<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 2400.14a-11(c) or 240.14a-12
LSI LOGIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
David E. Sanders - Vice President, General Counsel and Secretary
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-66(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
LSI LOGIC CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1998
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of LSI Logic
Corporation (the "Company"), a Delaware corporation, will be held on May 12,
1998 at 4:30 p.m., local time, at the Continental Center, Ricker Auditorium,
Mezzanine Level, 180 Maiden Lane, New York, New York, for the following
purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's 1991 Equity Incentive Plan
(the "1991 Incentive Plan") to increase the number of shares of Common
Stock reserved for issuance thereunder by 7,000,000 shares.
3. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for its 1998 fiscal year.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 13, 1998, are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
date, sign and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she returned a proxy.
Sincerely,
David E. Sanders
Secretary
Milpitas, California
March 24, 1998
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN
IT IN THE ENCLOSED ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES).
<PAGE> 3
LSI LOGIC CORPORATION
------------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of LSI Logic Corporation (the
"Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on May 12, 1998 at 4:30 p.m., local time, or at any adjournment(s)
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Continental Center, Ricker Auditorium, Mezzanine Level, 180 Maiden Lane, New
York, New York. The Company's principal executive offices are located at 1551
McCarthy Boulevard, Milpitas, California 95035 and its telephone number is (408)
433-8000.
These proxy solicitation materials were mailed on or about March 26, 1998
to all stockholders entitled to vote at the meeting.
RECORD DATE; SHARES OUTSTANDING
Stockholders of record at the close of business on March 13, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting. As of the
Record Date, 140,281,283 shares of the Company's Common Stock, $0.01 par value,
were issued and outstanding. On the Record Date, the closing price of the
Company's Common Stock on the New York Stock Exchange was $23.50 per share.
REVOCABILITY OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
On all matters other than the election of directors, each share has one
vote. See "ELECTION OF DIRECTORS -- REQUIRED VOTE." The cost of soliciting
proxies will be borne by the Company. The Company has retained the services of
Georgeson & Company, Inc. to aid in the solicitation of proxies from brokers,
bank nominees and other institutional owners. The Company estimates that it will
pay Georgeson & Company, Inc. a fee not to exceed $10,000 for its services and
will reimburse it for certain out of pocket expenses estimated to be $6,000. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may be solicited by
certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST", or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law in Delaware as to the
proper treatment of abstentions in the counting of votes, the Company believes
that abstentions should be counted for purposes of determining both the presence
or absence of a quorum for the transaction of business and the total number of
shares present or represented and entitled to vote on the proposal other than
with respect to the election of directors.
<PAGE> 4
In the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. In a 1988 Delaware case, Berlin v. Emerald
Partners, the Delaware Supreme Court held that, while broker non-votes may be
counted as present or represented for purposes of determining the presence or
absence of a quorum for the transaction of business, broker non-votes may not be
counted for purposes of determining the number of shares entitled to vote with
respect to the particular proposal for which authorization to vote was withheld.
Accordingly, broker non-votes will not be considered shares entitled to vote and
therefore will not be counted in determining the outcome of any proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting must be received by
the Company no later than November 26, 1998, and be otherwise in compliance with
applicable laws and regulations in order that such proposals may be considered
for possible inclusion in the proxy statement and form of proxy relating to that
meeting.
SECURITY OWNERSHIP
PRINCIPAL STOCKHOLDERS
As of the Record Date, the following persons were known to the Company to
be beneficial owners of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES OWNED PERCENTAGE OF TOTAL
---------------- ---------------------- -------------------
<S> <C> <C>
Wilfred J. Corrigan(1)
1551 McCarthy Blvd.
Milpitas, CA 95035........................ 7,599,952 5.42%
</TABLE>
- ---------------
(1) Includes 1,175,000 shares, options for which are presently exercisable or
will become exercisable within 60 days of Record Date.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of the Record Date (the most recent practicable date) by all
directors, each of the named executive officers set forth in the Summary
Compensation Table (the "Named Executive Officers") and by all directors and
current executive officers as a group:
<TABLE>
<CAPTION>
NUMBER APPROXIMATE
OF SHARES PERCENTAGE
NAME OWNED OWNED
---- ----------- ------------
<S> <C> <C>
Wilfred J. Corrigan(1).................................... 7,599,952 5.42%
T.Z. Chu(2)............................................... 60,075 *
Malcolm R. Currie(3)...................................... 136,325 *
James H. Keyes(4)......................................... 82,625 *
R. Douglas Norby(5)....................................... 224,708 *
John P. Daane(6).......................................... 71,134 *
W. Richard Marz(7)........................................ 134,643 *
Joseph M. Zelayeta(8)..................................... 189,500 *
All current directors and executive officers as a group
(11 persons)(9)......................................... 8,689,136 6.19%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 1,175,000 shares, options for which are presently exercisable or
will become exercisable within 60 days of the Record Date.
