<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Definitive Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Preliminary Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VIXEL CORPORATION
(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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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.
6. Amount Previously Paid:
- --------------------------------------------------------------------------------
7. Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
8. Filing Party:
- --------------------------------------------------------------------------------
9. Date Filed:
- --------------------------------------------------------------------------------
1.
<PAGE> 2
VIXEL CORPORATION
11911 NORTH CREEK PARKWAY SOUTH
BOTHELL, WA 98011
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2000
To the Stockholders of Vixel Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Vixel
Corporation, a Delaware corporation (the "Company"), will be held on Wednesday,
May 24, 2000 at 9:00 a.m. local time at the Bellevue Hyatt Regency, 900 Bellevue
Way NE, Bellevue, Washington for the following purposes:
1. To elect one director to hold office until the 2003 Annual Meeting of
Stockholders.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Company for its fiscal year ending December 31, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
The Board of Directors has fixed the close of business on April 17, 2000,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ KURTIS L. ADAMS
Kurtis L. Adams
Vice President of Finance, Chief
Financial Officer,
Treasurer and Secretary
Bothell, Washington
April 20, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
VIXEL CORPORATION
11911 NORTH CREEK PARKWAY SOUTH
BOTHELL, WA 98011
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Vixel Corporation, a Delaware corporation (Vixel or the "Company"), for use at
the Annual Meeting of Stockholders to be held on May 24, 2000, at 9:00 a.m.
local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Bellevue Hyatt Regency,
900 Bellevue Way NE, Bellevue, Washington. The Company intends to mail this
proxy statement and accompanying proxy card on or about April 20, 2000, to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
17, 2000, will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on April 17, 2000, the Company had outstanding and
entitled to vote 23,365,829 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 11911
North Creek Parkway South, Bothell, WA 98011, a written notice of revocation or
a duly executed proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE> 4
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 Annual
Meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is December 18, 2000. Unless a stockholder who wishes to bring a
matter before the stockholders at the Company's 2001 Annual Meeting of
stockholders notifies the Company of such matter prior to February 3, 2001,
management will have the discretionary authority to vote all shares for which it
receives proxies in opposition to such matter. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws provide that the
Board of Directors shall be divided into three classes, with each class having a
three-year term. Vacancies on the Board may be filled only by persons elected by
a majority of the remaining directors. A director elected by the Board to fill a
vacancy (including a vacancy created by an increase in the number of directors)
shall serve for the remainder of the full term of the class of directors in
which the vacancy occurred and until such director's successor is elected and
qualified.
The Board of Directors is presently composed of six members. There are two
directors in the class whose term expires in 2000 ("Class I"). There is one
nominee for election to Class I at the Annual Meeting. The other Class I
position will be vacant following the Annual Meeting. The single nominee for
election to Class I is currently a director of the Company who was previously
elected by the stockholders. If elected at the Annual Meeting, the nominee would
serve until the 2003 annual meeting and until his successor is elected and has
qualified, or his earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the nominee named below. In the event that the nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2003 ANNUAL MEETING
Kevin A. Fong (age 46) has served as one of our directors since October
1995. He has been a general partner with Mayfield Fund, a venture capital firm,
and has been a general partner of several venture capital funds affiliated with
Mayfield, since 1990. Mr. Fong is a member of the Board of Directors of Legato
Systems, Inc., a publicly held network storage management company, and interWAVE
Communications, a publicly held wireless networking company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEE.
2
<PAGE> 5
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
Charles A. Haggerty (age 58) has served as one of our directors since March
1996. In January 2000, Mr. Haggerty retired as president and chief executive
officer of Western Digital Corporation, a publicly held data storage company. He
held these positions since July 1993. Mr. Haggerty continues to serve as the
chairman of the board of directors of Western Digital.
Werner F. Wolfen (age 69) has served as one of our directors since March
1998. He has been president of Capri Investment Company, LLC, an asset
management company, since January 1999. Mr. Wolfen is a senior partner emeritus
of the law firm of Irell & Manella where he was co-chairman of the firm's
executive committee from 1982 to 1992. Mr. Wolfen is a member of the Board of
Directors of Broadcom Corporation, a publicly held networking company.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2002 ANNUAL MEETING
James M. McCluney (age 48) has served as our president, chief executive
officer and director since April 1999 and the Chairman of the Board of Directors
since January 2000. From October 1997 to January 1999, he served as president
and chief executive officer of Crag Technologies, formerly Ridge Technologies, a
storage system manufacturer. From October 1994 to September 1997, Mr. McCluney
served in various positions at Apple Computer, including senior vice president
of worldwide operations and vice president of European operations.
