<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
E-TEK DYNAMICS, INC.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
E-TEK Dynamics, Inc.
Notice of Annual Meeting of Stockholders
On October 28, 1999
Dear E-TEK Stockholder:
On Thursday, October 28, 1999, E-TEK Dynamics, Inc. will hold its 1999
Annual Meeting of Stockholders at our headquarters at 1865 Lundy Avenue, San
Jose, California 95131. The meeting will begin at 4:30 p.m. Pacific Time, for
the following purposes:
1. To elect one Class I director.
2. To approve the appointment of our independent auditors for fiscal year 2000.
3. To attend to other business properly presented at the meeting.
Only stockholders who owned stock at the close of business on August 30,
1999 can vote at this meeting or any adjournments that may take place. For ten
days prior to the meeting, a complete list of stockholders entitled to vote at
the meeting will be available for examination by any stockholder, for any
purpose relating to the meeting, during ordinary business hours at our principal
offices located at 1865 Lundy Avenue, San Jose, California.
Whether or not you expect to attend the meeting in person, you are urged to
sign, date, and return the enclosed proxy card at your earliest convenience to
ensure the presence of a quorum at the annual meeting.
If you send in your proxy and then decide to attend the Annual Meeting to
vote your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.
Your Board of Directors recommends that you vote in favor of the two
proposals outlined in this Proxy Statement. Please refer to the Proxy Statement
for detailed information on each of the proposals.
All of us would like to express our appreciation for your continued
interest in E-TEK Dynamics.
Very truly yours,
/s/ Michael J. Fitzpatrick
Michael J. Fitzpatrick
September 9, 1999 Chairman, President
San Jose, California and Chief Executive Officer
<PAGE> 3
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors (the "Board")
of E-TEK Dynamics, Inc. for use at the Annual Meeting of Stockholders to be held
on Thursday, October 28, 1999, at 4:30 p.m., and at any adjournment that may
take place.
The Annual Meeting will be held at E-TEK's headquarters located at 1865
Lundy Avenue, San Jose, California 95131. The date of this Proxy Statement is
September 9, 1999 and we anticipate sending the proxy materials to shareholders
on or about September 27, 1999.
SOLICITATION AND VOTING OF PROXIES
The following is important information in a question-and-answer format
regarding the Annual Meeting and this Proxy Statement.
Q: What may I vote on?
A: (1) The election of one Class I director to serve on our Board of Directors;
(2) The approval of the appointment of our independent auditors for fiscal
2000; and
(3) Any other business properly presented at the meeting.
Q: How does the Board recommend I vote on the proposals?
A: The Board recommends a vote FOR the nominee standing for re-election as
director and FOR the appointment of PricewaterhouseCoopers LLP as
independent auditors for fiscal 2000.
Q: Who is entitled to vote?
A Stockholders as of the close of business on August 30, 1999 (the "Record
Date") are entitled to vote at the Annual Meeting. Each shareholder is
entitled to one vote for each share of Common Stock held on the Record
Date. As of the Record Date, 66,921,949 shares of E-TEK's Common Stock were
issued and outstanding.
Q: How do I vote?
A: You may vote in person at the Annual Meeting or by signing and dating each
proxy card you receive and returning it in the prepaid envelope. You may
also be able to vote electronically via the Internet or by telephone as
outlined on the proxy card. Please note that there are separate Internet
and telephone voting arrangements, depending upon whether shares are
registered in your name or in the name of a broker or bank.
Q: How can I change my vote or revoke my proxy?
A: You have the right to revoke your proxy and change your vote at any time
before the meeting by notifying our Secretary, or by returning a
later-dated proxy card. You may also revoke your proxy and change your vote
by voting in person at the meeting.
Q: What does it mean if I get more than one proxy card?
A: It means you hold shares registered in more than one account.
Sign and return all proxies to ensure that all your shares are
voted.
<PAGE> 4
Q: Who will count the vote?
A: Representatives of EquiServe, E-TEK's transfer agent, will count the votes.
E-TEK's corporate secretary will appoint an inspector of election. The
procedures to be used by the inspector to count the votes will be
consistent with Delaware law concerning voting of shares and determination
of a quorum.
Q: How many votes are needed to approve a proposal?
A: The number of votes needed to approve a proposal varies depending on
the nature of the proposal. For the proposals being presented at the
1999 Annual Meeting, a majority of the shares voted at the meeting,
whether in person or by proxy, must vote in favor of the proposal,
provided a "quorum" is present at the Meeting. Directors, however, are
elected by a plurality of the shares. A quorum is one-third of the
issued and outstanding shares entitled to vote at a meeting. They may
be present at the meeting or represented by proxy. There must be a
quorum for the meeting to be held and action to be validly taken.
Abstentions are not counted in the tally of votes FOR or AGAINST a
proposal. A withheld vote is the same as an abstention. If a broker
indicates on a proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter (broker non-votes),
those shares will be counted as present with respect to that matter
for purposes of establishing a quorum but not for any other purpose.
Q: How will my proxy be exercised?
A: All valid proxies received before the meeting will be exercised. All shares
represented by a proxy will be voted, and where a stockholder specifies by
means of his or her proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so
made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposals.
Q: Who can attend the Annual Meeting?
A: All stockholders as of the Record Date can attend. If your shares are held
in the name of a broker or other nominee, please bring proof of stock
ownership with you to the Annual Meeting. A copy of your brokerage account
statement or an omnibus proxy (which you can get from your broker) will
serve as proof of stock ownership.