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<PAGE> 5
(2) Includes 25,625 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(3) Includes 33,125 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(4) Includes 33,125 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(5) Includes 188,125 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(6) Includes 66,000 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(7) Includes 132,500 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(8) Includes 174,000 shares, options for which are presently exercisable or will
become exercisable within 60 days of the Record Date.
(9) Includes 1,992,250 shares, that are subject to options held by 11 executive
officers and outside directors and that are presently exercisable or will
become exercisable within 60 days of the Record Date.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's five nominees named below, all of whom are currently directors of the
Company. If any nominee of the Company is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for such
nominee as shall be designated by the present Board of Directors to fill the
vacancy. If additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of the
nominees listed below as possible and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and qualified.
The names of the nominees for election to the Board of Directors, and
certain information about them, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Wilfred J. Corrigan............... 60 Chairman of the Board of Directors 1981
and Chief Executive Officer of
the Company
T.Z. Chu.......................... 63 Retired President of Hoefer 1992
Pharmacia Biotech, Inc.
Malcolm R. Currie................. 71 Chief Executive Officer, Currie 1992
Technologies, Inc.; Chairman
Emeritus, Hughes Aircraft, Inc.
James H. Keyes.................... 57 Chairman and Chief Executive 1983
Officer of Johnson Controls, Inc.
R. Douglas Norby.................. 62 Executive Vice President and Chief 1993
Financial Officer of the Company
</TABLE>
3
<PAGE> 6
There are no family relationships between or among any directors or
executive officers of the Company.
Mr. Corrigan, a founder of the Company, has served as Chief Executive
Officer and a director of the Company since its organization in January 1981.
Mr. Corrigan also serves on the boards of directors of several privately held
corporations.
Mr. Chu served as President of Hoefer Pharmacia Biotech, Inc., a
biotechnology company, from March 1995 until his retirement in February 1997.
From August 1993 until March 1995, Mr. Chu served as President and Chief
Executive Officer of Hoefer Scientific Instruments, a manufacturer of scientific
instruments. From January 1992 until August 1993, Mr. Chu acted as a consultant
to Hambrecht & Quist, an investment banking firm and to Thermo Instrument
Systems, Inc., a manufacturer of analytical instruments.
Mr. Currie serves as Chief Executive Officer of Currie Technologies, Inc.,
a manufacturer of electric propulsion systems for bicycles. Mr. Currie served as
Chairman and Chief Executive Officer of Hughes Aircraft Company from March 1988
until his retirement in July 1992. He presently serves on the boards of
directors of Unocal Corporation, Investment Company of America, U.S. Electricar,
and Regal One Corp., and as Chairman of the Board of Trustees of the University
of Southern California.
Mr. Keyes has served as Chairman and Chief Executive Officer of Johnson
Controls, Inc., a manufacturer of automated building controls, batteries, and
automotive interiors and seating systems, since January 1993. Mr. Keyes also
serves on the boards of directors of Universal Foods Corp., Firstar Corp. and
Pitney Bowes, Inc.
Mr. Norby has served as Executive Vice President and Chief Financial
Officer of the Company since November 1996. From September 1993 until November
1996, Mr. Norby served as Senior Vice President and Chief Financial Officer of
Mentor Graphics Corporation, an EDA company. From July 1992 until September
1993, Mr. Norby served as President and Chief Executive Officer of Pharmetrix
Corporation, a health care company located in Menlo Park, California. Mr. Norby
serves on the board of directors of Corvas International, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the fiscal year ended December 31, 1997. The Board of Directors has an Audit
Committee and a Compensation Committee, both of which consist solely of
non-employee directors. The Board of Directors does not have a nominating
committee or a committee performing the functions of a nominating committee.
The Audit Committee, which consists of Mr. Currie (who serves as its
chairman), Mr. Chu and Mr. Keyes, held three meetings during the last fiscal
year. The Audit Committee recommends engagement of the Company's independent
accountants, and is primarily responsible for approving the services performed
by the Company's independent accountants and for reviewing and evaluating the
Company's accounting principles and its system of internal accounting controls.