Timothy M. Spicer (age 50) has served as a one of our directors since
February 1998, and served as our interim chief executive officer from February
1999 to April 1999. He has been the managing partner of eCompanies Venture
Group, a Santa Monica, California based incubator and venture fund, since
September 1999. From 1993 to September 1999, Mr. Spicer served as the president
and chief operating officer of San Francisco Sentry Investment Group, a
registered investment advisor.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended January 2, 2000, the Board of Directors held
15 meetings. The Board has an Audit Committee and Compensation Committee.
The Audit Committee meets with our independent auditors at least annually
to review the results of the annual audit and discuss the financial statements.
The Audit Committee also recommends to the board the independent accountants to
be retained and reviews the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with our audit and
financial controls. The Audit Committee is composed of two non-employee
directors, Messrs. Kevin A. Fong and Timothy M. Spicer. It met one time during
fiscal year 1999.
The Compensation Committee makes recommendations to the board concerning
salaries and incentive compensation, awards stock options to employees and
consultants under our stock option plans and performs other functions regarding
compensation as delegated by the board. The Compensation Committee is composed
of two non-employee directors, Messrs. Charles A. Haggerty and Werner F. Wolfen.
It met eight times and acted by unanimous written consent five times during
fiscal 1999.
During the fiscal year ended January 2, 2000, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
3
<PAGE> 6
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending December 31, 2000, and
has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of PricewaterhouseCoopers LLP. Abstentions
will be counted toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative votes. Broker
non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE> 7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 1, 2000, by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock. Unless otherwise indicated, the address
of the individuals named below is 11911 North Creek Parkway South, Bothell,
Washington 98011.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED (1)
-----------------------
NUMBER PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES OF TOTAL
------------------------------------ ---------- ---------
<S> <C> <C>
Herb Alpert(2).............................................. 2,037,758 8.7%
360 N. LaCienega Boulevard
Los Angeles, CA 90048-1925
Gregory R. Olbright(3)...................................... 1,627,635 7.0
1041 Kalmia Avenue
Boulder, CO 80304.
Entities associated with Mayfield Fund(4)................... 1,491,710 6.4
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025.
Entities associated with Menlo Ventures(5).................. 1,475,043 6.3
3000 Sand Hill Road, #4-100
Menlo Park, CA 94025
Western Digital Corporation(6).............................. 1,344,326 5.8
8105 Irvine Center Drive
Irvine, CA 92718
James M. McCluney(7)........................................ 1,000,000 4.3
Kurtis L. Adams(8).......................................... 216,666 *
Stuart B. Berman(9)......................................... 707,061 3.0
Richard G. Helgeson......................................... 66,666 *
Jay R. O'Donald(10)......................................... 446,037 1.9
Stanley H. Reese(11)........................................ 54,166 *
Kevin A. Fong(12)........................................... 1,491,710 6.4
Charles A. Haggerty(13)..................................... 1,410,992 6.0
Juan A. Rodriguez........................................... 47,752 *
Timothy M. Spicer(14)....................................... 157,782 *
Werner F. Wolfen(15)........................................ 247,950 1.1
All executive officers and directors as a group (12
persons)(16).............................................. 5,807,616 24.6
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedule 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
23,348,829 shares outstanding on April 1, 2000, adjusted as required by
rules promulgated by the SEC.
(2) Includes 94,312 shares held by the Werner Wolfen Grantors Retained Annuity
Trust (GRAT), 9,431 shares held by the Max Balter GRAT and 18,862 shares
held by the Richard Hall GRAT.
(3) Includes 272,107 shares held by Olbright LLC and 34,030 shares subject to
repurchase within 60 days of April 1, 2000.
5
<PAGE> 8
(4) Includes 1,401,293 shares held by Mayfield VII, L.P., a California limited
partnership, 73,751 shares held by Mayfield Associates Fund II, a
California limited partnership and 16,666 shares held by Mayfield VII
Management Partners, L.P., a California limited partnership.
(5) Includes 21,827 shares held by Menlo Entrepreneurs Fund VI, L.P. and
1,453,216 held by Menlo Ventures VI L.P.
(6) Includes 10,993 shares issuable upon the exercise of a warrant.