Q: How will voting on any other business be conducted?
A: We do not know of any other business to be considered at the 1999 Annual
Meeting other than the proposals described in this proxy statement. If any
other business is properly presented at the Annual Meeting, your signed
proxy card gives authority to Michael J. Fitzpatrick, E-TEK's Chairman and
Chief Executive Officer, and/or Sanjay Subhedar, E-TEK's Senior Vice
President of Operations and Chief Financial Officer, to vote on such
matters.
Q: Who pays for the proxy solicitation process?
A: E-TEK bears the cost of soliciting proxies, including the reimbursement to
brokerage firms and other persons representing beneficial owners of shares
for their expenses in forwarding solicitation material to such beneficial
owners.
<PAGE> 5
PROPOSAL ONE: ELECTION OF DIRECTOR
The Board of Directors currently consists of six members. The directors are
divided into three classes, designated Class I, Class II and Class III, each
serving a staggered three-year term. Class I, whose terms will expire at our
1999 Annual Meeting of Stockholders, consists of Dr. Joseph W. Goodman and Peter
Y. Chung; Class II, whose terms will expire at our 2000 Annual Meeting of
Stockholders, consists of David W. Dorman and Donald J. Listwin; Class III,
whose terms expire at our 2001 Annual Meeting of Stockholders, consists of
Michael J. Fitzpatrick and Walter G. Kortschak.
At each Annual Meeting of Stockholders, directors will be elected for a
full term of three years to succeed those directors whose terms are expiring.
Management's nominee to serve as the Class I director is current Class I member
Dr. Joseph Goodman. Peter Y. Chung is not standing for re-election, and the
authorized number of directors will be reduced from six to five effective
immediately upon the expiration of Mr. Chung's term, unless otherwise acted upon
by the Board. Please see "Information about E-TEK Dynamics Board of Directors"
for information concerning the nominee. If elected, the nominee will serve as
Director until E-TEK Dynamics' Annual Meeting in 2003 and until his successor is
elected and qualified.
If any director is unable to stand for re-election, the Board may reduce
the size of the Board, designate a substitute or leave a vacancy unfilled. If a
substitute is designated, proxies voting on the original director candidate will
be cast for the substituted candidate. The Board has no reason to believe that
the nominee will be unwilling or unable to serve if elected as director. Signed
but unmarked proxies will be voted for election of the nominee to the Board.
Your Board unanimously recommends a vote FOR the election of the nominee
named above.
PROPOSAL TWO: APPROVAL OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board has approved, the
appointment of PricewaterhouseCoopers LLP as our independent auditors for fiscal
2000 subject to your approval. PricewaterhouseCoopers has served as our
independent auditors since 1995. Representatives of PricewaterhouseCoopers will
attend the Annual Meeting to answer appropriate questions.
Audit services provided by PricewaterhouseCoopers during fiscal 1999
included an audit of E-TEK's consolidated financial statements, a review of
E-TEK's Annual Report and certain other filings with the Securities and Exchange
Commission ("SEC") and certain other governmental agencies. In addition,
PricewaterhouseCoopers provided various non-audit services to E-TEK during
fiscal 1999.
In the event that the stockholders do not approve the selection of
PricewaterhouseCoopers LLP, the appointment of the independent auditors will be
reconsidered by the Board of Directors. Unless marked to the contrary, signed
proxies received will be voted FOR ratification of the appointment of
PricewaterhouseCoopers LLP as the independent auditors for fiscal 2000.
Your Board unanimously recommends a vote FOR the approval of the
appointment of PricewaterhouseCoopers LLP as independent auditors for fiscal
2000.
As of the date of this Proxy Statement, the Board of Directors knows of no
other business that will be conducted at the 1999 Annual Meeting of stockholders
of E-TEK Dynamics other than as described in this Proxy Statement. If any other
matter or matters are properly brought before the meeting, or any adjournment or
postponement of the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy on such matters in accordance with
their best judgment.
<PAGE> 6
INFORMATION ABOUT E-TEK DYNAMICS
Principal Ownership of E-TEK Dynamics Common Stock
The following table shows the number of shares of E-TEK Common Stock owned
as of August 30, 1999 by:
o each of our stockholders who is known to be the beneficial owner of more than
5% of our common stock; o each of our directors; o each of our executive
officers listed in the Summary Compensation Table; and o all of our directors
and executive officers as a group.
Except as indicated herein, and as provided by applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock.
The number of shares outstanding for purposes of the following table is
based on 66,921,949 shares outstanding on August 30, 1999, plus an additional
400,062 shares reserved for issuance to certain of the shareholders of E-TEK
ElectroPhotonics Solutions Corporation (the "EPS shareholders"). The EPS
shareholders currently hold shares of a subsidiary of E-TEK that are
exchangeable into E-TEK common stock for a limited period of time. For purposes
of the Annual Meeting, however, the EPS shareholders do not have a right to vote
their exchangeable shares.
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission. For purposes of calculating beneficial
ownership, common stock subject to options currently exercisable or exercisable
on or prior to 60 days after August 30, 1999 are deemed outstanding for
computing the percentage ownership of the person holding such options, but are
not deemed outstanding for computing the percentage ownership of any other
person.
