-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V9+AFMF3FzaGSb8ofLYQr3ZXO3cFDpzJRMMkQAt7O1kjUGIAOgDtAy0AJX/LixoD N+R96GT+hiluYyicRWz8GQ== 0000927016-98-001068.txt : 19980323 0000927016-98-001068.hdr.sgml : 19980323 ACCESSION NUMBER: 0000927016-98-001068 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980506 FILED AS OF DATE: 19980320 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMC CORP CENTRAL INDEX KEY: 0000790070 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 042680009 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-09853 FILM NUMBER: 98569530 BUSINESS ADDRESS: STREET 1: 171 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748-9103 BUSINESS PHONE: 5084351000 MAIL ADDRESS: STREET 1: 171 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748-9103 DEF 14A 1 NOTICE & PROXY [LOGO OF EMC CORPORATION APPEARS HERE] March 20, 1998 Dear Stockholder: We cordially invite you to attend our 1998 Annual Meeting, which will be held on Wednesday, May 6, 1998, at 10:00 a.m. at the Company's facility at 5-9 Technology Drive, Milford, Massachusetts. At this meeting you are being asked to elect three Class II members to the Board of Directors for a three-year term, to approve the addition of 3,500,000 shares of common stock to the 1993 Stock Option Plan and to approve an amendment to the 1989 Employee Stock Purchase Plan. Your Board of Directors recommends that you vote in favor of each of these proposals. You should read with care the attached Proxy Statement, which contains detailed information about these proposals. Your vote is important regardless of the number of shares you own. Accordingly, we urge you to complete, sign, date and return your Proxy card promptly in the enclosed postage-paid envelope. The fact that you have returned your Proxy in advance will in no way affect your right to vote in person should you attend the meeting. However, by signing and returning the Proxy, you have assured representation of your shares. Following completion of the scheduled business, we will report on the Company's operations and plans and answer questions from the floor. We hope that you will be able to join us on May 6th. Very truly yours, /s/ Richard J. Egan RICHARD J. EGAN Chairman of the Board EMC CORPORATION NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS MAY 6, 1998 To the Stockholders: Notice is hereby given that the Annual Meeting of Stockholders of EMC Corporation, a Massachusetts corporation ("EMC" or the "Company"), will be held at the Company's facility at 5-9 Technology Drive, Milford, Massachusetts, on Wednesday, May 6, 1998, at 10:00 a.m. for the following purposes: 1. To elect three members to the Board of Directors to serve for a three- year term as Class II Directors. 2. To amend the Company's 1993 Stock Option Plan to increase the number of shares available for grant under the plan by 3,500,000 shares. 3. To amend the Company's 1989 Employee Stock Purchase Plan to provide that employees whose customary employment is 20 hours or less per week shall be ineligible to participate in the plan. 4. To transact any and all other business that may properly come before the meeting or any adjournments thereof. All stockholders of record at the close of business on March 9, 1998 are entitled to notice of and to vote at this meeting and any adjournments thereof. Stockholders are requested to sign and date the enclosed Proxy and return it in the enclosed envelope. The envelope requires no postage if mailed in the United States. EMC's Annual Report on Form 10-K for 1997 is enclosed herewith. By order of the Board of Directors THOMAS J. DOUGHERTY, Clerk March 20, 1998 EMC CORPORATION PROXY STATEMENT ---------------- INFORMATION CONCERNING SOLICITATION AND VOTING GENERAL. This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of EMC Corporation, a Massachusetts corporation ("EMC" or the "Company"), for the Annual Meeting of Stockholders of EMC to be held May 6, 1998, and any adjournments thereof, for the purposes set forth in the Notice of the Annual Meeting. EMC was incorporated in 1979, and its principal executive offices are located at 35 Parkwood Drive, Hopkinton, Massachusetts 01748. This Proxy Statement is first being distributed to stockholders on or about March 20, 1998. All per share amounts of the common stock, $.01 par value (the "Common Stock"), of the Company noted in this Proxy Statement have been adjusted to give effect to all stock splits. VOTING RIGHTS AND OUTSTANDING SHARES. As of March 9, 1998, EMC had outstanding 497,102,028 shares of Common Stock. Each share of Common Stock entitles the holder of record thereof at the close of business on March 9, 1998 to one vote on each of the matters to be voted upon at the meeting. The expenses of preparing, printing and assembling the materials used in the solicitation of proxies will be borne by EMC. In addition to the solicitation of proxies by use of the mails, EMC may utilize the services of certain of its officers and employees (who will receive no compensation therefor in addition to their regular salaries) to solicit proxies personally and by mail, telephone and telegraph from brokerage houses and other stockholders. Also, the Company has retained D.F. King & Co., Inc. to aid in the solicitation of proxies. D.F. King & Co., Inc. will receive a fee and reimbursement of expenses estimated not to exceed $10,000 in the aggregate, all of which will be paid by the Company. If the enclosed form of Proxy is properly signed and returned, the shares represented thereby will be voted. If the stockholder specifies in the Proxy how the shares are to be voted, they will be voted as specified. If the stockholder does not specify how the shares are to be voted, they will be voted in favor of electing as Class II Directors, the three persons listed under "Election of Directors" to serve until their successors are elected and qualified and in favor of each of the additional items set forth in the accompanying Notice of the Annual Meeting. Should any person so named be unable or unwilling to serve as director, the persons named in the enclosed form of Proxy for the Annual Meeting intend to vote for such other person as management may recommend. Any stockholder has the right to revoke his or her Proxy at any time before it is voted by attending the meeting and voting in person or filing with the Clerk of the Company either a written instrument revoking the Proxy or another newly executed proxy bearing a later date. An automated system administered by the Company's transfer agent tabulates all votes cast at the Annual Meeting. Abstentions and broker non-votes are each included in the determination of the number of shares present and voting for purposes of determining the presence of a quorum. Each is tabulated separately. If a quorum is present, the three nominees who receive the greatest number of votes properly cast will be elected as Class II Directors. Neither abstentions nor broker non-votes will have any effect upon the outcome of voting with respect to the election of directors. A broker non-vote will have no effect upon the outcome of voting on Proposals 2 or 3. However, an abstention will have the same effect as a vote against Proposals 2 and 3. As of the date hereof, management of EMC has no knowledge of any business other than that described in the Notice of the Annual Meeting that will be presented for consideration at such meeting. If any other business should come before such meeting, the persons appointed by the enclosed form of Proxy shall have discretionary authority to vote all such Proxies as they shall decide. PROPOSAL 1 ELECTION OF DIRECTORS THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW. Pursuant to Section 50A of Chapter 156B of the Massachusetts General Laws, the Board of Directors is currently divided into three classes, having staggered terms of three years each. Under Section 50A and the By-laws of the Company, the Board of Directors may determine the total number of directors and the number of directors to be elected at any annual meeting of stockholders or special meeting in lieu thereof. The Board of Directors has fixed at eight the total number of directors and has fixed at three the number of Class II Directors to be elected at the 1998 Annual Meeting. Of the current total of eight directors, three Class II Directors have terms expiring at the 1998 Annual Meeting, three Class III Directors have terms expiring at the 1999 Annual Meeting and two Class I Directors have terms expiring at the 2000 Annual Meeting. The three directors whose terms expire at the 1998 Annual Meeting have been nominated by the Board of Directors for election at such meeting. All of the nominees for director are now Class II members of the Board of Directors. Each Class II Director elected at the 1998 Annual Meeting will serve until the 2001 Annual Meeting of Stockholders or Special Meeting in lieu thereof, and until that director's successor is elected and qualified. INFORMATION WITH RESPECT TO NOMINEES. Set forth below is information with respect to each nominee for Class II Director to be elected at the Annual Meeting and for each Class III Director and Class I Director. All of the directors were previously elected by the stockholders. NOMINEES TO SERVE AS DIRECTORS FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING (CLASS II DIRECTORS) JOHN R. EGAN Mr. Egan, age 40, has been Executive Vice President, Products and Offerings of the Company since May 1997. In May 1992, he was elected a Director of the Company. From October 1986 to January 1992, he served in a number of executive positions with the Company including Executive Vice President, Operations and Executive Vice President, International Sales. From January 1992 to June 1996, he was Executive Vice President, Sales and Marketing of EMC. He was on a leave of absence as an executive officer of the Company from June 1996 to May 1997. Mr. Egan is a member of the Mergers and Acquisitions Committee of EMC. 2 JOSEPH F. OLIVERI Mr. Oliveri, age 49, has been a Director of the Company since March 1993. From March 1983 to the present, Mr. Oliveri has been President and Chief Executive Officer of Interface Electronics Corporation, a distributor of a diversified group of semiconductor, electronic component and subsystem component products. Mr. Oliveri is a member of the Audit Committee and the Stock Repurchase and Bond Redemption Oversight Committee of EMC. MICHAEL C. RUETTGERS Mr. Ruettgers, age 55, has been President of the Company since October 1989 and in January 1992 he also became Chief Executive Officer of EMC. In May 1992, he was elected a Director of the Company. Mr. Ruettgers was Executive Vice President, Operations of EMC from July 1988 to October 1989 and Chief Operating Officer from October 1989 to January 1992. Before joining EMC, he was Chief Operating Officer at Technical Financial Services, Incorporated, a high-technology consulting company, from February 1987 to October 1989. He is also a Director of Commonwealth Energy System, a public utility, and EG&G Inc., a diversified technology company. DIRECTORS SERVING A TERM EXPIRING AT THE 1999 ANNUAL MEETING (CLASS III DIRECTORS) MICHAEL J. CRONIN Mr. Cronin, age 59, has been a Director of the Company since May 1990. He has been Chief Executive Officer of Cognition Corporation, a CAD/CAM software supplier, from September 1987 to the present. Mr. Cronin is also Chairman of the Board of Cognition Corporation. He was Chief Executive Officer and President of Automatix, Inc., an industrial vision systems manufacturer, from June 1984 to September 1990. He is also a Director of Leeman Labs, Inc., a manufacturer of analytical instruments for the environmental and industrial markets. Mr. Cronin is a member of the Audit Committee, the Executive Compensation and Stock Option Committee and the Mergers and Acquisitions Committee of EMC. MAUREEN E. EGAN Mrs. Egan, age 60, has been a Director of the Company since March 1993. She was one of the Company's initial investors and its first employee. Mrs. Egan was employed in a number of administrative capacities from the Company's inception in 1979 until her retirement in 1985. Mrs. Egan is a founder and member of the Hopkinton Technology for Education Trust, a non- profit organization in Hopkinton, Massachusetts. W. PAUL FITZGERALD Mr. Fitzgerald, age 57, has been a Director of the Company since March 1991. From January 1988 to March 1995, he was Senior Vice President, Finance and Administration and Chief Financial Officer of EMC. From October 1991 to March 1995, Mr. Fitzgerald was Treasurer of the Company. From January 1985 to January 1988, he was Vice President, Finance of EMC. Mr. Fitzgerald retired as an employee of the Company in October 1995. Mr. Fitzgerald is a member of the Audit Committee and the Stock Repurchase and Bond Redemption Oversight Committee of EMC. 3 DIRECTORS SERVING A TERM EXPIRING AT THE 2000 ANNUAL MEETING (CLASS I DIRECTORS) RICHARD J. EGAN Mr. Egan, age 62, is a founder of the Company and has served as a Director since the Company's inception in 1979. He was elected Chairman of the Board in January 1988. Prior to January 1988, he was also President of EMC. From 1979 to January 1992 he was Chief Executive Officer of the Company. He is also a Director of Cognition Corporation, a CAD/CAM software supplier, Boston Edison Company, a public utility, and Shiva Corporation, a provider of remote access hardware, software and services. Mr. Egan is a member of the Executive Compensation and Stock Option Committee and the Stock Repurchase and Bond Redemption Oversight Committee of EMC. JOHN F. CUNNINGHAM Mr. Cunningham, age 55, has been a Director of the Company since November 1991. He was a consultant to the Company from January 1992 to December 1993. He has been Chairman and Chief Executive Officer of Cunningham & Company, a corporation involved in private investments and financial consulting, from February 1989 to the present. From July 1985 to January 1989, he was Chairman of the Board and Chief Executive Officer of Computer Consoles, Inc., a manufacturer of computers and telecommunications equipment. Prior to such time, Mr. Cunningham served in various capacities at Wang Laboratories, Inc., a manufacturer of computers, most recently as President and Chief Operating Officer and a Director. Mr. Cunningham is a member of the Executive Compensation and Stock Option Committee, the Mergers and