(7) Includes 729,167 shares subject to repurchase within 60 days of April 1,
2000 and 50,000 shares held by the Willow Trust.
(8) Includes 95,599 shares subject to options early exercisable within 60 days
of April 1, 2000 and 68,987 shares subject to repurchase within 60 days of
April 1, 2000.
(9) Includes 25,000 shares held by the Toni A. Berman Income Trust, 25,000
shares held by the Berman Children's Trust and 60,534 shares subject to
options exercisable within 60 days of April 1, 2000.
(10) Includes 1,800 shares held by the Kevin M. O'Donald Irrevocable Trust,
1,800 shares held by the Jeffrey M. O'Donald Irrevocable Trust, 53,533
shares held by the O'Donald Family Trust and 25,703 shares subject to
options exercisable within 60 days of April 1, 2000.
(11) Includes 54,166 shares subject to options exercisable within 60 days of
April 1, 2000.
(12) Includes 1,491,710 shares held by the entities listed in note 4 above. Mr.
Fong is a general partner of the Mayfield Fund. Mr. Fong disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest therein.
(13) Includes 1,344,326 shares held by Western Digital Corporation and 50,000
shares held by the Charles A. Haggerty & Carleen R. Haggerty Trust. Mr.
Haggerty is chairman of the board of Western Digital. He disclaims
beneficial ownership of the shares held by Western Digital.
(14) Includes 26,666 shares subject to options exercisable within 60 days of
April 1, 2000.
(15) Includes 123,547 shares held in trust for the current and former partners
of Irell and Manella LLP. Mr. Wolfen disclaims beneficial ownership of the
shares held in trust except to the extent of his pecuniary interest
therein. Includes 94,312 shares held by a Grantor's Retained Annuity Trust
(GRAT) naming Mr. Wolfen as beneficiary, 15,719 shares held by the Richard
Wolfen GRAT and 474 shares held by Mr. Wolfen's spouse. Excludes shares
held by Herb Alpert and Jerome Moss for which Mr. Wolfen has a general
power of attorney. Mr. Wolfen disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein.
(16) Includes options and warrants to purchase 301,161 shares exercisable within
60 days of April 1, 2000.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
We do not provide our directors with cash compensation for their services
as members of the Board of Directors, although we reimburse our directors for
reasonable expenses they incur in connection with attendance at board and
committee meetings. Non-employee members of the Board of Directors are eligible
to receive nondiscretionary stock options under our 1999 Equity Incentive Plan
(the "1999 Plan"). Under the 1999 Plan, an initial grant of nonstatutory options
of 16,500 shares of the common stock will be made to each newly-elected
non-employee director on the date such individual is first elected to the board.
At each annual meeting of our stockholders, annual nonstatutory option grants
will be made to each non-employee director of 5,000 shares of common stock as of
the date of each annual meeting. The exercise price of the stock options is the
fair market value of the stock on the day it is granted. The stock options of a
director will vest annually over a three-year period from the date of grant and
generally must be exercised within ten years.
In May 1999, the Board of Directors granted each director who was not an
employee, a fully vested option to purchase 16,666 shares of common stock at a
price of $6.00 per share. Each director immediately exercised the option to
purchase 16,666 shares of common stock and delivered to us a $100,000
full-recourse promissory note. In April 1999, the Board of Directors granted a
special option to purchase 26,666 shares of
6
<PAGE> 9
common stock at a price of $3.075 per share to Timothy Spicer, one of our
directors, and paid Mr. Spicer $40,000 for his service as our interim chief
executive officer from February through April 1999. During 1999, Gregory R.