The Compensation Committee, which consists of Mr. Keyes (who serves as its
chairman), Mr. Chu and Mr. Currie, held three meetings during the last fiscal
year. The Compensation Committee reviews and approves the Company's executive
compensation policy and makes recommendations concerning the Company's employee
benefit plans.
During the fiscal year ended December 31, 1997, all incumbent directors
attended at least 75% of the aggregate number of meetings of the Board of
Directors and meetings of the committees of the Board on which they served.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are not employees of the Company
receive an annual fee of $20,000 paid on a prorated basis and $1,250 for each
meeting they attend, plus reimbursement of expenses for attendance at Board and
committee meetings. The Company's 1995 Director Option Plan (the "1995 Director
Plan"), as adopted by the Board of Directors and approved by the stockholders,
provides for the grant of
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<PAGE> 7
nonstatutory stock options to non-employee directors of the Company ("Outside
Director"). Each Outside Director shall be granted an option to purchase 15,000
shares of Common Stock (the "First Option") on the date on which he or she first
becomes an Outside Director; provided, however, that no Outside Director who was
an Outside Director immediately prior to the effective date of the 1995 Director
Plan (June 1, 1995) was granted a First Option. In addition, on April 1 of each
year each Outside Director shall automatically be granted an option to purchase
7,500 shares of Common Stock of the Company (a "Subsequent Option"), if on such
date he or she shall have served on the Board of Directors for at least six
months. The 1995 Director Plan provides for neither a maximum nor a minimum
number of option shares that may be granted to any one non-employee director,
but does provide for the number of shares that may be included in any grant and
the method of making a grant. The vesting schedule for options granted under the
1995 Director Plan is set by the plan at 25% on each of the four anniversaries
of the grant. Options may be exercised only while the optionee is a director of
the Company, within 12 months after death or within three months after the
optionee ceases to serve as a director of the Company, but in no event after its
ten-year term has expired. A total of 500,000 shares have been reserved for
issuance under the 1995 Director Plan, of which 52,500 are subject to
outstanding options, none has been issued upon exercise of options, and 447,500
remain available for grant. During fiscal 1997, Subsequent Options having an
exercise price of $35.00 per share were granted to each of directors Chu, Currie
and Keyes.
REQUIRED VOTE
Directors shall be elected by a plurality of the votes of the shares of the
Company's Common Stock entitled to vote and represented in person or by proxy at
the Annual Meeting. The five nominees for director receiving the highest number
of affirmative votes of the shares entitled to be voted for them shall be
elected as directors. Votes against, votes withheld and broker non-votes have no
legal effect on the election of directors due to the fact that such elections
are by a plurality.
Every stockholder voting in the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected (five) multiplied by the number of votes to which the
stockholder's shares are entitled, or may distribute the stockholder's votes on
the same principle among as many candidates as the stockholder thinks fit,
provided that votes cannot be cast for more than five candidates. However, no
stockholder shall be entitled to cumulate votes for a candidate unless the
candidate's name has been properly placed in nomination prior to the voting, and
the stockholder, or any other stockholder, has given notice at the meeting prior
to the voting of the intention to cumulate votes. The proxy holders will
exercise discretionary authority to cumulate votes in the event that additional
persons are nominated at the Annual Meeting for election of directors.
MANAGEMENT RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL TWO
AMENDMENT TO THE 1991 EQUITY INCENTIVE PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER
GENERAL
The 1991 Equity Incentive Plan (the "1991 Incentive Plan") was adopted by
the Board of Directors and approved by the stockholders in May 1991 and a total
of 2,000,000 shares of Common Stock were initially reserved for issuance
thereunder. From time to time since May 1991, the Board of Directors and
stockholders have approved amendments to the 1991 Incentive Plan to increase the
number of shares reserved for issuance thereunder to an aggregate of 18,000,000
shares and to make certain additional amendments to the 1991 Incentive Plan.
As of the Record Date, 3,863,560 shares had been issued pursuant to the
exercise of options granted under the 1991 Incentive Plan and options to
purchase 12,809,052 shares were outstanding, leaving only 1,327,388 of the
18,000,000 shares available for future grants under the 1991 Incentive Plan
(without giving effect to this proposed amendment).
5
<PAGE> 8
PROPOSED AMENDMENT TO INCREASE SHARES RESERVED
Stockholder approval is hereby being sought for an amendment approved by
the Board of Directors on February 11, 1998, increasing the number of shares of
Common Stock reserved for issuance under the 1991 Incentive Plan by 7,000,000
shares. The total number of shares of Common Stock reserved for issuance under
the 1991 Incentive Plan is 18,000,000. If the proposed amendment is approved,
the total number of shares of Common Stock reserved for issuance under the 1991
Incentive Plan will be 25,000,000.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast will be required to
approve PROPOSAL TWO.