Acquisitions Committee and the Stock Repurchase and Bond Redemption Oversight Committee of EMC. During the fiscal year ended December 31, 1997, the EMC Board of Directors held eight meetings. Each incumbent director who is a nominee for election at the Annual Meeting attended all of the meetings of the Board of Directors and the committees of which they were a member in 1997. PROPOSAL 2 APPROVAL OF AMENDMENT TO THE COMPANY'S 1993 STOCK OPTION PLAN THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2. On May 12, 1993, the Company's stockholders adopted and approved the Company's 1993 Stock Option Plan (the "1993 Plan") and 12,000,000 shares of Common Stock were reserved for issuance thereunder to employees of the Company and its subsidiaries. On May 10, 1995 and on May 7, 1997, the 1993 Plan was amended to include an additional 4,000,000 and 12,000,000 shares of Common Stock, respectively. Currently, the total number of shares of Common Stock that are authorized to be issued under the 1993 Plan is 28,000,000. As of February 28, 1998, 6,549,494 shares remained available for future option grants under this plan. On January 21, 1998, the Board of Directors approved an amendment to the 1993 Plan to increase the number of shares available under the plan by 3,500,000 shares. The affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting is required to approve this amendment to the 1993 Plan. The Company's forecast for the 1993 Plan indicates that there are currently sufficient shares for projected grants of options only through approximately the end of 1998. Additional shares are needed for use 4 in the 1993 Plan so that stock option grants can continue to be made to attract and retain key employees of the Company and its subsidiaries. If this amendment to the 1993 Plan is not approved by the stockholders, no grants of options will be made under the 1993 Plan once the presently available number of options are granted. Members of the Board of Directors of the Company who are not employed as regular salaried officers or employees of the Company may not participate in the 1993 Plan. The closing price of a share of Common Stock on the New York Stock Exchange on February 27, 1998 was $37.75. The proceeds received by the Company from the sale of Common Stock pursuant to the 1993 Plan will be used for the general corporate purposes of the Company. SUMMARY OF THE 1993 PLAN If the January 21, 1998 amendment adding 3,500,000 shares is approved, a total of 31,500,000 shares of Common Stock will be reserved for issuance to employees and officers of the Company and its subsidiaries under the 1993 Plan. Options granted pursuant to the 1993 Plan may, at the discretion of the Board of Directors or the Executive Compensation and Stock Option Committee (the "Compensation Committee"), be incentive stock options. The 1993 Plan is not qualified under Section 401(a) of the Internal Revenue Code (the "Code") and is not subject to the provisions of the Employee Retirement Income Security Act of 1974. The Board of Directors or the Compensation Committee approves all transactions under the 1993 Plan and determines the provisions of options to be granted under the 1993 Plan. The Compensation Committee was appointed by and serves at the pleasure of the Board of Directors and, subject to the 1993 Plan, each of the Board of Directors and the Compensation Committee has full authority to interpret the terms of the 1993 Plan and options granted under the 1993 Plan, to adopt, amend and rescind rules and guidelines for the administration of the 1993 Plan and for its own acts and proceedings and to decide all questions and settle all controversies and disputes which may arise in connection with the 1993 Plan; provided that any change to the terms of an option will be approved by the Board of Directors to the extent such change would be deemed to be a new option grant or such terms relate to a subsequent transaction that would not be exempt from Section 16(b) of the Securities Exchange Act of 1934, in the absence of such approval. The Board of Directors or the Compensation Committee approves conclusively, consistent with the 1993 Plan, the individuals to receive options, the number and exercise price of the options, the time when the options become exercisable, and whether such options will be incentive stock options. The shares of Common Stock subject to the 1993 Plan may be adjusted to give effect to stock dividends, stock splits and the like. The Common Stock delivered to option holders upon the exercise of options may, in the discretion of the Board of Directors, be either authorized but unissued shares or shares held by the Company in treasury. Each of the Board of Directors and the Compensation Committee may, at its discretion, approve an option grant to an eligible person under the 1993 Plan. An eligible person to participate in the 1993 Plan is any employee of the Company or any of its subsidiaries. As of February 28, 1998, there were approximately 6,200 employees eligible to participate in the 1993 Plan and approximately 3,400 employees participating in the 1993 Plan. The number of options which may be granted to any eligible person is also within the discretion of each of the Board of Directors and the Compensation Committee, subject to certain conditions concerning incentive stock options. 5 Options granted under the 1993 Plan are exercisable at such time or times as the Board of Directors or the Compensation Committee shall determine. However, no incentive stock option may be exercisable after ten years from the date of its grant (five years in the case of a 10% or more stockholder). Under the 1993 Plan, options are transferable only by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order, and may be exercised by a person other than the option holder only in the circumstances outlined below; provided that the Board of Directors or the Compensation Committee may allow for transferability of nonstatutory stock options to immediate family members of the option holder or to trusts, partnerships or other entities controlled by and of which the beneficiaries are immediate family members of the option holder. Under the 1993 Plan, all previously unexercised options terminate and are forfeited automatically upon the termination of the option holder's employment with the Company, unless the Compensation Committee or the Board of Directors specifies otherwise. However, if an option holder dies at a time when he or she is entitled to exercise an option, then the portion formerly exercisable by the option holder may be exercised by the option holder's executor or administrator, or by the person to whom the option is transferred under the applicable laws of descent or distribution, within three years of the death of the option holder, subject, in the case of incentive stock options, to the limitations stated above on their exercise. Shares which are not delivered because of termination of options may be reused for other options. The exercise price of stock options granted under the 1993 Plan is determined by the Board of Directors or the Compensation Committee on the date of grant, subject to limitations contained in the 1993 Plan, including the limitation that the exercise price may not be less than par value. However, there are certain pricing restrictions for incentive stock options as set forth below. Payment for shares to be granted upon exercise of options must be made in full in cash or by bank draft, check or money order before the shares are delivered. A person electing to exercise an option must give written notice to the Company of the election, accompanied by any documents required by the Board of Directors or the Compensation Committee and the purchase price. The Board of Directors or the Compensation Committee may require the person to fulfill any conditions it stipulates that are not inconsistent with the terms of the 1993 Plan. When options other than incentive stock options are exercised or any options are exercised by an individual subject to taxation in a foreign jurisdiction, the Company may require the option holder to remit to the Company applicable taxes prior to the delivery of any shares of Common Stock. If at the time an incentive stock option is exercised, the Compensation Committee determines that the Company could be liable for withholding applicable taxes upon a disposition of the underlying Common Stock, the Compensation Committee may require as a condition of exercise that the option holder agree to notify the Company of any disposition of the underlying Common Stock and provide the Company with such security as the Compensation Committee deems adequate to meet the potential liability of the Company for withholding of taxes. The Board of Directors or the Compensation Committee may at any time discontinue granting options under the 1993 Plan. The Board of Directors may amend the 1993 Plan except that no such amendment may adversely affect the rights of any option holder without his or her consent and except that no such amendment will, without the approval of the stockholders of the Company, increase the number of shares available under the 1993 Plan, change the group of employees eligible to receive options, reduce the exercise price of outstanding incentive stock options, reduce the price at which future incentive stock options may be granted, extend the time within which options may be granted, alter the 1993 Plan so that options intended to qualify as incentive stock options under the Code would not do so, or change the amendment provisions of the 1993 Plan. 6 No grant of incentive stock options can be made under the 1993 Plan after May 12, 2003, but options granted before that day may be exercised after it. In the event of a stock dividend, stock split or other change in corporate structure or capitalization affecting the Common Stock, the number and kind of shares of stock or securities of the Company to be subject to the 1993 Plan and the options then outstanding or to be granted thereunder, and the option price, will be appropriately adjusted by the Compensation Committee, whose determination will be binding on all persons. In the event of a dissolution, liquidation, consolidation or merger in which the Company is not the surviving corporation, all outstanding options will thereupon terminate, provided that at least twenty days prior to the effective date of any such dissolution, liquidation, consolidation or merger, the Company will either (i) make all outstanding options immediately exercisable or (ii) arrange to have the surviving corporation grant replacement options to the option holders. The exercise price of incentive stock options may not be less than 100% of the fair market value of the Common Stock at the time the option is granted, except as stated otherwise below. The aggregate fair market value, determined at the time the option is granted, of the stock for which any person may be granted incentive stock options which become exercisable for the first time by such person in any calendar year cannot exceed the sum of $100,000 (determined at the time such option is granted). No incentive stock option will be granted to a person who is not an "employee" as defined in the applicable provisions of the Code and regulations issued thereunder. No incentive stock option will be granted to any person who at the time of the grant owns, directly or indirectly through application of the attribution rules of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its subsidiaries unless the option price at the time of the grant is at least 110% of the fair market value of the stock subject to the option and the period of the option does not exceed five years from the date of grant. FEDERAL INCOME TAX CONSEQUENCES In general, neither the grant nor the exercise of an incentive stock option granted under the 1993 Plan will result in taxable income to the option holder or a deduction to the Company. If the option holder does not dispose of stock received upon exercise of an incentive stock option within two years from the date the option is granted and within one year after the date of exercise, any later sale of such stock will result in a capital gain or loss. If shares received upon exercising an incentive stock option are disposed of before the holding period requirements described above have been satisfied, the option holder will generally realize ordinary income at the time of disposition of the stock. The amount of such ordinary income will generally be equal to the difference between the fair market value of the stock on the date of exercise and the option price. In the case of a disqualifying disposition which is a sale with respect to which loss (if sustained) would be recognized, then the amount of ordinary income will not exceed the excess of the amount realized on such sale over the adjusted basis of the stock, that is, in general, the price paid for the stock. The Company will generally be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the option holder, subject to any necessary withholding and reporting requirements. Certain option holders exercising incentive stock options may become subject to the alternative minimum tax, under which the difference between (i) the fair market value of stock purchased under incentive stock options, determined on the date of exercise, and (ii) the exercise price will be an item of tax preference in the year of exercise for purposes of the alternative minimum tax. 7 Options granted under the 1993 Plan which are not incentive stock options are "nonstatutory options." No income results upon the grant of a nonstatutory option. When an option holder exercises a nonstatutory option he or she will realize ordinary income subject to withholding. Generally such income will be realized at the time of exercise and in an amount equal to the excess, measured at the time of exercise, of the then fair market value of the Common Stock over the option price. The Company will generally be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income realized by the option holder, subject to certain withholding and reporting requirements. The foregoing summary is not a complete description of the U.S. Federal income tax aspects of the 1993 Plan. Moreover, the foregoing summary relates only to Federal income taxes; there may also be Federal estate and gift tax consequences associated with the 1993 Plan, as well as