Olbright, pursuant to the terms of an employment agreement, received an annual
base salary of $50,000 while serving as Chairman of the Board. Mr. Olbright
resigned as a director in December 1999.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended January 2, 2000, and
January 3, 1999, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and its other four most highly compensated executive
officers at January 2, 2000 and two former executive officers who departed from
the Company during fiscal year 1999 and received compensation in excess of
$100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION OPTION COMPENSATION
--------------------------- ------- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James M. McCluney................ 1999 $207,692 $62,308 $ -- 1,000,000 $209,412(2)
President and Chief Executive 1998 -- -- -- -- --
Officer
Stanley H. Reese................. 1999 144,231 23,820 -- 216,666 --
Vice President of Product 1998 -- -- -- -- --
Development
Stuart B. Berman................. 1999 151,635 10,000 2,212(3) -- --
Chief Technology Officer 1998 128,082 -- -- 60,534 --
Jay R. O'Donald.................. 1999 154,394 -- 6,760(3) -- --
Vice President of Operations 1998 130,481 -- 7,829(3) 82,836 42,857(4)
Kurtis L. Adams.................. 1999 144,846 -- 4,200(3) 83,333 --
Vice President of Finance,
Chief 1998 40,384 -- -- 133,333 --
Financial Officer, Treasurer
and Secretary
Former Executive Officers
Gregory R. Olbright(5)........... 1999 154,734 -- 8,642(3) -- --
President and Chief Executive 1998 249,039 -- 9,600(3) 1,400,000 813,977(6)
Officer
Richard G. Helgeson(7)........... 1999 116,061 55,057(8) 12,132(3) -- 48,345(9)
Vice President of Sales 1998 127,212 80,000(8) 2,181(3) 160,000 --
</TABLE>
- ---------------
(1) As permitted by the rules promulgated by the SEC, no amounts are shown for
1997.
(2) Includes relocation expense payments totaling $129,654 and a tax gross-up
reimbursement made by the Company of $79,758.
(3) Consists of contributions made by the Company under its 401(k) plan.
(4) Consists of relocation expense payments made by the Company.
(5) Mr. Olbright resigned as president and chief executive officer of Vixel in
February 1999. He continued full-time employment through April 1999 at which
time he became Chairman of the Board of Directors and a part-time employee.
Mr. Olbright resigned as Chairman of the Board of Directors in December
1999.
(6) Consists of $473,643 in relocation expenses, $250,000 in accrued severance
and $90,334 in interest forgiveness.
(7) Mr. Helgeson departed from the Company in October 1999.
(8) Consists of sales commissions and bonuses.
(9) Includes accrued severance of $45,000 and accrued COBRA medical insurance
premiums of $3,345 to be paid by the Company.
7
<PAGE> 10
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted to
Named Executive Officers during the fiscal year ended January 2, 2000.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------- POTENTIAL REALIZABLE VALUE
PERCENTAGE OF AT ASSUMED ANNUAL RATES OF
SHARES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR(2) SHARE(3) DATE 5% 10%
---- ---------- -------------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James M. McCluney................. 1,000,000 37.74% $3.075 04/26/09 $1,933,851 $4,900,758
Stanley H. Reese.................. 216,666 8.18% 3.075 01/20/09 419,001 1,061,831
Stuart B. Berman.................. -- -- -- -- -- --
Jay R. O'Donald................... -- -- -- -- -- --
Kurtis L. Adams................... 33,333 1.26% 3.075 04/21/09 64,462 163,359
50,000 1.89% 9.000 07/13/09 283,003 717,184
Gregory R. Olbright............... -- -- -- -- -- --
Richard G. Helgeson............... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Mr. Reese's options vest at a rate of 25% on January 20, 2000 and then
monthly thereafter in 36 equal installments and expire ten years from the
date of grant, or earlier upon termination of employment. Mr. McCluney's
options vest with respect to 25% on April 26, 2000 and then monthly
thereafter in 36 equal installments. Mr. Adams' grant of 33,333 options
vests at a rate of 25% on the first anniversary of the vesting commencement
date and quarterly thereafter over three years. Mr. Adams' grant of 50,000
options vests quarterly over a two-year period. Mr. McCluney's and Mr.
Adams' options permit early exercise and expire ten years from the date of
grant.
(2) Based on options to purchase 2,649,433 shares of the Company's Common Stock
granted to employees and directors, including the Named Executive Officers,
during the fiscal year ended January 2, 2000.
(3) The exercise price per share of each option was equal to the fair market
value of the Company's Common Stock on the date of grant as determined by
the Board of Directors.