SUMMARY OF THE 1991 INCENTIVE PLAN
The essential features of the 1991 Incentive Plan are outlined below.
Purpose
The purpose of the 1991 Incentive Plan is to enable the Company to provide
an incentive to eligible employees and consultants whose present and potential
contributions are important to the continued success of the Company, to afford
them an opportunity to acquire a proprietary interest in the Company and to
enable the Company to hire and retain the best available talent for the
successful conduct of its business.
The Board of Directors believes that the Company's 1991 Incentive Plan is
an important factor in attracting and retaining the high caliber employees and
consultants essential to the success of the Company and in aligning their
long-term interests with those of the stockholders. Competition for highly
qualified individuals in the Company's industry is intense, particularly in the
current environment of very low unemployment among the limited pool of
candidates possessing the specialized skills required in areas in which the
Company competes. Employers with which the Company competes for such highly
qualified individuals, including those companies that anticipate an initial
public offering, frequently offer grants of substantial numbers of stock options
as part of a comprehensive compensation package. Accordingly, management
believes that to successfully attract the best candidates and retain key
employees, the Company must be in a position to offer a competitive stock option
incentive program as an essential component of its compensation packages.
The Board of Directors further believes that stock options serve an
important role in motivating recipients to contribute to the Company's continued
growth and profitability. The proposed amendment to the 1991 Incentive Plan is
intended to ensure that there will be a reasonable number of shares available
under the Plan to meet these needs for the coming year.
Stock Options
The 1991 Incentive Plan permits the granting both of stock options that
either are intended to qualify as Incentive Stock Options ("ISOs") and of stock
options that are not intended to so qualify ("Nonstatutory Stock Options" or
"NSOs").
The exercise price for each option may not be less than 100% of the fair
market value of a share of Common Stock on the date such option is granted (or
not less than 110% of such fair market value in the case of grants of ISOs to
10% stockholders). Without stockholder approval, the exercise price of granted
options may not be reduced. No employee may be granted, in any fiscal year,
options to purchase more than 750,000 shares.
The term of each option is fixed by the Board at the time of the grant,
generally at 10 years from the date of grant. (In the case of ISOs the term may
not exceed five years in the case of grants to a 10% stockholder and 10 years
for others.) The Board also determines the vesting schedule for each option
grant, which is generally 25% on each of the first four anniversaries of the
date of grant.
6
<PAGE> 9
The exercise price of options granted under the 1991 Incentive Plan,
including applicable tax withholding if any, must be paid in full at the time of
exercise. The method of payment is determined by the Board or its designated
committee administering the 1991 Incentive Plan and may consist of cash, check,
promissory note, other shares of Common Stock, delivery of a properly executed
exercise notice with irrevocable instructions to the optionee's broker to
deliver to the Company the amount of sale proceeds required to pay the exercise
price, any combination of the foregoing methods of payment or such other
consideration and method of payment permitted under the Delaware General
Corporation Law.
If an optionee's employment terminates for any reason, including
retirement, his or her exercisable options may be exercised within the time
period set forth in the option agreement, which is generally 90 days from the
date of termination. If the Board or its designated committee determine that an
employee was discharged for misconduct (as defined in the 1991 Incentive Plan),
the employee has no further rights under the options granted to him or her or
under the plan. If an optionee's employment is terminated by reason of the
optionee's death or permanent total disability, the option will be exercisable
for 12 months following the date of death or disability, subject to the stated
term of the option. Options granted to consultants have such terms and
conditions with respect to the effect of termination of the consulting
relationship (including upon the death of the consultant) as the Board or its
designated committee may determine in each case.
Eligibility
Any employee (including any officer) or consultant of the Company or of its
majority owned subsidiaries whom the Board deems to have the potential to
contribute to the future success of the Company is eligible to receive NSO
option grants under the 1991 Incentive Plan. Only employees of the Company or of
its subsidiaries are eligible to ISO grants. As of the Record Date, the Company
had approximately 4400 employees.
Adjustments for Recapitalizations and Reorganizations
In the event of a stock dividend, stock split, combination or similar
event, the number of shares of Common Stock available for issuance under the
1991 Incentive Plan shall be increased or decreased proportionately, and the
number of shares of Common Stock deliverable upon exercise, and, where
applicable, the exercise price of each option, shall be proportionately
adjusted. In the event of a merger, reorganization, liquidation or similar
event, the Board may either provide for the assumption or substitution of
outstanding options or provide that the options must be exercised within 30
days. In either case, the Board may provide for accelerated vesting of such
options.