foreign, state and local tax consequences. PROPOSAL 3 APPROVAL OF AMENDMENT TO THE COMPANY'S 1989 EMPLOYEE STOCK PURCHASE PLAN THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3. On May 10, 1989, the Company's stockholders adopted the Company's 1989 Employee Stock Purchase Plan (the "1989 Plan") and 1,800,000 shares of Common Stock were reserved for purchase thereunder. On May 8, 1991, May 12, 1993 and May 8, 1996, the 1989 Plan was amended to include an additional 3,600,000, 2,400,000 and 2,000,000 shares of Common Stock, respectively. Currently, the total number of shares of Common Stock that are authorized to be purchased under the 1989 Plan is 9,800,000. As of February 28, 1998, 1,923,464 of these shares remained available for future purchases under the 1989 Plan. On January 21, 1998, the Board of Directors approved an amendment to the 1989 Plan to provide that employees whose customary employment is 20 hours or less per week shall be ineligible to participate in the 1989 Plan. Stockholder approval of this amendment is required by the terms of the 1989 Plan and for the 1989 Plan to remain qualified under the Code. This modification to eligibility under the 1989 Plan is intended to make the 1989 Plan consistent with the Company's employment and benefits policies. The affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting is required to approve this amendment to the 1989 Plan. As of February 28, 1998 there were approximately 5,300 employees of the Company and its subsidiaries eligible to participate in the 1989 Plan and approximately 2,400 employees participating in the 1989 Plan. The Company cannot now determine the number of shares to be received by all current executive officers as a group and all employees, including all current officers, who are not executive officers, as a group, in the event they participate in the 1989 Plan. Members of the Board of Directors of the Company who are not employed as regular salaried officers or employees of the Company may not participate in the 1989 Plan. Since inception of the 1989 Plan there have been seventeen completed six-month offerings. The closing price of a share of Common Stock on the New York Stock Exchange on February 27, 1998 was $37.75. The proceeds received by the Company from the sale of Common Stock pursuant to the 1989 Plan will be used for the general corporate purposes of the Company. 8 SUMMARY OF THE 1989 PLAN A total of not more than 9,800,000 shares of Common Stock may be issued under the 1989 Plan. Such shares may be issued from the Company's authorized but unissued stock or may be shares of reacquired stock. The 1989 Plan provides for the Company to grant six-month options to participating employees to purchase shares. Each employee of the Company or a subsidiary of the Company having at least six months of continuous service on the date of grant of an option is eligible to participate in the 1989 Plan. However, any employee who immediately after the grant of an option would be deemed under the provisions of the Code to own 5% or more of the Common Stock will not be eligible to receive such an option. In addition, if the January 21, 1998 amendment is approved, employees whose customary employment is 20 hours or less per week shall be ineligible to participate in the 1989 Plan. Furthermore, no employee will be granted an option under the 1989 Plan which would permit his or her right to purchase shares to accrue at a rate which exceeds $25,000 in fair market value of Common Stock (determined at the time the option is granted) for any calendar year. Options are granted twice yearly, on January 1 and July 1, and are exercisable on the succeeding June 30 or December 31. Options are exercisable through accumulations of payroll deductions. The amount of the deductions are determined by the employee, but may not be less than 2% nor more than 10% of the employee's compensation (up to a maximum of $2,500 in each option period, less any amount rolled over from the preceding option period representing an amount in lieu of a fractional share). The number of shares acquired in a particular option period is determined by dividing the balance in the employee's withholding account on the last day of the period by the purchase price per share for the Common Stock determined under the 1989 Plan. In lieu of a fractional share, any remaining balance in an employee's withholding account at the end of an option period is rolled over to the opening balance for the next option period. The purchase price for shares is the lower of 85% of the fair market value of the Common Stock at the time of grant or 85% of said value at the time of exercise. In the event the number of shares then available under the 1989 Plan is otherwise insufficient, the number of shares each employee is entitled to purchase shall be proportionately reduced and the balance in each employee's withholding account shall be returned to such employee. An employee may at any time prior to exercise cancel his or her option, and upon such cancellation, all accumulated payroll deductions in the employee's withholding account shall be returned to him or her without interest. During an employee's lifetime, his or her rights in an option will be exercisable only by him or her and may not be sold, pledged, assigned, or otherwise transferred. The employee may elect to have the amount credited to his or her withholding account at the time of his or her death applied to the exercise of his or her option for the benefit of named beneficiaries. Nothing in the 1989 Plan is to be construed so as to give an employee the right to be retained in the service of the Company. In the event there is a change in the Common Stock due to a stock dividend, stock split, combination of shares, recapitalization, merger or other capital change, the aggregate number of shares available under the 1989 Plan and under any outstanding options, the option price and other relevant provisions of the 1989 Plan will be appropriately adjusted. The Company will have the right to amend the 1989 Plan at any time, but cannot make an amendment (other than as stated above) relating to the aggregate number of shares available under the 1989 Plan or the option price without the approval of the stockholders. The Company may suspend or terminate the 1989 Plan at any time, but such termination will not affect the rights of employees holding options at the time of termination. 9 The Compensation Committee administers the 1989 Plan, makes determinations regarding all questions arising thereunder, and adopts, administers, and interprets such rules and regulations relating to the 1989 Plan as it deems necessary or advisable. FEDERAL INCOME TAX CONSEQUENCES The 1989 Plan is intended to qualify as an "Employee Stock Purchase Plan" within the meaning of Section 423 of the Code. Under the Code, neither the grant of an option under the 1989 Plan nor the acquisition of shares upon exercise of such an option will result in taxable income to the employee or a deduction for the Company. The Federal income tax treatment of the employee's subsequent disposition of shares acquired under a 1989 Plan option ("Plan Shares") will vary depending upon the timing of the disposition. (For these purposes, a "disposition" includes any transfer of shares other than certain transfers at death, certain tax-free exchanges, or a mere pledge or hypothecation). If the employee disposes of Plan Shares within two years after the corresponding option was granted, or within one year after the Plan Shares were purchased, the employee will recognize ordinary income on the date of disposition--and the Company will receive a corresponding deduction--equal to the difference between the price that the employee paid for the Plan Shares and the fair market value of the Plan Shares on the date they were purchased. If, on the other hand, the employee disposes of Plan Shares after both of the periods specified above, or if the employee dies while owning the Plan Shares, then he or she will recognize ordinary income (on the date of disposition or death) only to the extent of the lesser of (i) the excess of the fair market value of the shares at the time the option was granted over the option price (computed as of the grant date); or (ii) the excess of the fair market value of the Plan Shares at the time of death or disposition over the purchase price. In this case, the Company will receive no corresponding deduction. The foregoing summary is not a complete description of the U.S. Federal income tax aspects of the 1989 Plan. Moreover, the foregoing summary relates only to Federal income taxes; there may also be Federal estate and gift tax consequences associated with the 1989 Plan, as well as foreign, state and local tax consequences. 10 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the Company's Common Stock owned on February 28, 1998 (i) by each person who is known by the Company to own beneficially more than 5% of the Company's Common Stock, (ii) by each of the Company's directors and nominees for director owning Common Stock in the Company, (iii) by each of the executive officers named in the Summary Compensation Table on page 13, and (iv) by all directors and executive officers as a group.
NUMBER OF SHARES PERCENT OF BENEFICIALLY OUTSTANDING NAME OF BENEFICIAL OWNER OWNED(1) SHARES - ------------------------ ------------ ----------- Richard J. Egan(2)................................... 6,117,600 1.2% Maureen E. Egan(3)................................... 1,010,002 ** Michael J. Cronin.................................... 6,000 ** John F. Cunningham................................... 36,000 ** John R. Egan*(4)..................................... 1,424,300 ** W. Paul Fitzgerald(5)................................ 100,371 ** Raymond Fortune(6)................................... 42,098 ** Michael A. Klayko(7)................................. 41,150 ** Joseph F. Oliveri*................................... 53,400 ** Michael C. Ruettgers*(8)............................. 1,161,210 ** FMR Corp.(9)......................................... 40,503,272 8.1 Putnam Investments, Inc.(10)......................... 25,287,942 5.1 All directors and executive officers as a group (13 persons)(11)........................................ 10,419,072 2.1
- -------- * Nominee for director ** Less than 1% (1) Except as otherwise noted, all persons have sole voting and investment power with respect to their shares. All amounts shown in this column include shares obtainable upon exercise of stock options exercisable within 60 days from the date of this table. (2) Excludes 2,434,302 shares held by Mr. Richard Egan's wife, Maureen E. Egan, and John R. Egan, as to which Mr. Richard Egan disclaims beneficial ownership. (3) Excludes 7,541,900 shares held by Mrs. Egan's husband, Richard J. Egan, and John R. Egan, as to which Mrs. Egan disclaims beneficial ownership. (4) Mr. John Egan is deemed to own 580,000 of these shares by virtue of a currently exercisable option to purchase these shares. (5) Mr. Fitzgerald is deemed to own 35,333 of these shares by virtue of a currently exercisable option to purchase these shares. (6) Excludes 10,902 shares held by Mr. Fortune's wife, as to which Mr. Fortune disclaims beneficial ownership. (7) Mr. Klayko is deemed to own 40,000 of these shares by virtue of currently exercisable options to purchase these shares. 11 (8) Mr. Ruettgers is deemed to own 480,000 of these shares by virtue of a currently exercisable option to purchase these shares. Excludes 4,800 shares owned by Mr. Ruettgers' children, as to which he disclaims beneficial ownership. (9) Based solely on the Schedule 13G filed jointly by FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson and Fidelity Management & Research Company dated February 14, 1998 indicating that (i) Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp., beneficially owns 35,976,021 shares of Common Stock as a result of serving as investment adviser to various investment companies and as a result of acting as sub- adviser to Fidelity American Special Situations Trust; (ii) Fidelity Management Trust, a wholly-owned subsidiary of FMR Corp., beneficially owns 4,091,151 shares of Common Stock as a result of serving as investment manager to certain institutional accounts; (iii) Fidelity International Limited beneficially owns 471,000 shares of Common Stock as a result of serving as investment adviser to various non-U.S. investment companies; (iv) FMR Corp., through its relationships with the foregoing entities, has the sole power to vote or direct the voting of 3,522,722 of these shares and the sole power to dispose of or direct the disposition of 40,503,272 of these shares; and (v) Mr. Johnson, through his relationship with FMR Corp., has the sole power to vote or direct the voting of 3,051,722 of these shares and the sole power to dispose of or direct the disposition of 40,503,272 of these shares. (10) Based solely on the Schedule 13G filed jointly by Marsh & McLennan Companies, Inc., Putnam Investments, Inc., Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc. dated January 16, 1998 indicating that (i) of the 25,287,942 shares of Common Stock beneficially owned by Putnam Investments, Inc., 21,243,914 shares are beneficially owned by Putnam Investment Management, Inc. and 4,044,028 shares of Common Stock are beneficially owned by The Putnam Advisory Company, Inc., both registered investment advisers and wholly-owned subsidiaries of Putnam Investments, Inc.; (ii) with respect to 2,557,136 shares, Putnam Investments, Inc. and The Putnam Advisory Company, Inc. have shared power to vote or direct the voting of such shares; (iii) Putnam Investments, Inc. and Putnam Investment Management, Inc. have shared power to dispose of or direct the disposition of 21,243,914 shares; and (iv) Putnam Investments, Inc. and The Putnam Advisory Company, Inc. have shared power to dispose of or direct the disposition of 4,044,028 shares. Putnam Investments, Inc. is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (11) Includes 1,314,293 shares of Common Stock beneficially owned by all executive officers and directors as a group based upon stock options exercisable within 60 days from the date of this table. Excludes shares as to which the named individuals have disclaimed beneficial ownership as described above. The address of all persons listed above other than FMR Corp. and Putnam Investments, Inc. is c/o EMC Corporation, 171 South Street, Hopkinton, Massachusetts 01748. The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109. The address of Putnam Investments, Inc. is One Post Office Square, Boston, Massachusetts 02109. 12 COMPENSATION OF EXECUTIVE OFFICERS The following table discloses compensation received by the Company's Chief Executive Officer and the four remaining most highly paid executive officers for the three fiscal years ended December 31, 1997. SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM COMPENSATION COMPENSATION --------------------------------------------- ------------ AWARDS OTHER ANNUAL ------------ ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($) - --------------------------- ---- --------- ----------- --------------- ------------ --------------- Michael C. Ruettgers..... 1997 594,616 966,800 51,844(2) 500,000 2,000(3) President, Chief 1996 397,808 661,479 -- 500,000 2,000(3) Executive Officer and 1995 276,700 366,120 -- -- 2,000(3) Director Michael A. Klayko........ 1997 250,000 1,258,575 -- 50,000 2,000(3) Senior Vice President 1996(4) 202,885 273,250 -- 150,000 1,500(3) North American 1995 -- -- -- -- -- Sales/Services Raymond Fortune.......... 1997 249,596 454,377 -- -- 2,000(3) Senior Vice President 1996 234,327 396,434 -- -- 2,000(3) International Sales 1995 190,192 217,450 -- 112,500 2,000(3) John R. Egan............. 1997(5) 264,000 295,125 -- 500,000 2,000(3) Executive Vice President 1996(5) 171,538 173,652 -- -- 1,500(3) Products and Offerings 1995 212,844 284,609 -- -- 2,000(3) and Director Richard J. Egan.......... 1997 -- 433,334 483,333(6) -- 234,239(7) Chairman of the Board 1996 105,500 236,400 100,000(6) 2,000,000(8) 291,840(7) and Director 1995 276,700 366,120 -- -- 319,376(7)