<TABLE>
Principal Stock Ownership
<CAPTION>
Name of Individuals or Percent of
Identity of Group(1) Number of Shares Total
- -------------------------------- ----------------------- ------------
<S> <C> <C>
Summit Partners Entities(2) 19,850,517 29.7%
Jing Jong Pan(3) 8,891,000 13.3
Theresa Pan(4) 8,139,500 12.2
Putnam Investments, Inc.(5) 7,534,472 11.3
Peter Y. Chung(6) 19,652,012 29.4
Walter G. Kortschak(7) 19,850,517 29.7
Michael J. Fitzpatrick(8) 2,402,422 3.6
David W. Dorman(9) 50,000 *
Joseph W. Goodman(9) 50,000 *
Donald J. Listwin(9) 50,000 *
Ming Shih(10) 853,218 1.3
Sanjay Subhedar(11) 1,186,695 1.8
Philip J. Anthony(12) 152,078 *
Jim Northington(13) 65,225 *
All directors and executive officers as a group
(9 persons) (14) 24,660,155 36.5
</TABLE>
*Represents beneficial ownership of less than 1% of the outstanding shares of
our common stock.
<PAGE> 7
(1) Except as otherwise noted, the address of each person listed in the
table is c/o E-TEK Dynamics, Inc., 1865 Lundy Avenue, San Jose,
California 95131.
(2) Represents 17,766,213 shares held by Summit Ventures IV, L.P., 1,885,799
shares held by Summit Subordinated Debt Fund II, L.P. and 198,505 shares
held by Summit Investors III, L.P. The address for these entities is c/o
Summit Partners 499 Hamilton Avenue, Suite 200, Palo Alto, California
94301.
(3) Mr. Pan is the spouse of Theresa Pan.
(4) Ms. Pan is the spouse of Jing Jong Pan and the sister of Ming Shih.
(5) Based on information furnished by Putnam in Schedule 13G filed with the
Securities and Exchange Commission on September 9, 1999. The address for
Putnam is One Post Office Square, Boston, MA 02109.
(6) Represents 17,766,213 shares held by Summit Ventures IV, L.P. and
1,885,799 shares held by Summit Subordinated Debt Fund II, L.P. Mr.
Chung, a director of E-TEK, is (i) a general partner of Stamps, Woodsum &
Co. IV, which is the general partner of Summit Partners IV, L.P., which
is the general partner of Summit Ventures IV, L.P. and (ii) a general
partner of Stamps, Woodsum & Co. IV, which is the general partner of
Summit Ventures SD II, LLC, which is the general partner of Summit
Subordinated Debt Fund II, L.P. Mr. Chung disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein.
(7) Represents 17,766,213 shares held by Summit Ventures IV, L.P., 1,885,799
shares held by Summit Subordinated Debt Fund II, L.P. and 198,505 shares
held by Summit Investors III, L.P. Mr. Kortschak, a director of E-TEK, is
(i) a Managing Partner of Stamps, Woodsum & Co. IV, which is the general
partner of Summit Partners IV L.P., which is the general partner of
Summit Ventures IV, L.P. and (ii) a Managing Partner of Stamps, Woodsum &
Co. IV, which is the general partner of Summit Partners SD II, LLC, which
is the general partner of Summit Subordinated Debt Fund II, L.P. Mr.
Kortschak is also a Managing Partner of Summit Investors III, L.P. Mr.
Kortschak disclaims beneficial ownership of such shares except to the
extent of his pecuniary interest therein.
(8) Includes 126,291 shares of common stock issuable upon the exercise of
options.
(9) Represents shares of common stock issuable upon the exercise of
options.
(10) Ming Shih is the brother of Theresa Pan. Includes 325,000 shares of
common stock issuable upon the exercise of options.
(11) Includes 162,500 shares of common stock issuable upon the exercise of
options.
(12) Includes 46,249 shares of common stock issuable upon the exercise of
options.
(13) Includes 62,500 shares of common stock issuable upon the exercise of
options.
(14) Includes shares of common stock of E-TEK issuable upon the exercise of
stock options and shares beneficially owned by Summit Ventures IV, L.P.,
Summit Subordinated Debt Fund II, L.P. and Summit Investors III, L.P.,
with which Messrs. Chung and Kortschak are associated, as to which shares
they disclaim beneficial ownership, except to the extent of their
pecuniary interest therein.
<PAGE> 8
Board of Directors
This section provides information concerning the background of the current
directors, including the Class I nominee to be elected at this meeting.
Michael J. Fitzpatrick Chairman since April 1999
Age 50 Director since October 1997
Mr. Fitzpatrick has been Chairman of the Board since April 1999 and President
and Chief Executive Officer of E-TEK Dynamics since October 1997. From July 1994
to October 1997, Mr. Fitzpatrick served as President and Chief Executive Officer
of Pacific Telesis Enterprises, a service provider. While at Pacific Telesis,
Mr. Fitzpatrick also served as Executive Vice President of Marketing and Sales
from January 1994 to July 1994 and Executive Vice President of Statewide Markets
with Pacific Bell, an affiliate of Pacific Telesis, from September 1993 to
January 1994. From October 1991 to August 1993, Mr. Fitzpatrick was President
and Chief Executive Officer of Network Systems Corporation, an internetworking
company. Mr. Fitzpatrick also serves as a director of NorthPoint Communications
Group, Inc., a national provider of local data network services. Mr. Fitzpatrick
received a B.A. from Duke University.
