full title as such. Joint owners should each sign
personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners), Title
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Date
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(See Reverse Side)
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White Proxy Card
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QUANTUM
CORPORATION
Annual Meeting of
StockholdersMarch 31, 2017
THIS PROXY IS
SOLICITED BY THE BOARD OF DIRECTORS
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The undersigned
stockholder(s) of Quantum Corporation, a Delaware Corporation, hereby
acknowledge(s) receipt of the Proxy Statement dated __________, 2017, and hereby
appoint(s) Jon W. Gacek and Shawn D. Hall, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of Quantum Corporation, to be held on March 31, 2017 at
____________________, Pacific Time, at
______________________________________________, and at any adjournments or
postponements thereof, and to vote (including cumulatively, if required) all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on all matters set forth on the reverse
side.
In accordance with the
discretion and at the instruction of the Board of Directors, the proxy holder is
authorized to act upon all matters incident to the conduct of the meeting and
upon other matters that properly come before the meeting subject to the
conditions described in Quantums Proxy Statement concerning the Annual Meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. Where no direction is given, except in the case
of broker non-votes, the shares represented by this proxy will be voted in
accordance with the Board of Directors (or an authorized committee thereof)
recommendations. Unless you specifically instruct otherwise, this proxy confers
discretionary authority to cumulate votes for any or all of the nominees for
election of directors for which authority to vote has not been withheld by
voting For All Except and naming one or more nominees or voting Withhold
All, in accordance with the instruction of the Board of Directors. At the
Annual Meeting, unless you specifically instruct otherwise, the Board of
Directors will instruct the proxy holders to cast the votes as to which voting
authority has been granted so as to provide for the election of the maximum
number of the Company's director nominees, and will provide instructions as to
the order of priority of our nominees in the event that fewer than all of our
nominees are elected. Except as set forth in the prior sentence, the Board of
Directors has not yet made any determination as to the order of priority of
candidates to which it will allocate votes assuming cumulative voting applies,
and expects to make this determination, if necessary, at the Annual Meeting. If
any nominee named on the reverse side for good cause will not serve or is unable
to serve as a director, the persons named as proxies shall have the authority to
vote for any other person who may be nominated at the Instruction and discretion
of the Board of Directors or an authorized committee thereof.
PLEASE MARK, SIGN AND
DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. (Continued,
and to be signed and dated, on the reverse side.)
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