- -------- (1) Includes performance bonuses and commissions accrued in year of service whether paid during year of service or in succeeding year. (2) Includes the amount of $17,837 for tax planning advice and $24,228 for personal use of the Company airplane. (3) The amount noted was paid to such executive officer's account in the EMC 401(k) Plan. (4) Mr. Klayko joined the Company on March 1, 1996. (5) Mr. Egan was on a leave of absence from the Company effective June 12, 1996 to May 5, 1997. (6) Represents consulting payments made to Mr. Egan, following his resignation as an employee of the Company effective June 30, 1996. (7) Includes the amount of $1,000 for 1996 and $2,000 for 1995 paid to Mr. Egan's account in the EMC 401(k) Plan. Also includes $234,239, $290,840 and $317,376, respectively, for 1997, 1996 and 1995, reflecting the present value of the economic benefit to Mr. Egan of the non-term portion of the premium advanced, on a non-interest bearing basis, by the Company during 1997, 1996 and 1995 ($789,601, $794,496 and $829,568, respectively) with respect to a split-dollar insurance agreement described below, based on the earliest 13 possible date on which the Company may terminate the split dollar agreement and receive back all funds advanced, which is August 16, 2002. The Company did not pay any portion of the term life insurance portion of the premium in 1997, 1996 or 1995. In January 1993, the Company entered into a "split dollar" life insurance agreement with the Egan Family Irrevocable Insurance Trust, for the benefit of the Richard J. Egan family. Richard J. Egan is Chairman of the Board, Maureen E. Egan is a Director and John R. Egan is a Director and an executive officer of the Company. Under the agreement, premiums equivalent, in general terms, to the aggregate annual increase in the cash value of the policies will be advanced by the Company to the Egan Family Irrevocable Insurance Trust and will be required to be repaid to the Company (without interest) upon death or at such time as the aggregate cash value of the fully funded policies equals the Company's total premium advances. All Company advances will be collateralized by the aggregate cash value of the policies. (8) Mr. Egan transferred all of such options to a trust for the benefit of "immediate family members" as defined in and pursuant to the terms and conditions of such grants. OPTION GRANTS IN LAST FISCAL YEAR The following table provides information on option grants in fiscal 1997 to the named executive officers.
INDIVIDUAL GRANTS ------------------ PERCENT POTENTIAL REALIZED NUMBER OF TOTAL VALUE AT ASSUMED OF OPTIONS MARKET ANNUAL RATES OF OPTIONS GRANTED TO PRICE PER STOCK PRICE GRANTED EMPLOYEES EXERCISE SHARE ON APPRECIATION FOR OPTION TERM IN IN FISCAL PRICE DATE OF EXPIRATION --------------------------------- NAME 1997 YEAR(1) PER SHARE GRANT DATE 0% 5% 10% ---- ------- ---------- --------- --------- ---------- ---------- ---------- ----------- Michael C. Ruettgers (2).................... 250,000 2.97% $12.23 $24.47 7/23/07 $3,060,000 $6,907,500 $12,810,000 250,000 2.97% 24.47 24.47 7/23/07 -- 3,847,500 9,750,000 Michael A. Klayko (3)... 50,000 0.60% 18.13 18.13 3/5/07 -- 570,000 1,444,500 Raymond Fortune......... -- -- -- -- -- -- -- -- John R. Egan (4)........ 250,000 2.97% 12.23 24.47 7/23/07 3,060,000 6,907,500 12,810,000 250,000 2.97% 24.47 24.47 7/23/07 -- 3,847,500 9,750,000 Richard J. Egan......... -- -- -- -- -- -- -- --
- -------- (1) The Company granted options representing an aggregate of 8,406,194 shares to 1,568 employees of EMC and its subsidiaries in fiscal 1997 under the Company's 1985 Stock Option Plan (the "1985 Plan") and the 1993 Plan. (2) Mr. Ruettgers' options become exercisable in increments of 20% over a five-year period. The terms of such option grants are ten years from the date of the grants, which was July 23, 1997. Such options are transferable to "immediate family members," as defined in the grants. (3) Mr. Klayko's options become exercisable in increments of 20% over a five- year period. The term of such option grant is ten years from the date of the grant, which was March 5, 1997. (4) Mr. Egan's options become exercisable in increments of 20% over a five- year period. The terms of such option grants are ten years from the date of the grants, which was July 23, 1997. Such options are transferable to "immediate family members," as defined in the grants. 14 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table provides information on option exercises in 1997 by the named executive officers and the value of such officers' unexercised options at December 31, 1997.
NUMBER OF NUMBER OF UNEXERCISED VALUE OF UNEXERCISED SHARES OPTIONS AT IN-THE-MONEY OPTIONS ACQUIRED FISCAL YEAR END AT FISCAL YEAR END ON VALUE ------------------------- ------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- --------- ---------- ----------- ------------- ----------- ------------- Michael C. Ruettgers.... 100,000 $2,184,380 480,000 900,000 $12,828,720 $13,670,200 Michael A. Klayko....... 30,000 280,572 -- 170,000 -- 2,506,050 Raymond Fortune......... 52,500 778,831 -- 127,500 -- 2,309,850 John R. Egan............ 110,000 2,918,394 610,000 500,000 16,303,165 4,544,200 Richard J. Egan......... -- -- -- -- -- --
15 Notwithstanding anything to the contrary set forth in any of the Company's filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the "Exchange Act") that might incorporate other filings with the Securities and Exchange Commission, including this Proxy Statement, in whole or in part, the following report and the Stock Price Performance Graph on page 19 shall not be incorporated by reference into any such filings. REPORT OF THE EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE AND THE BOARD OF DIRECTORS EMC's compensation philosophy is to tightly link executive pay to corporate performance and returns to stockholders. A significant portion of executive compensation is tied to the Company's success in meeting one or more specified performance goals and to appreciation in the Company's market valuation. Thus, a significant portion of an executive's compensation is at risk. The goals of the compensation program are to attract and retain exceptional executive talent, to motivate these executives to achieve the Company's business goals, to link executive and stockholder interests through equity-based plans, and to recognize individual contributions as well as overall business results. Each year the Compensation Committee conducts a full review of the Company's executive compensation program. As occurred in 1997, this review often includes a comprehensive report from an independent executive compensation consultant comparing the Company's executive compensation, corporate performance, stock price appreciation and total return to stockholders to a peer group of public high technology companies. The Compensation Committee reviews the selection of peer companies used for compensation analysis annually. The companies in the peer group used for compensation analysis are generally not the same as those in the peer group index in the Performance Graph included in this Proxy Statement. The peer group in the Performance Graph is comprised of companies in the computer storage field. The Compensation Committee is of the opinion that EMC generally does not compete with such companies for executive talent and therefore uses other high technology companies for compensation analysis. The companies used for compensation analysis are generally other leading high technology companies which are comparable to the Company in terms of revenues, workforce size or growth rate. The selected peer group for compensation analysis may vary from year to year based upon market conditions and changes in the Company's business. The annual compensation review provides an ongoing comparison of the Company's executive compensation with the compensation programs of similar companies. The key elements of the Company's executive compensation are generally base salary, bonus and stock options. The Compensation Committee's policies with respect to each of the elements are discussed below. While the elements of compensation are considered separately, the Compensation Committee also takes into account the complete compensation package provided by the Company to the individual executive. BASE SALARIES Base salaries for executive officers are determined by evaluating the responsibilities of the position and the experience of the individual, and by reference to the competitive marketplace for pertinent executive talent, including a comparison to base salaries for comparable positions at other companies. The base salaries of the Company's executive officers are generally low in comparison to base salaries for comparable positions at other companies. This is due to the fact that the Company's executive compensation program is weighted heavily towards bonuses and other incentives, more tightly coupling executive interests with those of stockholders. 16 Annual salary adjustments are determined by evaluating the financial performance and, where appropriate, certain non-financial performance measures, of the Company, and the performance of each executive officer. For 1997, the non-financial performance factors used were increase in market share, manufacturing efficiency gains, improvements in product quality and improvements in relations with customers, suppliers and employees. With respect to the base salary granted to Mr. Ruettgers in 1997, the Compensation Committee took into account base salaries of chief executive officers of peer companies, the Company's success in meeting its return on equity goals in 1996, the performance of the Common Stock and the assessment by the Compensation Committee of Mr. Ruettgers' individual performance. The Compensation Committee also took into account the longevity of Mr. Ruettgers' service to the Company and its belief that Mr. Ruettgers is an excellent representative of the Company to the public by virtue of his stature in the industry. On these bases, in particular the continuing need to bring Mr. Ruettgers' base salary more in line with base salaries of chief executive officers of peer companies, the Compensation Committee believes that the significant increase in Mr. Ruettgers' 1997 base salary from that of 1996 is well justified. EXECUTIVE BONUSES The Company's executive officers are eligible for an annual cash bonus. Individual and corporate performance objectives, both quarterly and annual, are established at the beginning of each year by the Compensation Committee. Eligible executives are assigned target bonus levels. The corporate performance measure for bonus payments for 1997 was based on a fractional percentage of the Company's pre-tax profits. As in the case of base salary, the Compensation Committee also considers individual non-financial performance measures and, where appropriate, business unit performance measures, in determining bonuses. Mr. Ruettgers' bonus for 1997 was largely based on the Company's performance in 1997. In 1997, the Company again exceeded its performance goals by a significant margin. In awarding the bonus to Mr. Ruettgers, the Compensation Committee also considered on a subjective basis the performance of the Common Stock and the role of Mr. Ruettgers in promoting the long-term strategic growth of the Company and, in particular, the Company's growth in market share. Based on the above factors, Mr. Ruettgers received a significant increase over the bonus paid to him in 1996. STOCK OPTIONS The purpose of the Company's stock option plans is to provide an additional incentive to certain employees of the Company to work to maximize stockholder value. Generally, stock options vest in equal increments over five years. This approach is designed to act as a retention device for key employees and to encourage employees to take into account the long-term interests of the Company. Stock options may be granted to the Company's executive officers under the Company's 1985 and 1993 Plans. The Company has a set of guidelines that is used to determine the size of stock option awards. These guidelines take into account the duties and responsibilities of the individual, individual performance, years of service to the Company, the number of outstanding options and the size of prior option awards. These guidelines were used in 1997 by the Board of Directors in making the stock option grants to Mr. Ruettgers and all other executive officers of the Company. In the event of poor corporate performance, the Board of Directors may elect not to award options. In 1997, Mr. Ruettgers received options to purchase 250,000 shares at an exercise price of fair market value on the date of grant and 250,000 shares at an exercise price of 50% of fair market value on the date of grant. 