Walter G. Kortschak
Age 40 Director since July 1997
Mr. Kortschak was Chairman of the Board of Directors from July 1997 until April
1999. Mr. Kortschak is a Managing Partner and Managing Member of various
entities affiliated with Summit Partners, L.P., a private equity capital firm in
Palo Alto, California, where he has been employed since June 1989. Summit
Partners, L.P. and its affiliates manage a number of venture capital funds,
including Summit Ventures IV, L.P., Summit Investors III, L.P. and Summit
Subordinated Debt Fund II, L.P. Mr. Kortschak also serves as a director of
several privately held companies. Mr. Kortschak received a B.S. from Oregon
State University, an M.S. from The California Institute of Technology and an
M.B.A. from the University of California, Los Angeles.
David W. Dorman
Age 45 Director since June 1998
Mr. Dorman is the President and Chief Executive Officer of the AT&T/BT
Global Venture where he has been employed since April 1999. Prior to that, Mr.
Dorman was the Chairman, President and Chief Executive Officer of PointCast
Incorporated, a company providing broadcast news through the Internet and
corporate intranets. Prior to joining PointCast in November 1997, Mr. Dorman
served as the Executive Vice President of SBC Communications from August 1997 to
November 1997, following the merger of SBC and Pacific Telesis. Prior to that,
Mr. Dorman served as President and Chief Executive Officer of Pacific Bell from
July 1994 to August 1997. From 1981 to July 1994, Mr. Dorman held various senior
management positions at Sprint Corporation, a telecommunications company. Mr.
Dorman also serves as a director of 3Com Corporation, Science Applications
International Corporation, and Scientific-Atlanta, Inc.
Mr. Dorman received a B.S. from the Georgia Institute of Technology.
Dr. Joseph W. Goodman
Age 63 Director since July 1998
Dr. Goodman has served as Acting Dean of Engineering, Senior Associate Dean
of Engineering, and Chairman of the Department of Electrical Engineering
at Stanford University. He has been employed at Stanford University in
various capacities since 1963, and has held the William Ayer Chair of
Electrical Engineering since 1988. He received a B.A. degree from Harvard
University and M.S. and Ph.D. degrees from Stanford University. Dr. Goodman has
been nominated for re-election as a Class I director at the 1999 Annual Meeting.
<PAGE> 9
Donald J. Listwin
Age 40 Director since July 1998
Mr. Listwin is an Executive Vice President at Cisco Systems, Inc., where he has
been employed since 1990. In April 1997, Mr. Listwin was named the Senior Vice
President of Cisco's Service Provider Line of Business. Prior to that, he was
Senior Vice President of Cisco's Market Development from August 1996 to April
1997, Vice President and General Manager of Cisco's Access Business Unit from
September 1995 to August 1996, and Vice President of Marketing from September
1993 to September 1995. Mr. Listwin also serves as a director of TIBCO Software
Inc. and Software.com. Mr. Listwin received a B.S. from the University of
Saskatchewan, Canada.
Peter Y. Chung Director since December 1998
Age 31
Mr. Chung served as one of our directors from July 1997 until July 1998 and then
rejoined our Board in December 1998. Mr. Chung is a General Partner and Member
of various entities affiliated with Summit Partners, L.P., a private equity
capital firm in Palo Alto, California, where he has been employed since August
1994. Summit Partners, L.P., and its affiliates manage a number of venture
capital funds, including Summit Ventures IV, L.P., Summit Investors III, L.P.
and Summit Subordinated Debt Fund II, L.P. From August 1989 to July 1992, Mr.
Chung worked in the Mergers and Acquisitions Department of Goldman, Sachs & Co.
Mr. Chung also serves as a director of Splash Technology Holdings, Inc., a
developer of color server systems, and Ditech Communications Corporation, a
telecommunications equipment company, as well as several privately held
companies. Mr. Chung received a B.A. from Harvard University and an M.B.A. from
Stanford University. Mr. Chung is not standing for re-election as a director.
Relationships Among Directors or Executive Officers
There are no family relationships among any of the directors or executive
officers of E-TEK.
Board Meetings and Committees
The Board held eight meetings during fiscal 1999 and each of the directors
attended at least 75% of those Board meetings held during the period for which
he has been a director. In addition, the Board has established the following
three standing committees:
Compensation Committee. The Compensation Committee determines compensation
for E-TEK's executive officers and administers our 1998 Stock Plan, 1998
Director Option Plan and 1998 Employee Stock Purchase Plan. During fiscal 1999,
the Committee, which currently consists of Walter G. Kortschak and David W.
Dorman, met eight times and all members attended at least 75% of the meetings.
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews the plans and results of
the audit engagement with E-TEK's independent public accountants, reviews the
independence of E-TEK's independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of E-TEK's internal accounting
controls. During fiscal 1999, the Committee, which currently consists of Walter
G. Kortschak, Peter Y. Chung and Dr. Joseph W. Goodman, met two times and all
members attended at least 75% of the meetings.
Employee Stock Option Committee. The Employee Stock Option Committee of the
Board of Directors determines stock option grants for employees below the
executive officer level. Michael J. Fitzpatrick is currently the only member of
the Employee Stock Option Committee. The Employee Stock Option Committee was
formed in June 1999 and reviews proposed stock option grants approximately once
every month.
The Board currently has no nominating committee or committee performing a
similar function.