Administration
The 1991 Incentive Plan is administered by the Board of Directors of the
Company or by a committee appointed by the Board in compliance with Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"). If permitted by Rule 16b-3, the 1991 Incentive Plan may be
administered by different bodies with respect to employees who are directors,
non-director officers, employees who are neither directors nor officers, and
consultants. A member of the Board who is an eligible employee is permitted to
participate in the 1991 Incentive Plan but may not be a member of a committee
appointed to administer the 1991 Incentive Plan. Members of the Board receive no
additional compensation for their services in connection with the administration
of the 1991 Incentive Plan.
Amendment and Termination
The Board may amend, alter, suspend or discontinue the 1991 Incentive Plan
at any time, but such amendment, alteration, suspension or discontinuation shall
not impair the rights of any participant in the 1991 Incentive Plan, without the
participant's consent. In addition, no ISO may be granted under the 1991
Incentive Plan after March 8, 2001.
In addition, to the extent necessary and desirable to comply with Rule
16b-3 under the Exchange Act or under Section 422A of the Internal Revenue Code
of 1986, as amended ("the Code") (or any other applicable law or regulation),
the Company shall obtain stockholder approval of any 1991 Incentive Plan
amendment, in such a manner and to such a degree as required to comply with such
laws or regulations.
7
<PAGE> 10
Certain United States Federal Income Tax Information
The following is only a brief summary of the effect of federal income
taxation upon the participant and the Company under the 1991 Incentive Plan
based upon the Code. This summary does not purport to be complete and does not
discuss the income tax laws of any municipality, state or country outside of the
United States in which a participant may reside. It is advisable that a
participant contact his or her own tax advisor concerning the application of tax
laws.
If an option granted under the 1991 Incentive Plan is an ISO, the optionee
will recognize no taxable income upon grant or exercise of the ISO unless the
alternative minimum tax rules apply. Upon the resale or exchange of the shares
at least two years after grant of the ISO and one year after exercise by the
optionee, any gain (or loss) will be taxed to the optionee as ordinary income
(or loss) or capital gain (or loss), depending on how long the optionee has held
the stock.
All options that do not qualify as ISOs are taxed as NSOs. An optionee will
not recognize any taxable income at the time he or she is granted an NSO.
However, upon the exercise of an NSO, the optionee will generally recognize
ordinary income for federal income tax purposes measured by the excess, if any,
of the then fair market value of the shares over the exercise price. The
ordinary income recognized upon exercise of an NSO by an optionee who is also an
employee of the Company will be treated as wages for tax purposes and will be
subject to tax withholding out of the current compensation, if any, paid to the
optionee. Upon resale of such shares by the optionee, any difference between the
sale price and fair market value on the date of exercise will be treated as
capital gain (or loss).
The Company will be entitled to a tax deduction (except that such deduction
may be limited or disallowed by Section 162(m) of the Code for certain highly
compensated executive officers) in the same amount as the ordinary income, if
any, recognized by the optionee (i) upon exercise of an NSO and (ii) upon the
sale of shares acquired by exercise of an ISO in a disqualifying disposition.
The Company will not be allowed a deduction for federal income tax purposes as a
result of the exercise of an ISO, regardless of the applicability of the
alternative minimum tax.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1991 INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER. THE
EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE AMENDMENT OF
THE 1991 INCENTIVE PLAN.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the consolidated financial statements of the Company for
its 1998 fiscal year and recommends that the stockholders vote for ratification
of such appointment. If there is a negative vote on such ratification, the Board
of Directors will reconsider its selection. Price Waterhouse LLP has audited the
Company's consolidated financial statements since the fiscal year ended December
31, 1981. Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting with the opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF PRICE WATERHOUSE LLP AS THE INDEPENDENT ACCOUNTANTS FOR THE 1998 FISCAL YEAR.