17 The Board of Directors believes that the above grants are justified on the basis of the factors discussed above, in particular Mr. Ruettgers' and the Company's performance in 1997 and recent years. The Board of Directors believes that the equity interests held by Mr. Ruettgers and the other executive officers align the interests of stockholders and management. POLICY ON DEDUCTIBILITY OF COMPENSATION Section 162(m) of the Code limits the tax deductibility by a company of compensation in excess of $1 million paid to any of its five most highly compensated executive officers. However, performance-based compensation that has been approved by stockholders is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals and the board committee that establishes such goals consists solely of "outside directors" (as defined for purposes of Section 162(m)). While the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of the Compensation Committee's overall compensation philosophy. The Compensation Committee intends to establish executive officer compensation programs which will maximize the Company's tax deduction if the Compensation Committee determines that such actions are consistent with its philosophy and in the best interests of the Company and its stockholders. However, from time to time the Compensation Committee may award compensation which is not fully deductible if the Compensation Committee determines that such award is consistent with its philosophy and in the best interests of the Company and its stockholders. CONCLUSION Through the programs described above, a very significant portion of the Company's executive compensation is linked directly to corporate and individual performance and stock price appreciation. In 1997, as in previous years, the majority of the Company's executive compensation consisted of compensation with performance-based elements. The Compensation Committee and the Board of Directors intend to continue the policy of linking executive compensation to corporate performance and returns to stockholders. EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE Michael J. Cronin, Chairman John F. Cunningham Richard J. Egan As to the portion of the above report relating to stock options, BOARD OF DIRECTORS Richard J. Egan, Chairman Michael J. Cronin John F. Cunningham John R. Egan Maureen E. Egan W. Paul Fitzgerald Joseph F. Oliveri Michael C. Ruettgers 18 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee members are Michael J. Cronin, Chairman, John F. Cunningham and Richard J. Egan. Richard J. Egan, Chairman of the Board of the Company, is also a member of the Board of Directors of Cognition Corporation, of which Michael J. Cronin is Chief Executive Officer and Chairman of the Board. In addition to Messrs. Cronin and Cunningham, Richard J. Egan, Michael C. Ruettgers and John R. Egan, who are executive officers and Directors of the Company, and W. Paul Fitzgerald, who is a former executive officer and current Director of the Company, participated in deliberations of the Board of Directors concerning the stock option portion of executive compensation during the last fiscal year. STOCK PRICE PERFORMANCE GRAPH COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG EMC CORPORATION, S&P 500 INDEX AND PEER GROUP SIC CODE 3572 (COMPUTER STORAGE DEVICES)** [LINE GRAPH APPEARS HERE] * $100 invested on 1/2/93 in Company stock, index or peer group including reinvestment of dividends, if any. ** 24 companies comprise the peer group. The Company will provide a list of the peer group companies to stockholders upon request. Note: The stock price performance shown on the graph above is not necessarily indicative of future price performance.
FISCAL YEAR --------------------------------------- 1992 1993 1994 1995 1996 1997 ---- ------ ------ ------ ------ ------ EMC Corporation......................... 100 277.89 369.99 258.94 563.08 932.79 Computer Storage Devices................ 100 129.67 130.45 196.80 354.64 387.81 S&P 500................................. 100 110.08 111.54 153.45 188.69 251.64
19 CERTAIN TRANSACTIONS Periodically during 1997, the Company rented the private airplane of Richard J. Egan for use for EMC business trips and sales activities, for which payments aggregated approximately $320,000. Richard J. Egan is Chairman of the Board of Directors of the Company. In 1997, the Company retained the Thomas A. Fitzgerald Company to provide various forms of corporate insurance and paid premiums of approximately $450,000. Thomas A. Fitzgerald is the brother of W. Paul Fitzgerald, a Director of the Company and of Maureen E. Egan, a Director of the Company, the brother-in-law of Richard J. Egan, Chairman of the Board of Directors of the Company and the uncle of John R. Egan, an executive officer and a Director of the Company. In December 1997, the Company purchased certain real property in Hopkinton, Massachusetts from Sovereign Development Ltd. and Interface Realty Partnership for $3,800,000. As part of the transaction, Interface Electronics Corporation entered into a lease to remain at the property for a period of six months. Joseph F. Oliveri, a Director of EMC, is a Director and stockholder of Sovereign Development Ltd., a general partner of Interface Realty Partnership, and a Director, stockholder and President and Chief Executive Officer of Interface Electronics Corporation. The Company believes that the terms of the arrangements described above were fair and not less favorable to the Company than could have been obtained from unaffiliated parties. COMMITTEES OF THE BOARD The Audit Committee, the Executive Compensation and Stock Option Committee, the Mergers and Acquisitions Committee and the Stock Repurchase and Bond Redemption Oversight Committee are the standing committees of the Board of Directors.
STOCK REPURCHASE EXECUTIVE COMPENSATION MERGERS AND AND BOND AUDIT AND STOCK OPTION ACQUISITIONS REDEMPTION OVERSIGHT - --------- ----------------------- ------------------- --------------------- W. Paul Fitzgerald* Michael J. Cronin* John F. Cunningham* Joseph F. Oliveri* Michael J. Cronin John F. Cunningham Michael J. Cronin John F. Cunningham Joseph F. Oliveri Richard J. Egan John R. Egan Richard J. Egan W. Paul Fitzgerald
- -------- * Chairman The Audit Committee, which held two meetings in 1997, reviews with management and the Company's independent public accountants the Company's financial statements, the accounting principles applied in their preparation, the scope of the audit, any comments made by the independent accountants upon the financial condition of the Company and its accounting controls and procedures, and such other matters as the committee deems appropriate. The Executive Compensation and Stock Option Committee, which held four meetings during 1997, reviews salary policies and compensation of executive officers, officers and other members of management and approves compensation plans. Although the full Board of Directors currently approves all transactions under the Company's stock option plans, this committee makes recommendations to the Board of Directors for option 20 grants and has the authority to administer and interpret the provisions of these option plans as well as the Company's employee stock purchase plan. The Mergers and Acquisitions Committee, which held two meetings in 1997, reviews with management of EMC potential acquisitions. The Stock Repurchase and Bond Redemption Oversight Committee held no formal meetings during 1997. This committee oversees and reviews with management the redemption of any of the Company's bonds or convertible notes which may be outstanding from time to time, and any common stock repurchase program of the Company which may exist from time to time. The Board of Directors does not have a Nominating Committee. The Company compensates each director who is not an employee of the Company $12,500 per annum, $2,000 for each regularly scheduled director's meeting attended, and for each committee on which they serve, $1,500 per annum or $2,000 per annum if they serve as Chairman. Under the 1992 Directors Plan, each Eligible Director (as defined below) is awarded an option to purchase up to 40,000 shares of Common Stock on the date he or she first becomes an Eligible Director, subject to the conditions of the 1992 Directors Plan ( a "formula option"). An Eligible Director is any director who (1) is not an employee of the Company; and/or (2) is not a five percent stockholder of the Company or a person in control of such stockholder. The exercise price for each option granted under the 1992 Directors Plan will be at the price per share determined by the Compensation Committee or the Board of Directors at the time the option is granted, which price shall not be less than 50% of the fair market value per share of Common Stock on the date of grant. Formula options become exercisable for one-third of the shares covered thereby on each of the first through third anniversaries of the grant. The 1992 Directors Plan also provides for the granting of discretionary, non- formula based options to Eligible Directors. Such non-formula based options may be on terms determined by the Compensation Committee or the Board of Directors not inconsistent with the 1992 Directors Plan. On July 23, 1997, pursuant to the 1992 Directors Plan, the Board of Directors granted options to purchase 80,000 shares of Common Stock (after giving effect to the 2-for-1 stock split effective November 17, 1997) to each of Mrs. Egan and Mr. Cunningham, Directors of the Company, at an exercise price of $12.23, equal to 50% of the fair market value of the Company's Common Stock on the date of grant. ---------------- Richard J. Egan, Chairman of the Board and a Director, is the husband of Maureen E. Egan, a Director of the Company. He also is the brother-in-law of W. Paul Fitzgerald, a Director of the Company. W. Paul Fitzgerald is the brother of Maureen E. Egan. John R. Egan, Executive Vice President, Products and Offerings and a Director of the Company, is the son of Richard J. and Maureen E. Egan. ADVANCE NOTICE PROCEDURES Under the Company's By-laws, nominations for a director may be made only by the Board of Directors, a nominating committee of the Board of Directors, a person appointed by the Board of Directors or by a stockholder entitled to vote who has delivered notice to the principal executive offices of the Company (containing certain information specified in the By-laws) (i) not less than 75 days nor more than 100 days prior 21 to the first anniversary of the preceding year's annual meeting, or (ii) if the meeting is called for a date which is more than 75 days prior to such anniversary date, not later than the close of business on the 20th day following the date notice of such meeting is mailed or made public, whichever is earlier. The By-laws also provide that no business may be brought before an annual meeting except as specified in the notice of the meeting or as otherwise brought before the meeting by or at the direction of the Board of Directors, the presiding officer or by a stockholder entitled to vote at such annual meeting who has delivered notice to the principal executive offices of the Company (containing certain information specified in the By-laws) (i) not less than 75 days nor more than 125 days prior to the first anniversary of the preceding year's annual meeting, or (ii) for a special meeting or an annual meeting called for a date which is more than 75 days prior to such anniversary date, not later than the close of business on the 20th day following the date notice of such meeting is mailed or made public, whichever is earlier. These requirements are separate and apart from and in addition to the requirements that a stockholder must meet in order to have a stockholder proposal included in the Company's Proxy Statement under Rule 14a-8 of the Securities Exchange Act of 1934, as amended. A copy of the full text of the By-laws provisions discussed above may be obtained by writing to the Clerk of the Company at 35 Parkwood Drive, Hopkinton, Massachusetts 01748-9103. STOCKHOLDER PROPOSALS To be eligible for inclusion in the Company's Proxy Statement for the 1999 Annual Meeting of Stockholders, stockholder proposals must be received at EMC's principal executive offices no later than November 20, 1998. INDEPENDENT PUBLIC ACCOUNTANTS The Directors have appointed Coopers & Lybrand L.L.P., who have served as the Company's auditors since 1984, to examine the financial statements of the Company for fiscal year 1998. The Company expects that representatives of Coopers & Lybrand L.L.P. will be present at the Annual Meeting, and will be given the opportunity to make a statement if they desire to do so and to respond to appropriate questions. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Exchange Act requires the Company's executive officers and directors, and persons who own more than 10% of the Company's Common Stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC") and the New York Stock Exchange. Executive officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish the Company with all copies of Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during the fiscal year ended December 31, 1997, all filing requirements were complied with in a timely fashion. 22 EX-99.1 2 1993 STOCK OPTION PLAN EMC CORPORATION 1993 STOCK OPTION PLAN, as amended January 21, 1998 1. PURPOSE. ------- The purpose of the EMC Corporation 1993 Stock Option Plan is to enable EMC Corporation to provide a special incentive to a limited number of key employees of the Company and its Subsidiaries, if any, who are in a position to have a significant effect upon the Company's business and earnings. In order to accomplish this purpose, the Plan authorizes the grant to such key employees of options to purchase Common Stock of the Company. Increased ownership of Common Stock will provide such key employees with an additional incentive to take into account the long-term interests of the Company. 2. DEFINITIONS. ----------- As used herein, the following words or terms have the meanings set forth below. The masculine gender is used throughout the Plan but is intended to apply to members of both sexes. 2.1 "Board of Directors" means the Board of Directors of the Company. 