<PAGE> 10
Director Compensation
Except for the grants of stock options, we do not currently compensate our
directors. Directors are reimbursed for out-of-pocket expenses incurred in
connection with attendance at meetings of the Board of Directors or any
committees thereof. The directors of our company who are not employees of our
company will receive periodic stock option grants under our 1998 Director Option
Plan. The directors who are employees of our company are generally eligible to
participate in our 1998 Stock Plan and in our 1998 Employee Stock Purchase Plan.
The Director Plan provides for the grant of nonstatutory stock options to
non-employee directors who are not also partners or members of any venture
capital investor which holds more than five percent (5%) of the total voting
power of E-TEK's outstanding capital stock. Each new director who is not an
employee of E-TEK shall automatically be granted an option to purchase 40,000
shares of E-TEK Common Stock upon election to the Board of Directors (First
Option) and a further option to purchase 10,000 shares on the date which is two
(2) days after our financial results for the preceding fiscal year are announced
to the public (Subsequent Option), if on such date he or she shall have served
on the Board of Directors for at least six months. The exercise price of each
First Option and each Subsequent Option shall be 100% of the fair market value
per share of E-TEK Common Stock on the date of grant.
During fiscal 1999, Messrs. Dorman, Goodman, and Listwin each were granted
an option to purchase 40,000 shares of Common Stock at an exercise price of
$10.00.
COMPENSATION OF EXECUTIVE OFFICERS AND OTHER MATTERS
The following table sets forth information regarding the compensation of
our Chief Executive Officer and the four most highly compensated executive
officers other than the CEO who were serving as executive officers at the end of
the fiscal year ended June 30, 1999. Compensation for fiscal years ended June
30, 1999, 1998 and 1997 is included.
Other annual compensation primarily represents imputed interest income
resulting from an interest-free loan made to several of the named executive
officers to fund the exercise of options to purchase our common stock. The
restricted stock awards represent shares that were purchased at fair market
value, as determined by our Board of Directors. The awards are subject to rights
of repurchase which lapse periodically over a two- to four-year period.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- -------------------
Other Restricted Securities
Name and Principal Fiscal Annual Stock Underlying
Positions Year Salary Bonus Compensation Awards* Options
- ------------------------ ---- ------ ----- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Fitzpatrick.. 1999 $300,000 $135,000 $387,317 -- 433,000
Chairman of the Board, 1998 188,077 300,000 258,000 2,825,000 --
President & Chief
Executive Officer 1997 -- -- -- -- --
Ming Shih.............. 1999 204,473 50,000 135,129 -- --
Senior Vice President, 1998 233,423 215,000 159,000 1,111,111 500,000
Sales & Marketing 1997 190,769 1,815,577 -- -- --
Sanjay Subhedar......... 1999 196,634 45,000 231,111 -- 300,000
Senior Vice President, 1998 86,154 -- -- 1,200,000 --
Operations, and Chief 1997 -- -- -- -- --
Financial Officer
Philip J. Anthony........1999 166,920 69,200 63,239 -- 50,000
Vice President of 1998 -- -- -- 125,000 125,000
Engineering 1997 -- -- -- -- --
Jim Northington........ 1999 138,458 12,433 -- -- 225,000
Vice President 1998 -- -- -- -- --
of Manufacturing 1997 -- -- -- -- --
</TABLE>
* As of June 30, 1999, the value of 2,475,000 restricted shares held by Mr.
Fitzpatrick was $117,717,188; the value of 758,218 restricted shares held
by Mr. Shih was $36,062,744; the value of 1,125,000 restricted shares held
by Mr. Subhedar was $53,507,813, and the value of 125,000 restricted shares
held by Mr. Anthony was $5,953,125
<PAGE> 11
Option Grant Summary
The following table presents additional information concerning the option
awards shown in the Summary Compensation Table for fiscal year 1999.
All options were granted at an exercise price equal to the fair market
value of our common stock as determined by our Board of Directors on the date of
the grant. Our common stock was not publicly traded at the time of the option
grants listed below.
Potential realizable values are net of exercise price, but before taxes
associated with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The assumed 5% and 10% rates of stock price appreciation are provided in
accordance with rules of the Securities and Exchange Commission and do not
represent our estimate or projection of the future common stock price. Actual
gains, if any, on stock option exercises are dependent on the future performance
of our common stock, overall market conditions and the option holders' continued
employment through the vesting period.
<TABLE>
Option Grants in Fiscal 1999
<CAPTION>
% of Total
Number of Options to Potential Realizable
Securities Granted Exercise Value at
Underlying Employees or Base Assumed Annual Rates of
Options in Fiscal Price Expiration Stock Price Appreciation
Name Granted * Year Per Share Date for Option Term
- ---- --------- ------- -------- ------- ----------------------
5% 10%
-------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael J.
Fitzpatrick 433,000 14.1% $10.00 7/30/08 $2,723,114 $6,900,905
Philip J.
Anthony 50,000 1.6 10.00 7/30/08 314,447 796,871
Jim
Northington 200,000 6.5 10.00 7/30/08 1,257,789 3,187,485
25,000 0.8 24.625 1/13/09 387,163 981,148
Ming
Shih -- -- -- -- -- --
Sanjay
Subhedar 300,000 9.8 10.00 7/30/08 1,886,684 4,781,227
</TABLE>
* With the exception of Mr. Subhedar, all of the options included above
become exercisable at a rate of one-quarter of the shares subject to the
option one year after the date of the grant and an additional 1/48 of the
shares at the end of each month thereafter, subject to continued service as
an employee. One quarter of Mr. Subhedar's options vested on December 2,
1998, an additional one quarter vested on July 30, 1999, and the remaining
options will vest at the rate of 2% per month for 24 months.