8
<PAGE> 11
EXECUTIVE COMPENSATION
The following table shows, as to (i) the Chief Executive Officer, and (ii)
each of the four other most highly compensated executive officers whose salary
plus bonus exceeded $100,000 in 1997 (the "Named Executive Officers"),
information concerning all reportable compensation awarded to, earned by or paid
to each for services to the Company in all capacities during the fiscal year
ended December 31, 1997, as well as such compensation for each such individual
for the Company's previous two fiscal years (if such person was an executive
officer during any part of such previous fiscal year).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION OTHER ANNUAL ALL OTHER
--------------------------- COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) SARS(#)(2) ($)(3)
--------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Wilfred J. Corrigan.................... 1997 $704,231 $375,000 $ 8,800 300,000 $ 19,911
Chairman 1996 $685,577 $ -0- $10,400 -0- $ 13,807
Chief Executive Officer 1995 $600,769 $730,000 $13,100 1,400,000 $ 37,823
John P. Daane(4)....................... 1997 $230,000 $200,000 $ 7,033 100,000 $ 4,884
Executive Vice President,
Communications, Computer and ASIC
Products
W. Richard Marz........................ 1997 $337,308 $100,000 $ 7,700 20,000 $ 10,567
Executive Vice President, 1996 $332,077 $ 30,000 $ 9,100 175,000 $ 7,562
Geographic Markets 1995 $ 80,760 $125,000 $ 2,100 125,000 $ 85,607
R. Douglas Norby(5).................... 1997 $314,615 $150,000 $11,600 30,000 $187,530
Executive Vice President 1996 $ 45,000 $ -0- $ 2,100 307,500 $ 25,318
and Chief Financial Officer
Joseph M. Zelayeta(6).................. 1997 $304,423 $170,000 $ 6,900 70,000 $ 19,785
Executive Vice President, Worldwide
Operations
</TABLE>
- ---------------
(1) Includes amounts paid for car allowance and, in the case of Mr. Norby only,
tax preparation.
(2) The Company has not granted any stock appreciation rights. The number of
options granted has been adjusted for a two-for-one stock split in the form
of a stock dividend declared for stockholders of record on May 23, 1995.
(3) "All Other Compensation" is itemized as follows:
- In 1997, Mr. Corrigan received $13,611 for profit sharing and $6,300 for
group term life insurance. In 1996, Mr. Corrigan received $7,265 for
profit sharing and $6,542 for group term life insurance. In 1995, Mr.
Corrigan received $31,523 for profit sharing, and $6,300 for group term
life insurance.
- In 1997, Mr. Daane received $4,128 for profit sharing and $756 for group
term life insurance.
- In 1997, Mr. Marz received $6,535 for profit sharing and $4,032 for group
life insurance. In 1996, Mr. Marz received $3,375 for profit sharing and
$4,187 for group term life insurance. In 1995, Mr. Marz received $9,522
for profit sharing, $1,085 for group term life insurance and $75,000 as a
hire-on bonus.
- In 1997, Mr. Norby received $6,077 for profit sharing, $9,828 for group
term life insurance and $171,625 for relocation compensation. In 1996,
Mr. Norby received $23,750 for directors' fees.
- In 1997, Mr. Zelayeta received $5,619 for profit sharing, $4,032 for
group term life insurance and $10,134 for relocation.
(4) Mr. Daane was named an executive officer of the Company in October 1997.
(5) Mr. Norby was named an executive officer of the Company in November 1996.
(6) Mr. Zelayeta was named an executive officer of the Company in September
1997.
9
<PAGE> 12
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth information with respect to the stock
options granted to the Named Executive Officers under the Company's stock option
plans and the options exercised by such Named Executive Officers during the
fiscal year ended December 31, 1997 and the options held by the Named Executive
Officers at December 31, 1997.
The Option Grants Table sets forth hypothetical gains or "option spreads"
for the options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission. Each gain
is based on an arbitrarily assumed annualized rate of compound appreciation of
the market price of 5% and 10% from the date the option was granted to the end
of the option term and does not represent the Company's projection of future
stock price performance. Actual gains, if any, on option exercises are dependent
on the future performance of the Company's Common Stock and overall market
conditions.
OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES PERCENT OF AT ASSUMED ANNUAL RATES OF
UNDERLYING TOTAL STOCK PRICE APPRECIATION
OPTIONS OPTIONS/SARS EXERCISE OR FOR OPTION TERM
GRANTED IN GRANTED TO BASE PRICE EXPIRATION ---------------------------
NAME FISCAL YEAR(2) EMPLOYEES ($/SHARE) DATE 5% 10%
---- -------------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Wilfred J.
Corrigan........... 300,000 6.69% $33.25 8/15/2007 $6,273,224 $15,897,581
John P. Daane........ 100,000 2.23% $23.00 11/14/2007 $1,446,458 $ 3,665,608
W. Richard Marz...... 20,000 0.45% $23.00 11/14/2007 $ 289,292 $ 733,122
R. Douglas Norby..... 30,000 0.67% $23.00 11/14/2007 $ 433,937 $ 1,099,682
Joseph M. Zelayeta... 20,000 0.45% $33.25 8/15/2007 $ 418,215 $ 1,059,839
50,000 1.12% $23.00 11/14/2007 $ 723,229 $ 1,832,804
</TABLE>
- ---------------
(1) The Company has not granted any stock appreciation rights.