2.2 "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. 2.3 "Committee" means the Committee appointed by the Board of Directors to administer the Plan or the Board of Directors as a whole if no appointment is made. 2.4 "Common Stock" means the Common Stock of the Company. 2.5 "Company" means EMC Corporation, a corporation established under the laws of The Commonwealth of Massachusetts. 2.6 "Fair Market Value" in the case of a share of Common Stock on a particular day, means the fair market value as determined from time to time by the Board of Directors or, where appropriate, by the Committee, taking into account all information which the Board of Directors, or the Committee, considers relevant. 2.7 "Incentive Stock Option" means a stock option that satisfies the requirements of Section 422 of the Code. 2.8 "Participant" means an individual holding a stock option or stock options granted to him under the Plan. Page 1 of 10 2.9 "Plan" means the EMC Corporation 1993 Stock Option Plan set forth herein. 2.10 "Subsidiary" or "Subsidiaries" means a corporation or corporations in which the Company owns, directly or indirectly, stock possessing 50 percent or more of the total combined voting power of all classes of stock. 2.11 "Ten Percent Stockholder" means any person who, at the time an option is granted, owns or is deemed to own stock (as determined in accordance with Sections 422 and 424 of the Code) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or a subsidiary. 3. ADMINISTRATION. -------------- 3.1 The Plan shall be administered by the Committee and, to the extent provided herein, the Board of Directors. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. 3.2 Subject to the provisions set forth herein, each of the Committee and the Board of Directors shall have full authority to determine the provisions of options to be granted under the Plan. Subject to the provisions set forth herein, the Committee shall have full authority to interpret the terms of the Plan and of options granted under the Plan, to adopt, amend and rescind rules and guidelines for the administration of the Plan and for its own acts and proceedings and to decide all questions and settle all controversies and disputes which may arise in connection with the Plan; provided, however, that -------- ------- any change to the terms of an option granted hereunder shall be approved by the Board of Directors to the extent such change would be deemed to be a new option grant or such terms relate to a subsequent transaction that would not be exempt from Section 16(b) of the Securities Exchange Act of 1934 in the absence of such approval. 3.3 The decision of the Committee or the Board of Directors, as applicable, on any matter as to which the Committee or the Board of Directors, as applicable, is given authority under subsection 3.2 shall be final and binding on all persons concerned. 3.4 Nothing in the Plan shall be deemed to give any officer or employee, or his legal representatives or assigns, any right to participate in the Plan, except to such Page 2 of 10 extent, if any, as the Committee or the Board, as applicable, may have determined or approved pursuant to the provisions of the Plan. 4. SHARES SUBJECT TO THE PLAN. -------------------------- 4.1 The maximum number of shares of Common Stock that may be delivered upon the exercise of options granted under the Plan shall be 31,500,000*, subject to adjustment in accordance with the provisions of Section 8. 4.2 If any option granted under the Plan terminates without having been exercised in full (including an option which terminates by agreement between the Company and the Participant), or if shares of Common Stock are reacquired by the Company upon the rescission of an exercise of an option, the number of shares of Common Stock as to which an option has not been exercised prior to termination, or have been reacquired upon the rescission of an option, shall be available for future grants within the limits set forth in subsection 4.1. 4.3 Shares of Common Stock delivered upon the exercise of options shall consist of shares of authorized and unissued Common Stock, except that the Board of Directors may from time to time in its discretion determine in any case the shares to be so delivered shall consist of shares of authorized and issued Common Stock reacquired by the Company and held in its Treasury. No fractional shares of Common Stock shall be delivered upon the exercise of an option. 5. ELIGIBILITY FOR OPTIONS. ----------------------- Employees eligible to receive options under the Plan shall be those key employees of the Company and its Subsidiaries, if any, who, in the opinion of the Committee, are in a position to have a significant effect upon the Company's business and earnings. Members of the Board of Directors of the Company or a Subsidiary who are not employed as regular salaried officers or employees of the Company or a Subsidiary may not participate in the Plan. 6. GRANT OF OPTIONS. ---------------- 6.1 From time to time while the Plan is in effect, each of the Committee and the Board of Directors may, in its absolute discretion, select from among the persons eligible to receive options (including persons to whom options were previously granted) those persons to whom options are to be granted. *Subject to stockholder approval at the Annual Meeting of Stockholders to be held on May 6, 1998. Page 3 of 10 6.2 Each of the Committee and the Board of Directors shall, in its absolute discretion, determine the number of shares of Common Stock to be subject to each option granted by it under the Plan. 6.3 No Incentive Stock Option may be granted under the Plan after May 12, 2003, but options theretofore granted may extend beyond that date. 7. PROVISIONS OF OPTIONS. --------------------- 7.1 Incentive Stock Options or Other Options. Options granted under the ---------------------------------------- Plan may be either Incentive Stock Options or options which do not qualify as Incentive Stock Options, as the Committee or the Board of Directors shall determine at the time of each grant of options hereunder. 7.2 Stock Option Certificates or Agreements. Options granted under the --------------------------------------- Plan shall be evidenced by certificates or agreements in such form as the Committee shall from time to time approve. Such certificates or agreements shall comply with the terms and conditions of the Plan and may contain such other provisions not inconsistent with the terms and conditions of the Plan as the Committee shall deem advisable. In the case of options intended to qualify as Incentive Stock Options, the certificates or agreements shall contain such provisions relating to exercise and other matters as are required of incentive stock options under the Code. 7.3 Terms and Conditions. All options granted under the Plan shall be -------------------- subject to the following terms and conditions to the extent applicable and to such other terms and conditions not inconsistent therewith as the Committee or the Board of Directors shall determine: 7.3.1 Exercise Price. The exercise price per share of Common Stock -------------- with respect to each option shall be as determined by the Committee but in the case of an Incentive Stock Option not less than 100% (110% in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) of the Fair Market Value per share at the time the option is granted. In the case of an option which does not qualify as an Incentive Stock Option, the exercise price per share of Common Stock shall be not less than par value. 7.3.2 Value of Shares of Common Stock Subject to Incentive Stock ---------------------------------------------------------- Options. Each eligible employee may be granted Incentive Stock Options only ------- to the extent that, in the aggregate under this Plan and all incentive stock option plans of the Company and any related corporation, such Incentive Stock Options do not become exercisable for the first time by such employee during any calendar year in a manner which would entitle the employee to purchase more than $100,000 in fair market value (determined at the time the Incentive Stock Options were granted) of Common Stock in that year. Any options Page 4 of 10 granted to an employee in excess of such amount will be granted as Non-Qualified Options. 7.3.3 Period of Options. An option shall be exercisable during such ----------------- period of time as the Committee or Board of Directors may specify (subject to subsection 7.4 below), but in the case of an Incentive Stock Option not after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) from the date the option is granted. 7.3.4 Exercise of Options. ------------------- 7.3.4.1 Each option shall be made exercisable at such time or times as the Committee or the Board of Directors shall determine. In the case of an option made exercisable in installments, the Committee or the Board of Directors may later determine to accelerate the time at which one or more of such installments may be exercised. 7.3.4.2 Any exercise of an option shall be in writing signed by the proper person and delivered or mailed to the General Counsel of the Company, accompanied by an option exercise notice and payment in full for the number of shares in respect to which the option is exercised. 7.3.4.3 In the event an option is exercised by the executor or administrator of a deceased Participant, or by the person or persons to whom the option has been transferred by the Participant's will or the applicable laws of descent and distribution, the Company shall be under no obligation to deliver stock thereunder until the Company is satisfied that the person or persons exercising the option is or are the duly appointed executor or administrator of the deceased Participant or the person or persons to whom the option has been transferred by the Participant's will or by the applicable laws of descent and distribution. 7.3.4.4 The Committee or the Board of Directors may at the time of grant condition the exercise of an option upon agreement by the Participant to subject the Common Stock to any restrictions on transfer or repurchase rights in effect on the date of exercise, upon representations of continued employment and upon other terms not inconsistent with this Plan. Any such conditions shall be set forth in the option certificate or other document evidencing the option. 7.3.4.5 In the case of an option that is not an Incentive Stock Option, the Committee shall have the right to require that the individual exercising the option to remit to the Company an amount sufficient to satisfy any federal, state, or local withholding tax requirements (or makes other arrangements satisfactory to the Company with regard to Page 5 of 10 such taxes) prior to the delivery of any Common Stock pursuant to the exercise of the option. In the case of an Incentive Stock Option, if at the time the Incentive Stock Option is exercised the Committee determines that under applicable law and regulations the Company could be liable for the withholding of any federal or state tax with respect to a disposition of the Common Stock received upon exercise, the Committee may require as a condition of exercise that the individual exercising the Incentive Stock Option agree (i) to inform the Company promptly of any disposition (within the meaning of Section 422 (a) (1) of the Code and the regulations thereunder) of Common Stock received upon exercise, and (ii) to give such security as the Committee deems adequate to meet the potential liability of the Company for the withholding of tax, and to augment such security from time to time in any amount reasonably deemed necessary by the Committee to preserve the adequacy of such security. 7.3.4.6 In the case of an option that is exercised by an individual that is subject to taxation in a foreign jurisdiction, the Committee shall have the right to require the individual exercising the option to remit to the Company an amount sufficient to satisfy any federal or withholding requirement of that foreign jurisdiction (or make other arrangements satisfactory to the Company with regard to such taxes prior to the delivery of any Common Stock pursuant to the exercise of the option). 7.3.5 Payment for and Delivery of Stock. The shares of stock --------------------------------- purchased on any exercise of an option granted hereunder shall be paid for in full in cash or, if permitted by the terms of the option, in shares of unrestricted Common Stock at the time of such exercise or, if so permitted, a combination of such cash and Common Stock. A Participant shall not have the rights of a stockholder with respect to awards under the Plan except as to stock actually issued to him. 7.3.6 Listing of Stock, Withholding and Other Legal Requirements. ---------------------------------------------------------- The Company shall not be obligated to deliver any stock until all federal and state laws and regulations which the Company may deem applicable have been complied with, nor, in the event the outstanding Common Stock is at the time listed upon any stock exchange, until the stock to be delivered has been listed or authorized to be added to the list upon official notice of issuance to such exchange. In addition, if the shares of stock subject to any option have not been registered in accordance with the Securities Act of 1933, as amended, the Company may require the person or persons who wishes or wish to exercise such option to make such representation or agreement with respect to the sale of stock acquired on exercise of the option as will be sufficient, in the opinion of the Company's counsel, to avoid violation of said Act, and may also require that the certificates evidencing said stock bear an appropriate restrictive legend. Page 6 of 10 7.3.7 Non-transferability of Options. No option may be transferred ------------------------------ by the Participant otherwise than by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order, and during the Participant's lifetime the option may be exercised only by him or her; provided, however, that the Board of Directors or the Committee, as -------- ------- applicable, in its discretion, may allow for transferability of non- qualified stock options by the Participant to "Immediate Family Members." Immediate Family Members means children, grandchildren, spouse or common law spouse, siblings or parents of the Participant or to bona fide trusts, partnerships or other entities controlled by and of which the beneficiaries are Immediate Family Members of the Participant. Any option grants that are transferable are further conditioned on the Participant and Immediate Family Members agreeing to abide by the Company's then current stock option transfer guidelines. 