Aggregated Option Exercises and Year-End Values
The following table sets forth the number of shares acquired and the value
realized upon exercise of stock options during fiscal year 1999 and the number
of shares of our common stock subject to exercisable and unexercisable options
held as of June 30, 1999 by each of the executive officers named in the Summary
Compensation Table.
<PAGE> 12
The value of "in-the-money" stock options represents the positive spread
between the exercise price of options and the fair market value of the
underlying shares on June 30, 1999.
<TABLE>
<CAPTION>
Number of Number of
Shares Value Securities Underlying Value of Unexercised
Acquired Realized Unexercised Options In-the-Money Options
Name on Exercise ($) at Fiscal Year End at Fiscal Year End($)
- ---- ---------- -------- ------------------ ---------------------
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Michael J.
Fitzpatrick 0 $ 0.00 0 433,000 $ 0 $ 12,286,375
Philip J.
Anthony 0 0.00 31,250 143,750 886,719 4,078,906
Jim
Northington 0 0.00 0 225,000 0 6,018,750
Ming
Shih 0 0.00 300,000 200,000 10,537,500 7,025,000
Sanjay
Subhedar 0 0.00 75,000 225,000 2,128,125 6,384,375
</TABLE>
<PAGE> 13
Employment Agreements and Change of Control Arrangements
On October 1, 1997, we entered into an employment agreement with Michael J.
Fitzpatrick to serve as our President and Chief Executive Officer. The agreement
provides that Mr. Fitzpatrick is an "at-will" employee, that he will be paid a
minimum base salary of $300,000 per annum (subject to annual review), and that
he will be eligible to receive an annual bonus of up to $300,000. The agreement
also provides that if Mr. Fitzpatrick is terminated for any reason other than
"cause," or if he resigns for "good reason":
- he will be entitled to receive a severance payment in an amount
equal to his monthly base salary and pro rated bonus until the earlier of
the expiration of 12 months or his commencement of employment with another
firm; and
- the vesting of all of his options and restricted stock will be
accelerated by 12 months.
In addition, the agreement provides that in the event that Mr.
Fitzpatrick's employment with us is terminated by him or us within 6 months
following a "change of control" of E-TEK, the vesting of all of his options and
restricted stock will be fully accelerated and Mr. Fitzpatrick will be entitled
to receive a severance payment in an amount equal to two times his base salary
and bonus.
On December 2, 1997, we entered into an employment agreement with Sanjay
Subhedar to serve as our Vice President and Chief Financial Officer. The
agreement provides that Mr. Subhedar is an "at-will" employee, that he will be
paid a minimum base salary of $175,000 per annum (subject to annual review), and
that he will be eligible to receive an annual bonus of up to $100,000. The
agreement also provides that if Mr. Subhedar is terminated for any reason other
than "cause," or if he resigns for "good reason":
- he will be entitled to receive a severance payment in an amount equal
to his monthly base salary until the earlier of the expiration of 12 months
or his commencement of employment with another firm; and
- the vesting of all of his options and restricted stock will be
accelerated by 12 months.
In addition, the agreement provides that upon a "change of control" of
E-TEK, the vesting of all of his options and restricted stock will be
accelerated by 12 months (but will not be further accelerated beyond the
acceleration described in the foregoing sentence upon any subsequent termination
of his employment with us following a change of control).
On May 26, 1998, we entered into an employment agreement with Philip J.
Anthony to serve as our Vice President of Engineering. The agreement provides
that Mr. Anthony will be an "at-will" employee, that he will be paid a base
salary of $160,000 per annum (subject to annual review), and that he will be
entitled to receive a bonus of up to 30% of his then current base salary. The
agreement also provides that in the event that Mr. Anthony is terminated for any
reason other than "cause," or if he resigns for "good reason":
- he will be entitled to receive a severance payment in an amount equal
to his monthly base salary until the earlier of the expiration of 12 months
or his commencement of employment with another firm; and
- the vesting of all of his options and restricted stock will be
accelerated by 12 months.
On July 21, 1998, we entered into an employment agreement with Jim
Northington to serve as our Vice President of Manufacturing. The agreement
provides that Mr. Northington will be an "at-will" employee, that he will be
paid a base salary of $160,000 per annum (subject to annual review), and that he
will be entitled to receive a bonus of up to 30% of his then current base
salary.
Certain Transactions
From time to time we have made interest-free loans to certain of our
executive officers to fund the exercise of stock options held by these executive
<PAGE> 14
officers. These loans are evidenced by promissory notes which mature on the
dates set forth below, subject to certain acceleration events. These promissory
notes are secured by the shares of common stock purchased with the proceeds of
these loans, and are either full recourse or substantial recourse against the
assets of the borrower. The following table sets forth the name and position of
the relevant officers, certain information with respect to the promissory notes
issued to evidence such loans, and the number of shares of our common stock
purchased with the proceeds of these loans.