(2) All options shown in the table were granted under the 1991 Incentive Plan.
The material terms of the options are: (a) The exercise price of the options
is the fair market value of Common Stock as of the date of grant; (b) The
options vest cumulatively in equal 25% increments on each of the first four
anniversaries of the date of grant; (c) To the extent unexercised, the
options lapse after ten years; (d) The options are non-transferable and are
only exercisable during the period of employment of the optionee (or within
three months following termination of employment), subject to limited
exceptions in the cases of certain terminations, death or permanent
disability of the optionee.
AGGREGATED OPTION(1) EXERCISES IN LAST FISCAL YEAR
AND YEAR-END VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE(1) OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS HELD OPTIONS HELD AT
SHARES AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wilfred J. Corrigan........ -0- $-0- 825,000 1,000,000 $1,765,625 $ -0-
John P. Daane.............. -0- $-0- 56,000 216,000 $ 51,750 $ 4,500
W. Richard Marz............ -0- $-0- 106,250 213,750 $ -0- $ -0-
R. Douglas Norby........... -0- $-0- 75,000 255,000 $ -0- $ -0-
Joseph M. Zelayeta......... -0- $-0- 159,000 155,000 $1,743,125 $44,375
</TABLE>
- ---------------
(1) Value of unexercised options is based on the difference between the fair
market value of Company's Common Stock of $19.63 per share as of December
31, 1997 (the last day of the last completed fiscal year) and the exercise
price of the unexercised in-the-money options.
10
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Compensation Committee (the "Committee") of the Board of Directors
establishes the overall executive compensation strategies of the Company and
approves compensation elements of the Chief Executive Officer and other
executive officers. The Committee periodically reviews its approach to executive
compensation.
The Committee is comprised of all of the outside, non-employee members of
the Board of Directors (three), none of whom has interlocking relationships as
defined by the Securities and Exchange Commission. The Committee has available
to it such external compensation advice and data as the Committee deems
necessary and appropriate to obtain.
The compensation philosophy of the Committee is to provide a comprehensive
compensation package for each executive officer that is well suited to support
accomplishment of the Company's business strategies, objectives and initiatives.
For incentive-based compensation, the Committee considers the desirability of
structuring such compensation arrangements so as to qualify for deductibility by
the Company under Section 162(m) of the Code. As the Committee applies this
compensation philosophy in determining appropriate executive compensation levels
and other compensation factors, the Committee reaches its decision with a view
towards the Company's overall financial performance.
Executive Officer Compensation
The Committee's approach is based upon a belief that a substantial portion
of aggregate annual compensation for executive officers should be contingent
upon the Company's performance and an individual's contribution to the Company's
success. In addition, the Committee strives to align the interest of the
Company's executive officers with the long-term interests of stockholders
through stock option grants that can result in ownership of the Company's Common
Stock. The Committee endeavors to structure each executive officer's overall
compensation package to be consistent with this approach and to enable the
Company to attract, retain and reward personnel who contribute to the success of
the Company.
The Company's compensation program for executive officers is based on the
following guidelines:
- Establishment of salary levels and participation in generally available
employee benefit programs based on competitive compensation package
practices.
- Utilization of a performance-based, cash incentive plan.
- Inclusion of equity opportunities that create long-term incentives based
upon increases in stockholder return.
The Company had a cash incentive plan during 1997 that provided for bonus
awards to be made to the executive officers and other members of senior
management subject to an aggregate budget for all awards under the plan. The
plan established a minimum level of operating income to be achieved by the
Company for the year before any payments would be made under the plan. The plan
also allowed upward adjustments in awards to be made if the minimum operating
income target was exceeded. In addition, per the plan's provisions, except as to
his own eligibility for an award under the plan, the CEO was authorized to
determine individual bonus award amounts pursuant to his judgment of each
participant's relative personal contributions to the Company's performance,
subject to the approval of the Committee of awards to executive officers. The
Company's operating income for 1997 exceeded the threshold target established
under the plan for payments under the plan. Accordingly, awards were made to
executive officers consistent with the plan's provisions regarding the level of
operating income achieved by the Company.
11
<PAGE> 14
During 1997, the Committee approved a budget for increases in executive
officers' base salary levels, which reflected the compensation guidelines
described previously in this report. Increases in base salary amounts for
individual executive officers were then made pursuant to the CEO's judgment and
discretion in satisfying the Company's compensation philosophy set forth above,
which increases, in the aggregate, were within the budget that had been approved
by the Committee. The general level of compensation of the Company's executive
officers is in the median of ranges of compensation information sources against
which the Company makes competitive comparisons.