(4) The potential realizable value is calculated based on the term of the option
at its time of grant. It is calculated by assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option (10 years) and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. No gain to the option holder is possible unless the stock price
increases over the option term. The 5% and 10% assumed rates of appreciation
are derived from the rules of the SEC and do not represent the Company's
estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth information as of January 2, 2000 regarding
options held by the Named Executive Officers. There were no stock appreciation
rights outstanding.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James M. McCluney................... 1,000,000 $ -- -- -- $ -- $ --
Stanley H. Reese.................... -- -- -- 216,666 -- 3,030,625
Stuart B. Berman.................... -- -- 50,112 10,422 849,629 176,701
Jay R. O'Donald..................... 57,133 622,012 11,427 14,276 193,740 242,044
Kurtis L. Adams..................... 121,067 -- 95,599 -- 1,040,950 --
Gregory R. Olbright................. 415,290 -- -- -- -- --
Richard G. Helgeson................. 66,666 831,492 -- -- -- --
</TABLE>
8
<PAGE> 11
In the table above, value realized is based on the fair market value of the
Company's Common Stock, based on the last reported sales price of our Common
Stock on the exercise date, minus the exercise price of the shares acquired on
exercise. The value of the unexercised in-the-money options at fiscal year end
is based on the fair market value of the Company's Common Stock, based upon the
last reported sales price of our Common Stock on the last trading day prior to
January 2, 2000 of $17.06, minus the per share exercise price multiplied by the
number of shares.
EMPLOYMENT SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
In April 1999, we entered into an employment agreement with James M.
McCluney, our president and chief executive officer. Mr. McCluney's salary is
set annually by the Compensation Committee of the Board of Directors. The
agreement requires us to pay Mr. McCluney an annual incentive bonus of up to
100% of his base salary rate then in effect, with a target payout rate of 50%,
subject to his satisfaction of performance criteria to be determined by the
compensation committee and so long as he serves as our president and chief
executive officer for the year and during the first quarter of the following
calendar year. Mr. McCluney may defer all or any portion of his annual incentive
bonus. Under this agreement, we reimbursed Mr. McCluney for his relocation
expenses associated with moving his family to Washington. In the event that Mr.
McCluney is terminated without cause, he will be entitled to severance in the
amount of one year's base salary at the rate then in effect, any deferred
incentive bonuses and continued vesting of his stock options for one year.
We also granted Mr. McCluney an option to purchase up to 1,000,000 shares
of our common stock at an exercise price of $3.075 per share. This option vests
with respect to 250,000 shares on April 26, 2000, and then monthly thereafter in
36 equal installments. Under the terms of the option agreement, Mr. McCluney may
exercise unvested options; however, Vixel has a right to repurchase any of his
unvested shares. If there is a change in control of Vixel, Mr. McCluney's
options will accelerate and vest immediately on the occurrences and in the
amounts as follows: (1) 500,000 shares if there is a change of control before
April 26, 2000 and his options are not assumed or replaced by substantially
equivalent options; (2) the greater of 250,000 or half the unvested shares if
there is a change of control on or after April 26, 2000; and (3) if his
employment is terminated involuntarily, other than for cause, by a successor
company then as set forth above in (1) or (2) depending on the date.
In December 1998, we entered into an employment agreement with Stanley H.
Reese, our vice president of product development. We granted Mr. Reese an option
to purchase up to 216,666 shares of our common stock at an exercise price of
$3.075 per share. This option vests with respect to 54,166 shares on January 20,
2000, and then monthly thereafter in 36 equal installments. Mr. Reese resigned
in January 2000 and under this agreement is entitled to receive up to $150,000
payable over a one-year payroll cycle, reduced to the extent of compensation
received from other full-time employment.
In the fall of 1998, Gregory R. Olbright, our then chief executive officer,
and the Board of Directors agreed to commence a search for a new chief executive
officer and that Mr. Olbright would continue as chief executive officer during
the course of the search and after selection of the new chief executive officer
would remain as chairman of the board. In November 1998, we entered into an
employment agreement with Mr. Olbright, in connection with his transition to
chairman of the board. Under the terms of his employment agreement, Mr. Olbright
received an annual base salary of $50,000 while serving as our chairman of the
board. Mr. Olbright resigned as our chairman of the Board of Directors in
December 1999. Mr. Olbright continues to act as a part-time employee, for which
he receives an annual salary of $25,000.
In September 1998, we entered into an employment agreement with Kurtis L.
Adams, our chief financial officer and vice president of finance. Mr. Adams'
compensation, bonus and benefits, are set annually in the sole discretion of the
compensation committee of our Board of Directors. Under the employment
agreement, Mr. Adams was granted an option to purchase up to 133,333 shares of
our common stock at an exercise price of $6.75 per share. This option vested as
to 29,167 shares on the first anniversary of the grant. The remainder vest in
monthly increments of 2,431 over the next 24 months and then 3,819 per month
until fully vested. Under the terms of the option agreement, Mr. Adams may
exercise unvested options; however, we have a right to repurchase any of his
unvested shares according to the vesting schedule. Mr. Adams has exercised
options
9
<PAGE> 12
for 121,067 shares, all of which are subject to a right to repurchase in our
favor. If there is a change in control and Mr. Adams is terminated without cause
or there is a significant change in his responsibilities, all his options
immediately will vest the greater of one half of any unvested shares or 12
months of accelerated vesting.