7.3.8 Death. If a Participant dies at a time when he is entitled ----- to exercise an Incentive Stock Option, then at any time or times within three years after his death such Incentive Stock Option may be exercised, as to all or any of the shares which the Participant was entitled to purchase thereunder immediately prior to his death, by his executor or administrator or the person or persons to whom the Incentive Stock Option is transferred by will or the applicable laws of descent and distribution, and except as so exercised such Incentive Stock Option shall expire at the end of such three- year period. In no event, however, may any Incentive Stock Option granted under the Plan be exercised after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) from the date the Incentive Stock Option was granted. 7.3.9 Termination of Employment. If the employment of a Participant ------------------------- terminates for any reason other than his death, all options held by the Participant shall thereupon expire on the date of termination unless the option by its terms, or the Committee or the Board of Directors by resolution, shall allow the Participant to exercise any or all of the options held by him after termination. In the case of an Incentive Stock Option, the Incentive Stock Option shall in any event expire at the end of three months after such termination of employment, or after the expiration of ten years (five years in the case of an Incentive Stock Option granted to a Ten Percent Stockholder) from the date the Incentive Stock Option was granted, whichever occurs first. If the Committee or the Board of Directors so decides, an option may provide that a leave of absence granted by the Company or Subsidiary is not a termination of employment for the purpose of this subsection 7.3.9, and in the absence of such a provision the Committee may in any particular case determine that such a leave of absence is not a termination of employment for such purpose. The Page 7 of 10 Committee shall also determine all other matters relating to continuous employment. 7.3.10 Cancellation and Rescission of Options. (A) Unless the -------------------------------------- certificate or agreement evidencing the option specifies otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired option at any time if the Participant engages in "Detrimental Activity." As used in this subsection 7.3.10, "Detrimental Activity" shall include: (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company; (ii) the disclosure to anyone outside the Company, or the use in other than the Company's business, without prior written authorization from the Company, of any Confidential Information as defined in the Company's Key Employee Agreement, relating to the business of the Company, acquired by the Participant either during or after employment with the Company; (iii) the failure or refusal to disclose promptly and to assign to the Company, pursuant to the Company's Key Employee Agreement, all right, title and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment by the Company, relating in any manner to the actual or anticipated business, research or development work of the Company or the failure or refusal to do anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in other countries; (iv) activity that results in termination of the Participant's employment for cause; (v) the Participant otherwise fails to comply with the terms of the certificate or agreement evidencing the option, the Plan or the Key Employee Agreement; (vi) a violation of any rules, policies, procedures or guidelines of the Company, including but not limited to the Company's Business Conduct Guidelines; (vii) any attempt directly or indirectly to induce any employee of the Company to be employed or perform services elsewhere or any attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company; (viii) the Participant being convicted of, or entering a guilty plea with respect to a crime, whether or not connected with the Company; or (ix) any other conduct or act determined to be injurious, detrimental or prejudicial to any interest of the Company. (B) Upon exercise of an option, the Participant shall certify, in a manner acceptable to the Company, that he or she is in compliance with the terms and conditions of the Plan. In the event a Participant engages in Detrimental Activity prior to or during the six months after any exercise of an option, such exercise may be rescinded within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the rescinded exercise in such a manner and on such terms and conditions as may be required, and the Company Page 8 of 10 shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company. 7.4 Authority of the Committee. The Committee shall have the authority, -------------------------- either generally or in particular instances, to waive compliance by a Participant with any obligation to be performed by him under an option and to waive any condition or provision of an option, except that the Committee may not (i) increase the total number of shares covered by any Incentive Stock Option (except in accordance with Section 8), (ii) reduce the option price per share of any Incentive Stock Option (except in accordance with Section 8) or (iii) extend the term of any Incentive Stock Option to more than ten years, subject, however, to the provisions of Section 10. 8. CHANGES IN STOCK. ---------------- In the event of a stock dividend, stock split or other change in corporate structure or capitalization affecting the Common Stock that becomes effective after the adoption of the Plan by the Board of Directors, the Committee shall make appropriate adjustments in (i) the number and kind of shares of stock on which options may thereafter be granted hereunder, (ii) the number and kind of shares of stock remaining subject to each option outstanding at the time of such change and (iii) the option price. The Committee's determination shall be binding on all persons concerned. Subject to any required action by the stockholders, if the Company shall be the surviving corporation in any merger or consolidation (other than a merger or consolidation in which the Company survives but in which a majority of its outstanding shares are converted into securities of another corporation or are exchanged for other consideration), any option granted hereunder shall pertain and apply to the securities which a holder of the number of shares of stock of the Company then subject to the option would have been entitled to receive, but a dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation or in which a majority of its outstanding shares are so converted or exchanged shall cause every option hereunder to terminate; provided that if any such dissolution, liquidation, merger or consolidation is contemplated, the Company shall either arrange for any corporation succeeding to the business and assets of the Company to issue to the Participants replacement options (which, in the case of Incentive Stock Options, satisfy, in the determination of the Committee, the requirements of Section 424 of the Code) on such corporation's stock which will to the extent possible preserve the value of the outstanding options or shall make the outstanding options fully exercisable at least 20 days before the effective date of any such dissolution, liquidation, merger or consolidation. The existence of the Plan shall not prevent any such change or other transaction and no Participant thereunder shall have any right except as herein expressly set forth. Page 9 of 10 9. EMPLOYMENT RIGHTS. ----------------- Neither the adoption of the Plan nor any grant of options confers upon any employee of the Company or a Subsidiary any right to continued employment with the Company or a Subsidiary, as the case may be, nor does it interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees at any time. 10. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION. ------------------------------------------------------- The Committee or the Board of Directors may at any time discontinue granting options under the Plan and, with the consent of the Participant, may at any time cancel an existing option in whole or in part and grant another option to the Participant for such number of shares as the Committee or the Board of Directors specifies. The Board of Directors may at any time or times amend the Plan for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law or may at any time terminate the Plan as to any further grants of options, provided that no such amendment shall without the approval of the stockholders of the Company (a) increase the maximum number of shares available under the Plan, (b) change the group of employees eligible to receive options under the Plan, (c) reduce the exercise price of outstanding incentive options or reduce the price at which incentive options may be granted, (d) extend the time within which options may be granted, (e) alter the Plan in such a way that incentive options granted or to be granted hereunder would not be considered incentive stock options under Section 422 of the Code, or (f) amend the provisions of this Section 10, and no such amendment shall adversely affect the rights of any employee (without his consent) under any option previously granted. 11. EFFECTIVE DATE. -------------- The Plan became effective immediately upon its approval by the stockholders of the Company at the Annual Meeting on May 12, 1993. Page 10 of 10 EX-99.2 3 1989 EMPLOYEE STOCK OPTION PLAN EMC CORPORATION 1989 EMPLOYEE STOCK PURCHASE PLAN, as amended January 21, 1998 Section 1. Purpose of Plan The EMC Corporation 1989 Employee Stock Purchase Plan (the "Plan") is intended to provide a method by which eligible employees of EMC Corporation and its subsidiaries (collectively, the "Company") may use voluntary, systematic payroll deductions to purchase the Company's common stock, $.01 par value, ("stock") and thereby acquire an interest in the future of the Company. For purposes of the Plan, a subsidiary is any corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock unless the Board of Directors of the Company (the "Board of Directors") determines that employees of a particular subsidiary shall not be eligible. Section 2. Options to Purchase Stock Under the Plan as now amended, no more than 9,800,000 shares are available for purchase (subject to adjustment as provided in Section 16) pursuant to the exercise of options ("options") granted under the Plan to employees of the Company ("employees"). The stock to be delivered upon exercise of options under the Plan may be either shares of the Company's authorized but unissued stock, or shares of reacquired stock, as the Board of Directors shall determine. Section 3. Eligible Employees Except as otherwise provided in Section 20, each employee who has completed six months or more of continuous service in the employ of the Company shall be eligible to participate in the Plan. Section 4. Method of Participation The periods January 1 to June 30 and July 1 to December 31 of each year shall be option periods. Each person who will be an eligible employee on the first day of any option period may elect to participate in the Plan by executing and delivering, at least 15 days prior to such day, a payroll deduction authorization in accordance with Section 5. Such employee shall thereby become a participant ("participant") on the first day of such option period and shall remain a participant until his or her participation is terminated as provided in the Plan. Section 5. Payroll Deductions The payroll deduction authorization shall request withholding, at a rate of not less than 2% nor more than 10% from the participant's compensation (subject to a maximum of $2,500 per option period), by means of substantially equal payroll deductions over the option period; provided, however, that in the event -------- ------- any amount remaining in a participant's withholding account at the end of an option period (which would be equal to a fractional share) is rolled over to the opening balance in a participant's withholding account for the next option period pursuant to Section 8 below (a "rollover"), such amount will be applied to the last payroll deduction for the next option period, thereby reducing the amount of that payroll deduction; further provided that the maximum of $2,500 ---------------- per option period shall be reduced by the amount of any rollover. For purposes of the Plan, "compensation" shall mean all cash compensation paid to the participant by the Company. A participant may change the withholding rate of his or her payroll deduction authorization by written notice delivered to the Company at least 15 days prior to the first day of the option period as to which the change is to be effective. All amounts withheld in accordance with a participant's payroll deduction authorization shall be credited to a withholding account for such participant. Section 6. Grant of Options Each person who is a participant on the first day of an option period shall as of such day be granted an option for such period. Such option shall be for the number of shares of stock to be determined by dividing (a) the balance in the participant's withholding account on the last day of the option period by (b) the purchase price per share of the stock determined under Section 7, and eliminating any fractional share from the quotient. In the event that the number of shares then available under the Plan is otherwise insufficient, the Company shall reduce on a substantially proportionate basis the number of shares of stock receivable by each participant upon exercise of his or her option for an option period and shall return the balance in a participant's withholding account to such participant. Section 7. Purchase Price The purchase price of stock issued pursuant to the exercise of an option shall be 85% of the fair market value of the stock at (a) the time of grant of the option or (b) the time at which the option is deemed exercised, whichever is less. Fair market value