The Company maintains a set of guidelines for use in making recommendations
to the Committee on individual grants of stock options, including the size of
such grants, to executive officers. Options to purchase the Common Stock of the
Company were granted to the executive officers by reference to the guidelines.
These guidelines are developed by reference to external published surveys and
other information that are believed to fairly reflect the competitive
environment in which the Company operates and which are consistent with the
compensation principles set forth above.
Chief Executive Officer Compensation
Mr. Corrigan has been CEO of the Company since its founding in 1981. His
base salary prior to the beginning of fiscal 1997 was $675,000, which was
increased to $715,000 during 1997, based upon reference to external competitive
pay practices, the above-described compensation approach to executive officers
and an independent assessment by this Committee of Mr. Corrigan's performance.
As a result of the Company's performance during 1997, Mr. Corrigan was
awarded a cash bonus of $375,000. The amount of this award was determined by the
Committee pursuant to the provisions of the performance-based bonus compensation
plan for the Company's Chief Executive Officer, which plan was approved by the
Company's stockholders at the 1997 annual meeting of stockholders. In addition
Mr. Corrigan was granted options to purchase 300,000 shares of stock.
The Committee believes Mr. Corrigan has managed the Company well, and has
achieved distinguished results, including in terms of revenue, gross margin,
operating income and net income.
MEMBERS OF THE COMPENSATION
COMMITTEE
James H. Keyes
T.Z. Chu
Malcolm R. Currie
February 11, 1998
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are set forth in the preceding
section as well as in Proposal One. There are no members of the Compensation
Committee who were officers or employees of the Company or any of its
subsidiaries during the fiscal year, formerly officers of the Company, or had
any relationship otherwise requiring disclosure hereunder.
12
<PAGE> 15
PERFORMANCE GRAPH
The stock price performance shown on the graph following is not necessarily
indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG LSI LOGIC CORPORATION*, S&P 500 INDEX
AND HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
HAMBRECHT &
MEASUREMENT PERIOD LSI LOGIC STANDARD & POOR'S QUIST TECHNOLOGY
(FISCAL YEAR COVERED) CORPORATION 500 INDEX INDEX
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 147.67 110.08 117.41
1994 375.58 111.53 141.04
1995 609.30 153.45 210.89
1996 497.67 188.68 262.10
1997 365.12 251.63 307.29
</TABLE>
* During 1997, the Company changed its fiscal year to a straight calendar year
from a 52/53 week fiscal year which ended on the Sunday closest to December
31. Prior to the change, the Company's last trading day of its fiscal year may
have varied. For consistent presentation and comparison to the industry
indices shown herein, the Company has calculated its stock performance graph
assuming a December 31 year end.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors, and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of security ownership
and changes in such ownership with the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange. Executive officers, directors and
greater than ten percent stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it and
written representations received from those reporting persons recognized by the
Company as being subject to filing requirements, the Company believes that all
required Section 16(a) reports were timely filed during 1997.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
March 24, 1998
13
<PAGE> 16
[X] Please mark
vote as in
this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
1. Election of Directors.
NOMINEES: Wilfred J. Corrigan; T.Z. Chu; Malcolm R. Currie;
James H. Keyes; R. Douglas Norby
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] [ ]
[ ]
-------------------------------------------------------------------
FOR all nominees except withheld from nominees listed on line above.
FOR AGAINST ABSTAIN
2. Approval of amendment to the 1991 [ ] [ ] [ ]
Equity Incentive Plan to increase
the number of shares reserved for
issuance thereunder by 7,000,000
shares.
FOR AGAINST ABSTAIN
3. Ratification of appointment of [ ] [ ] [ ]
independent accountants.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
Signature
-------------------------------------------
Date
-------------------------------------------
Signature
-------------------------------------------
Date
-------------------------------------------
<PAGE> 17
DETACH HERE
PROXY
LSI LOGIC CORPORATION
1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned stockholder of LSI Logic Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated March 24, 1998, and hereby appoints
Wilfred J. Corrigan and David E. Sanders, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Annual Meeting
of Stockholders of LSI Logic Corporation to be held on May 12, 1998, at 4:30
p.m., local time, at Continental Center, Ricker Auditorium, Mezzanine Level, 180
Maiden Lane, new York, New York, and at any adjournment(s) thereof, and to vote
all shares of Common Stock which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth on the reverse
side.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