In February 1998, we entered into employment agreements with Stuart B.
Berman, our chief technology officer, and Jay R. O'Donald, our vice president of
operations, in connection with our acquisition of Arcxel Technologies. Their
employment agreements provide, that if either employee voluntarily terminates
his employment with Vixel, is terminated for cause, or in the event of a merger
of Vixel in which his options are not assumed or substituted by the acquiring
entity with new options, we have the right to repurchase any unvested shares
then held by the employee. Mr. O'Donald's agreement allows Vixel to repurchase
up to 189,903 shares. This number was reduced by 7,098 shares for each month of
his employment from February 28, 1998 until January 31, 2000, after which the
number is reduced at a rate of 3,912 shares per month. Mr. Berman's agreement
allows Vixel to repurchase up to 318,661 shares. This number was reduced by
12,669 shares for each month of his employment from February 28, 1998 until
January 31, 2000, after which the remaining balance is reduced at a rate of
2,858 shares per month. Both employment agreements may be terminated at any time
by either party.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our Compensation Committee is or has been, at any
time since our formation, an officer or employee of Vixel. No member of our
Compensation Committee and none of our executive officers serves as a member of
the Board of Directors or Compensation Committee of any entity that has one or
more executive officers serving as a member of our Board of Directors or
Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Company's executive compensation policies and practices are approved by
the Compensation Committee of the Board of Directors (the "Committee"). The
Compensation Committee of the Board of Directors ("Committee") consists of
Messrs. Charles A. Haggerty and Werner F. Wolfen, neither of whom are currently
officers or employees of the Company. The Committee is responsible for
establishing the Company's compensation programs for all employees, including
executives. The Committee's determinations on compensation of the Chief
Executive Officer and other executive officers are reviewed with all the non-
employee directors. For executive officers, the Committee evaluates performance
and determines compensation policies and levels.
PHILOSOPHY
The goal of the compensation program is to enhance stockholder value by
aligning the financial interests of the executive officers with the business
objectives and performance goals of the Company. The Committee has implemented
compensation policies, plans and programs that enable the Company to attract,
retain and reward executive officers and other key employees who contribute to
the long-term success of the Company and to motivate them to enhance long-term
stockholder value.
The Company pays competitively compared to leading technology companies
with which the company competes for talent. The Company provides annual
incentive compensation opportunities for selected executive officers. The
Company also provides stock options to attract, retain, motivate and reward
executive officers and other key employees. The plans are designed to provide an
incentive to management to grow revenue, enhance stockholder value and
contribute to the long-term growth of the Company. Incentive compensation is
reviewed at least annually to assure it meets the current strategies and needs
of the business.
The Company's executive compensation is based on two components, each of
which is intended to support the overall compensation philosophy.
10
<PAGE> 13
Base Salary and Bonuses. The Committee annually reviews each executive
officer's base salary. Base salary is targeted to compete with other technology
companies. When reviewing base salaries, the Committee considers individual and
corporate performance, levels of responsibility, prior experience, breadth of
knowledge and changes in competitive pay levels in the marketplace.
The Committee reviews with the Chief Executive Officer an annual salary
plan for the Company's executive officers (other than the Chief Executive
Officer). The salary plan is modified as deemed appropriate and approved by the
Committee. The annual salary plan is developed by the Company's Chief Executive
Officer based on publicly available information on organizations with similar
characteristics and on performance judgments as to the past and expected future
contributions of the individual executive. The Committee reviews and establishes
the base salary of the Chief Executive Officer based on similar competitive
compensation data and the Committee's assessment of his past performance and its
expectation as to his future contributions in directing the long-term success of
the Company.
The Committee believes that the annual bonus of select executive officers
should be based on optimizing revenue and margins, and prudent management of the
expenses of the business. The bonus of $62,308 paid to the Chief Executive
Officer for 1999 was based on the pre-established performance goals, including
achieving financial goals.