<TABLE>
<CAPTION>
Principal Shares Issuance Maturity
Name Amount Purchased Date Date
- --------------- ----------- --------- -------- -----------
<S> <C> <C> <C> <C>
Michael J. Fitzpatrick $5,198,000 2,260,000 11/13/97 11/13/2002
1,299,500 565,000 11/13/97 11/13/2002
Sanjay Subhedar 3,900,000 1,200,000 12/11/97 12/11/2002
Ming Shih 1,277,776 555,555 07/23/97 07/23/2006
1,277,778 555,556 07/23/97 07/23/2006
Philip J. Anthony 1,250,000 125,000 06/25/98 06/25/2003
</TABLE>
During fiscal 1999, Mr. Fitzpatrick paid $805,000, Mr. Subhedar paid
$243,750, and Mr. Shih paid $2,094,133 against their loans.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors currently consists of
two directors who are not employees of E-TEK. The Committee reviews and approves
salaries, bonuses and other benefits payable to E-TEK's executive officers. It
also administers E-TEK's employee stock option plans. During fiscal 1999,
Messrs. Dorman and Kortschak served as members of the compensation committee of
E-TEK's Board of Directors. Mr. Fitzpatrick also served as a member of the
compensation committee for a portion of fiscal 1999, but no longer serves on the
committee. There are no interlocking relationships between our directors and
executive officers and those of any other public company.
Compensation Goals. The Compensation Committee establishes compensation for
executive officers to align business objectives with performance, and to
attract, retain and reward executive officers who contribute to our long-term
success. The Committee and the Board consult with management regarding E-TEK's
stock option and stock purchase plans, compensation policies, compensation to be
offered to new executive hires, and executive performance reviews. The Committee
reviews and approves performance incentive payments and stock option grants to
executive officers. Our compensation programs, including those for executive
officers, share these characteristics:
- We offer a compensation program, including competitive base salaries
and, where appropriate, relocation benefits, to attract and retain the best
people in the industry. To ensure that pay is competitive, we review the
compensation practices of other leading companies in the industry.
- We pay for relative sustained performance. Executive officers are
rewarded based upon corporate, departmental, and individual performance.
Corporate and departmental performance are evaluated by reviewing whether
strategic and business plan goals are met. Individual performance is
evaluated by measuring organizational progress against set objectives.
- We strive for fairness to achieve a balance in compensation paid to
the executives within E-TEK and in comparable companies. We believe that
the contributions of each member of the executive staff are vital to our
success.
- We believe that employees should understand the performance evaluation
and compensation programs. At the beginning of the performance cycle, key
semi-annual and annual objectives are set for each officer. The chief
executive officer gives ongoing feedback on performance to each officer. At
the end of the performance cycle, the Compensation Committee evaluates the
accomplishments of the key objectives in making its decisions on merit
increases and stock option grants.
<PAGE> 15
Compensation Components. E-TEK's compensation program has three elements,
base salary, benefits, and at risk compensation. Combined, these three elements
should yield a total compensation package that is competitive in the industry.
In addition to base salary, officers participate in a Performance Incentive Plan
(PIP) that is based on the individual's annual performance and achievement of
corporate and departmental objectives. Our compensation packages are intended to
attract and retain highly skilled employees, provide useful products and
services to customers, enhance shareholder value, motivate technological
innovation, and reward performance.
Base Salary. The Committee sets base salary for officers by reviewing the
compensation levels for similar positions in comparable companies in the
industry. Base salaries are adjusted based on the individual's performance.
Performance Incentive Plan. Bonuses for eligible executive officers are
paid as a percentage of their base salary and on the basis of E-TEK's overall
achievement of certain corporate financial and operational goals and on
individual achievement.
Employee Stock Purchase Plan. E-TEK's 1998 Purchase Plan helps us meet the
objective of retaining highly skilled employees by allowing eligible employees
to purchase Common Stock through payroll deductions of up to 10% of the
participant's compensation during six-month purchase periods as defined by
E-TEK. The price of the stock purchased under the 1998 Purchase Plan is
generally 85% of the lower of the fair market value of the Common Stock (i) at
the beginning of the offering period or (ii) at the end of the purchase period.
Stock Options. Our 1998 Stock Plan provides for the grant of incentive
stock options to employees (including officers and employee directors) and for
the grant of nonstatutory stock options and stock purchase rights to employees,
directors and consultants. The Stock Plan seeks to align the interests of our
employees with those of our stockholders and nurture our employees' long-term
interest in E-TEK's success. The options become available for purchase over a
defined period to encourage employees to continue their employment with E-TEK.
We determine the number of stock options to be granted by evaluating several
factors such as individual performance, overall compensation level for the
individual, the importance to E-TEK of retaining the individual in the
long-term, other E-TEK equity ownership by the individual, and equity incentives
provided in the industry and to individuals with similar responsibilities at
other companies.
Chief Executive Officer Compensation. Michael J. Fitzpatrick has been
E-TEK's President and Chief Executive Officer since October 1997. His total
compensation consists of base salary, incentive compensation and employee stock
options. In determining Mr. Fitzpatrick's compensation, the Committee considers
the factors set forth above and also evaluates:
- Compensation paid to chief executive officers of comparable companies
- Corporate performance
- His individual performance
- Compensation paid to E-TEK's other executive officers
For fiscal year 1999, Mr. Fitzpatrick's salary was $300,000. Mr.
Fitzpatrick's salary was established at the time of his hire in October 1997.