shall be determined in accordance with the applicable provisions of the Internal Revenue Code of 1986, as amended or restated from time to time (the "Code"), or regulations issued thereunder, or, in the absence of any such provisions or regulations, shall be deemed to be the last sale price at which the stock is traded on the day in question or the last prior date on which a trade occurred as reported in The Wall Street Journal; or, ----------------------- if The Wall Street Journal is not published or does not list the stock, then in ----------------------- such other appropriate newspaper of general circulation as the Board of Directors 2 may prescribe; or, if the last price at which the stock traded is not generally reported then the mean between the reported bid and asked prices at the close of the market on the day in question or the last prior date when such prices were reported. Section 8. Exercise of Options If an employee is a participant in the Plan on the last business day of an option period, he or she shall be deemed to have exercised the option granted to him or her for that period. Upon such exercise, the Company shall apply the balance of the participant's withholding account to the purchase of the number of whole shares of stock determined under Section 6, and as soon as practicable thereafter shall issue and deliver certificates for said shares to the participant. The balance, if any, of the participant's withholding account in excess of the total purchase price of the whole shares so issued shall be applied to the opening balance in his or her withholding account for the next option period. No fractional shares shall be issued hereunder. Notwithstanding anything herein to the contrary, the Company shall not be obligated to deliver any shares unless and until, in the opinion of the Company's counsel, all requirements of applicable federal and state laws and regulations (including any requirements as to legends) have been complied with, nor, if the outstanding stock is at the time listed on any securities exchange, unless and until the shares to be delivered have been listed (or authorized to be added to the list upon official notice of issuance) upon such exchange, nor unless or until all other legal matters in connection with the issuance and delivery of shares have been approved by the Company's counsel. Section 9. Interest No interest will be payable on withholding accounts. Section 10. Cancellation and Withdrawal A participant who holds an option under the Plan may at any time prior to exercise thereof under Section 8 cancel all (but not less than all) of his or her option by written notice delivered to the Company. Upon such cancellation, the balance in his or her withholding account shall be returned to him or her. A participant may terminate his or her payroll deduction authorization as of any date by written notice delivered to the Company and shall thereby cease to be a participant as of such date. Any participant who voluntarily terminates his or her payroll deduction authorization prior to the last business day of an option period shall be deemed to have cancelled his or her option. 3 Section 11. Termination of Employment Except as otherwise provided in Section 12, upon the termination of a participant's employment with the Company for any reason whatsoever, he or she shall cease to be a participant, and any option held by him or her under the Plan shall be deemed cancelled, the balance of his or her withholding account shall be returned to him or her, and he or she shall have no further rights under the Plan. For purposes of this Section 11, a participant's employment will not be considered terminated in the case of sick leave or other bona fide leave of absence approved for purposes of this Plan by the Company or a subsidiary or in the case of a transfer to the employment of a subsidiary or to the employment of the Company. Section 12. Death or Retirement of Participant In the event a participant holds any option hereunder at the time his or her employment with the Company is terminated (1) by his or her retirement with the consent of the Company, and such retirement is within three months of the time such option becomes exercisable, or (2) by his or her death, whenever occurring, then such participant (or his or her legal representative), may, by a writing delivered to the Company on or before the date such option is exercisable, elect either (a) to cancel any such option and receive in cash the balance in his or her withholding account, or (b) to have the balance in his or her withholding account applied as of the last day of the option period to the exercise of his or her option pursuant to Section 8, and have the balance, if any, in such account in excess of the total purchase price of the whole shares so issued returned in cash. In the event such participant (or his or her legal representative) does not file a written election as provided above, any outstanding option shall be treated as if an election had been filed pursuant to subparagraph 12(a) above. Section 13. Participant's Rights Not Transferable, etc. All participants granted options under the Plan shall have the same rights and privileges. Each participant's rights and privileges under any option granted under the Plan shall be exercisable during his or her lifetime only by him or her, and shall not be sold, pledged, assigned, or otherwise transferred in any manner whatsoever except by will or the laws of descent and distribution. In the event any participant violates the terms of this Section, any options held by him or her may be terminated by the Company and, upon return to the participant of the balance of his or her withholding account, all his or her rights under the Plan shall terminate. 4 Section 14. Employment Rights Neither the adoption of the Plan nor any of the provisions of the Plan shall confer upon any participant any right to continued employment with the Company or a subsidiary or affect in any way the right of the Company to terminate the employment of such participant at any time. Section 15. Rights as a Shareholder A participant shall have the rights of a shareholder only as to stock actually acquired by him or her under the Plan. Section 16. Change in Capitalization In the event of a stock dividend, stock split or combination of shares, recapitalization, merger in which the Company is the surviving corporation or other change in the Company's capital stock, the number and kind of shares of stock or securities of the Company to be subject to the Plan and to options then outstanding or to be granted hereunder, the maximum number of shares or securities which may be delivered under the Plan, the option price and other relevant provisions shall be appropriately adjusted by the Board of Directors, whose determination shall be binding on all persons. In the event of a consolidation or merger in which the Company is not the surviving corporation or in the event of the sale or transfer of substantially all the Company's assets (other than by the grant of a mortgage or security interest), all outstanding options shall thereupon terminate, provided that prior to the effective date of any such merger, consolidation or sale of assets, the Board of Directors shall either (a) return the balance in all withholding accounts and cancel all outstanding options, or (b) accelerate the exercise date provided for in Section 8, or (c) if there is a surviving or acquiring corporation, arrange to have that corporation or an affiliate of that corporation grant to the participants replacement options having equivalent terms and conditions as determined by the Board of Directors. Section 17. Administration of Plan The Plan will be administered by the Board of Directors. The Board of Directors will have authority, not inconsistent with the express provisions of the Plan, to take all action necessary or appropriate hereunder, to interpret its provisions, and to decide all questions and resolve all disputes which may arise in connection therewith. Such determinations of the Board of Directors shall be conclusive and shall bind all parties. The Board may, in its discretion, delegate its powers with respect to the Plan to an Employee Benefit Plan Committee or any other committee (the "Committee"), in which event all references to the Board of Directors hereunder, including without limitation the references in Section 17, shall be deemed to refer to the Committee. A 5 majority of the members of any such Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. Section 18. Amendment and Termination of Plan The Board of Directors may at any time or times amend the Plan or amend any outstanding option or options for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, provided that (except to the extent explicitly required or permitted herein) no such amendment will, without the approval of the shareholders of the Company, (a) increase the maximum number of shares available under the Plan, (b) reduce the option price of outstanding options or reduce the price at which options may be granted, (c) change the conditions for eligibility under the Plan, or (d) amend the provisions of this Section 18 of the Plan, and no such amendment will adversely affect the rights of any participant (without his or her consent) under any option theretofore granted. The Plan may be terminated at any time by the Board of Directors, but no such termination shall adversely affect the rights and privileges of holders of the outstanding options. Section 19. Approval of Shareholders The Plan shall be subject to the approval of the shareholders of the Company, which approval shall be secured within twelve months after the date the Plan is adopted by the Board of Directors. Notwithstanding any other provisions of the Plan, no option shall be exercised prior to the date of such approval. Section 20. Limitations Notwithstanding any other provision of the Plan: (a) An employee shall not be eligible to receive an option pursuant to the Plan if, immediately after the grant of such option to him or her, he or she would (in accordance with the provisions of Sections 423 and 425(d) of the Code) own or be deemed to own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporation, as defined in Section 425 of the Code. (b) No employee shall be granted an option under this Plan that would permit his or her rights to purchase shares of stock under this Plan of the Company to accrue at a rate which exceeds $25,000 in fair market value of such stock (determined at the 6 time the option is granted) for each calendar year during which any such option granted to such employee is outstanding at any time, as provided in Sections 423 and 425 of the Code. (c) No employee shall be granted an option under this Plan that would permit him or her to withhold more than $2,500 in each option period or $5,000 per calendar year, less the amount of any rollover. (d) No employee whose customary employment is 20 hours or less per week shall be eligible to participate in the Plan.* (e) No independent contractor shall be eligible to participate in the Plan. *Subsection 20(d) is subject to stockholder approval at the Annual Meeting of Stockholders to be held on May 6, 1998. 7 EX-99.3 4 PROXY CARD PROXY EMC CORPORATION PROXY ANNUAL MEETING OF STOCKHOLDERS - MAY 6, 1998 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS The undersigned hereby appoints Colin G. Patteson and Paul T. Dacier, and each of them, proxies with full power of substitution to each, to represent and to vote at the Annual Meeting of Stockholders of EMC Corporation to be held May 6, 1998 at 10:00 a.m., local time, at EMC's facility at 5-9 Technology Drive, Milford, Massachusetts, and at any adjournments thereof, all the shares of Common Stock, $.01 par value per share, of EMC Corporation that the undersigned would be entitled to vote if personally present. The undersigned instructs such proxies, or their substitutes, to act on the following matters as specified by the undersigned and to vote in such manner as they may determine on any other matters that may properly come before the meeting. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please sign exactly as your name(s) appears(s) on the books of the Company. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [EMAM - EMC CORPORATION] [FILE NAME: EMACM2.ELX] [VERSION-3] [3/12/98] [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- EMC CORPORATION - -------------------------------------------------------------------------------- THIS PROXY, THEN WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THEN THIS PROXY WILL BE VOTED IN FAVOR OF ELECTING THE THREE NOMINEES NOTED HEREON TO THE BOARD OF DIRECTORS TO SERVE FOR A THREE-YEAR TERM AS CLASS II DIRECTORS, APPROVING THE ADDITION OF SHARES TO EMC CORPORATION'S 1993 STOCK OPTION PLAN AND APPROVING CERTAIN AMENDMENTS TO EMC CORPORATION'S 1989 EMPLOYEE STOCK PURCHASE PLAN. A VOTE FOR THE ELECTION OF DIRECTORS INCLUDES DISCRETIONARY AUTHORITY TO VOTE FOR A SUBSTITUTE IF ANY NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, IN THEIR DISCRETION. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. RECORD DATE SHARES: 1. Election of Directors: Electing three directors to serve a three-year term as Class II Directors and for all nominees. With- For All John R. Egan For held Except Joseph F. Oliveri Michael C. Ruettgers [_] [_] [_] If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE - -------------------------------------------------------------------------------- For Against Abstain 2. To approve the addition of 3,500,000 shares of Common Stock, $.01 par value, to the 1993 Stock [_] [_] [_] Option Plan. - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2. - -------------------------------------------------------------------------------- For Against Abstain 3. To approve certain amendments to the 1989 Employee Stock Purchase Plan as described in the Company's [_] [_] [_] Proxy Statement. - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3. - -------------------------------------------------------------------------------- Mark box at right if an address change has been noted on the reverse side at this card. [_] Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Stockholder sign here Co-owner sign here DETACH CARD DETACH CARD [EMACM - EMC CORPORATION] [FILE NAME-EMACM1.ELX] [VERSION-2] [3/11/98] -----END PRIVACY-ENHANCED MESSAGE-----