Long-Term Incentives. The Company's long-term incentive program consists of
the 1995 Stock Option Plan ("Stock Plan"), the 1999 Equity Incentive Plan
("Equity Plan"), and the 1999 Employee Stock Purchase Plan ("ESPP"). The
Committee believes these elements of the total compensation program directly
link the participant's interests with those of the stockholders and the
long-term performance of the Company. Through option grants and discount stock
purchases, executives and employees receive equity incentives to build long-term
stockholder value.
Stock options are granted at 100% of fair market value on the date of grant
and have value only if the Company's stock price appreciates over the long-term.
The option program utilizes vesting periods, generally four years, to encourage
key employees to continue in the employ of the Company. The Stock options
generally become exercisable at a rate of 25% beginning on the first anniversary
of the vesting commencement date and 1/16th quarterly thereafter.
The Committee establishes the number and terms of options granted under the
Stock Plan and the Equity Plan. These grants are intended to provide incentive
to maximize stockholder value over the next several years. The Committee
believes this approach creates an appropriate focus on longer-term objectives
and promotes executive and employee retention. The size of option grants is
determined based on competitive practices at leading companies in the technology
industry and the Company's philosophy of significantly linking executive
compensation with stockholder interests.
Out of a total of 2,649,433 options granted to employees, executive
officers and directors in 1999, executive officers of the Company received
grants for 1,873,333 shares, or approximately 70.71% of the total options
granted in 1999. Included in this amount was a grant to our Chief Executive
Officer of an option in April 1999 to acquire 1,000,000 shares. The number of
shares awarded in the 1999 grant recognizes Mr. McCluney's leadership and is an
incentive for Mr. McCluney to remain with the Company through the option's
vesting term of four years.
The Committee believes that the programs described above provide
compensation that is competitive with comparable technology companies, links
executive and stockholder interests and provides the basis for the Company to
attract and retain qualified executives. The Committee will continue to monitor
the relationship among executive compensation, the Company's performance and
stockholder value.
CHIEF EXECUTIVE OFFICER COMPENSATION
Following the Committee's review of compensation paid by leading technology
companies, the Committee set James M. McCluney's base salary for 1999 as
President and Chief Executive Officer at $300,000. In setting this amount, the
Committee took into account (i) its belief that Mr. McCluney is the Chief
Executive Officer of a leading technology company with significant and
broad-based experience in the storage industry,
11
<PAGE> 14
(ii) the scope of Mr. McCluney's responsibility, and (iii) the Board's
confidence in Mr. McCluney to lead the Company's continued development.
OTHER EXECUTIVE OFFICERS' COMPENSATION
In February 1999, the Committee established the base salary ranges for
other executive officers based on data regarding executive compensation of
similar technology companies, including published survey information, each
executive officer's base salary for prior years, past performance, the scope of
such officer's responsibility and other information available to the Committee.
Compensation payments in excess of $1 million to the Chief Executive
Officer or the other four most highly compensated executive officers are subject
to a limitation on deductibility for the Company under Section 162(m) of the
Internal Revenue Code of 1986, as amended. Certain performance-based
compensation is not subject to the limitation on deductibility. The Committee
does not expect cash compensation in 2000 to its Chief Executive Officer or any
other executive officer to be in excess of $1 million. The Company intends to
maintain qualification of its 1999 Equity Incentive Plan for the
performance-based exception to the $1 million limitation on deductibility of
compensation payments.
The Committee believes its executive compensation philosophy serves the
interests of Vixel and Vixel's stockholders.
The Compensation Committee
Charles A. Haggerty
Werner F. Wolfen
12
<PAGE> 15
PERFORMANCE MEASUREMENT COMPARISON(1)
The SEC requires a comparison on an indexed basis of cumulative total
stockholder return for the Company, a relevant broad equity market index and a
published industry line-of-business index. The following graph shows a
comparison of cumulative stockholder return of an investment of $100 in cash on
October 1, 1999 (the date the Company's Common Stock began trading on the Nasdaq
National Market) and January 2, 2000 in (i) the CRSP Total Return Index for the
Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Stock Market (U.S.) Index"),
(ii) Nasdaq Computer Manufacturers Index, and (iii) the Company's common stock.