The Compensation Committee has reviewed Mr. Fitzpatrick's accomplishments and
established performance objectives for him. Because Mr. Fitzpatrick and E-TEK
achieved certain performance objectives for fiscal 1998 and successfully
completed E-TEK's initial public offering, he received performance vesting of
376,667 shares in fiscal 1999, in accordance with a November 3, 1997 stock
option agreement. He also received a stock option grant and cash incentives
during fiscal 1999 for the achievement of financial, operational, and market
objectives relating to fiscal 1998 and the first half of fiscal 1999.
Accordingly, he received cash incentive payments of $135,000 and, on July 30,
1998, was granted options to purchase 433,000 shares of Common Stock at an
exercise price of $10.00. These options are for a 10-year term and are
exercisable at a rate of 1/4 of the shares subject to the option one year after
the date of the grant and an additional 1/48 of the shares at the end of each
month thereafter, beginning on July 30, 1999. Mr. Fitzpatrick elected not to
take a bonus payable to him for achievement of performance targets for the
second half of fiscal 1999. Mr. Fitzpatrick's equity ownership in E-TEK also
includes shares of Common Stock as set forth in the Principal Stock Ownership
Table on page 4 of this proxy statement. We believe Mr. Fitzpatrick's
<PAGE> 16
compensation is strongly aligned with the interests of stockholders since his
compensation has been linked to specific company and individual performance
measures.
Compensation Committee of the Board of Directors Walter G. Kortschak
David W. Dorman
Other Matters
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of forms filed or written notice that no annual forms
were required, we believe that from December 2, 1998 to June 30, 1999, all SEC
filings of our officers, directors and ten percent shareholders complied with
the requirements of Section 16 of the Securities Exchange Act, with one
exception. An acquisition of 5,000 shares of E-TEK Common Stock by Jim
Northington, Vice President of Manufacturing, on December 7, 1998 was
inadvertently reported one month late on a Form 4 filed with the Securities and
Exchange Commission on February 5, 1999.
<PAGE> 16
COMPARISON OF STOCKHOLDER RETURN
The following graph compares the cumulative total stockholder return on
E-TEK's Common Stock since the date of our initial public offering (December 1,
1998) through the fiscal year ended June 30, 1999, with the CRSP Total Return
Index for the NASDAQ Stock Market - US Index and the NASDAQ Electronic
Components Index. The total return values are prepared by the Center for
Research in Security Prices (CRSP) at the University of Chicago. The Electronic
Components Index consists of approximately 190 companies listed on the NASDAQ.
The graph is based on the assumption that $100 was invested in each of E-TEK's
Common Stock, the NASDAQ Stock Market - US Index and the NASDAQ Electronic
Components Index on December 1, 1998. The stock price performance on the graph
is not necessarily an indicator of future price performance.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/1/98 12/31/98 1/29/99 2/26/99 3/31/99 4/30/99 5/28/99 6/30/99
- ------------- ------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E-TEK
Dynamics, Inc. $100 $223 $250 $283 $299 $358 $302 $396
NASDAQ Stock
Market-US Index $100 $110 $126 $114 $123 $126 $123 $134
NASDAQ Electronic
Components Index $100 $106 $124 $107 $111 $117 $109 $126
</TABLE>
<PAGE>17
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must be received by the Corporate
Secretary of E-TEK at its offices at 1865 Lundy Avenue, San Jose, California
95131, no later than May 12, 2000, and satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included in
the Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
We know of no other matters to be presented for consideration at the
meeting. If any other matters properly come before the meeting, the persons
named in the enclosed proxy card intend to vote the shares they represent in
accordance with their best judgment.
By Order of the Board of Directors,
/s/ William Gerson
William N. Gerson
Secretary
San Jose, California
September 9, 1999
<PAGE> 18
[FORM OF FRONT OF PROXY CARD]
E-TEK DYNAMICS, INC.
1865 Lundy Avenue
San Jose, California 95131
Annual Meeting of Stockholders - October 28, 1999
Proxy Solicited on Behalf of the Board of Directors
The undersigned, revoking all prior proxies, hereby appoints Michael J.
Fitzpatrick and Sanjay Subhedar as Proxies, with full power of substitution to
each, to vote for and on behalf of the undersigned at the 1999 Annual Meeting of
Stockholders of E-TEK Dynamics, Inc. to be held at E-TEK's headquarters at 1865
Lundy Avenue, San Jose, California 95131, on Thursday, October 28, 1999, at 4:30
p.m., and at any adjournment or adjournments thereof. The undersigned hereby
directs the said proxies to vote in accordance with their judgement on any
matters which may properly come before the Annual Meeting, all as indicated in
the Notice of Annual Meeting, receipt of which is hereby acknowledged, and to
act on the following matters set forth in such notice as specified by the
undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1 AND 2.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
[FORM OF BACK OF PROXY CARD]
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares. Please mark the boxes on this proxy card to indicate how your
shares will be voted. Then sign the card, detach it and return your proxy vote
in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, to be
held on Thursday, October 28, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
E-TEK Dynamics, Inc.
The Board of Directors recommends a vote FOR the proposals outlined below.
1.Election of Director to a term expiring at the 2002 Annual Meeting of
Stockholders.
Nominee: Dr. Joseph W. Goodman
/ / FOR / / WITHHELD
2. Ratification of the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or any adjournment(s)
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as your name(s) appear(s) on the books of the Company. Joint
owners should each sign personally. Trustees, custodians, and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If the stockholder is a corporation, the
signature should be that of an authorized officer who should indicate his or her
title.
Signature.............................. Date...............
Signature.............................. Date...............