All values assume reinvestment of the full amount of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
VIXEL CORPORATION, NASDAQ STOCK MARKET (U.S.) INDEX AND NASDAQ COMPUTER
MANUFACTURERS INDEX
<TABLE>
<CAPTION>
10/1/99 1/2/00
------- ------
<S> <C> <C>
Vixel Corporation 100 94.79
Nasdaq Stock Market (U.S.) Index 100 147.82
Nasdaq Computer Manufacturers Index 100 149.26
</TABLE>
- ---------------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended or the Exchange Act, whether
made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
CERTAIN TRANSACTIONS
In March 1999, we issued to Western Digital Corporation a warrant to
purchase 10,993 shares of common stock at an exercise price of $15.00 a share in
connection with an extension of a secured promissory note. Charles A. Haggerty,
a member of our Board of Directors, was at that time the chairman, president and
chief executive officer of Western Digital.
In April 1999 and May 1999, Messrs. Olbright, McCluney and Adams delivered
promissory notes to us to finance their purchase of common stock upon exercise
of stock options. All of the notes are full-recourse, secured by the shares
purchased, bear interest at a rate of 5.75% and are due and payable upon the
earlier of four years from issuance or six months after the termination of the
officer's employment. In April 1999, in
13
<PAGE> 16
connection with the exercise of a stock option for 415,290 shares of our common
stock, Mr. Olbright delivered to us a $1.3 million full-recourse promissory
note. In April 1999, in connection with the exercise of a stock option for
1,000,000 shares of our common stock, Mr. McCluney, our president and chief
executive officer, delivered to us a $3.1 million full-recourse promissory note.
In May 1999, in connection with the exercise of stock options to purchase
121,067 shares of our common stock, Mr. Adams, our chief financial officer,
delivered to us a $372,000 full-recourse promissory note.
In May 1999, in connection with the exercise of stock options by each of
our non-employee directors to purchase 16,666 shares of our common stock, each
of these directors delivered to us a $100,000 promissory note. All of the notes
are full-recourse, collateralized by the shares purchased, bear interest at a
rate of 5.75% and are due and payable the earlier of the date which is four
years from issuance or six months after the termination of the director's
service to us.
In April 1999, we loaned $62,000 to Stuart B. Berman, our chief technology
officer. This loan is secured by the pledge of 653,128 shares of our common
stock held by Mr. Berman. This loan has similar terms as the other director and
officer notes except that it is due and payable on October 15, 2000.
We have entered into separate indemnification agreements with our executive
officers and directors. These agreements require us to, among other things,
indemnify the officer or director against liabilities that may arise by reason
of their status or service as an officer or director, other than liabilities
arising from willful misconduct of a culpable nature, and to advance his or her
expenses incurred as a result of any proceeding against them as to which they
could be indemnified.
A number of holders of common stock and warrants have registration rights
with respect to their shares of common stock and common stock issuable upon
exercise or conversion of their warrants.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 2, 2000, all Section
16(a) filing requirements applicable to the Company's officers, directors and
greater than ten percent beneficial owners were complied with.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ KURTIS L. ADAMS
Kurtis L. Adams
Vice President of Finance, Chief
Financial Officer,
Treasurer and Secretary
April 20, 2000
14
<PAGE> 17
PROXY
VIXEL CORPORATION
11911 NORTH CREEK PARKWAY SOUTH
BOTHELL, WA 98011
The undersigned hereby appoints James M. McCluney and Kurtis L. Adams, and
each of them proxies, with full power of substitution and revocation, to vote
the shares of stock of Vixel Corporation which the undersigned is entitled to
vote at the annual meeting of stockholders to be held at the Bellevue Hyatt
Regency, 900 Bellevue Way NE, Bellevue, Washington on May 24, 2000 at 09:00 a.m.
PDT, and at any adjournment thereof, with all the powers the undersigned would
possess if present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VIXEL
CORPORATION.
Please mark your vote, sign, date and return promptly in the enclosed
postage paid envelope.
This proxy, when properly executed, will be voted as instructed herein by
the undersigned stockholder. If no instructions are given, this proxy will be
voted "FOR" the proposals herein and according to the discretion of the proxy
holders on any other matters that may properly come before the meeting.
A VOTE FOR PROPOSAL I AND II IS RECOMMENDED BY THE BOARD OF DIRECTORS.
I. To elect the following nominee for director for a three year term
expiring at the 2003 Annual Meeting of Stockholders:
KEVIN A. FONG
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
to vote for all nominees listed
above
(continued on reverse side)
<PAGE> 18
II. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the company for its fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign exactly as name appears on this proxy. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by an authorized officer. If a
partnership, please sign in partnership name by an authorized person.
---------------------------
Date
---------------------------
Name of Stockholder
---------------------------
Authorized Signature
---------------------------
Title of Authorized
Signature
