<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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(Name of Registrant as Specified In Its Charter)
PLANTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY COPY
PLANTRONICS, INC.
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
PLANTRONICS, INC., a Delaware corporation (the "Company"), will be held on
Wednesday, July 30, 1997 at 3:00 p.m. local time, at the offices of Plantronics,
Inc., 375 Encinal Street, Second Floor, Santa Cruz, California for the following
purposes:
1. To elect seven directors to serve until the next Annual
Meeting of Stockholders and until their successors are
elected.
2. To increase the authorized number of shares of Common Stock
of the Company from 25,000,000 to 40,000,000 shares.
3. To ratify the appointment of Price Waterhouse LLP as
independent public accountants of the Company for the fiscal
year ending March 28, 1998.
4. To transact such other business as may properly come before
the meeting or any adjournment 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 June 3, 1997
are entitled to notice of and to vote at the meeting.
To assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy 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 has returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
John A. Knutson
Secretary
Santa Cruz, California
June 23, 1997
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
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PRELIMINARY COPY
PLANTRONICS, INC.
---------------------------
PROXY STATEMENT FOR 1997
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
PLANTRONICS, INC., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held Wednesday, July 30, 1997 at 3:00 p.m., local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at 375 Encinal Street, Second Floor, Santa Cruz, California. The
Company's principal executive offices are located at 337 Encinal Street, Santa
Cruz, California 95060 and the telephone number at that location is (408)
426-6060.
These proxy solicitation materials and the Annual Report to
Stockholders for the fiscal year ended March 29, 1997, including financial
statements, were first mailed on or about June 23, 1997 to all stockholders
entitled to vote at the meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on June 3, 1997 are
entitled to notice of and to vote at the meeting. At the record date, 8,203,224
shares of the Company's authorized Common Stock were issued and outstanding and
held of record by 89 stockholders. No shares of the Company's authorized
Preferred Stock were outstanding.
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 Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock
on all matters presented at the Annual Meeting. Stockholders do not have the
right to cumulate their votes in the election of directors.
This solicitation of proxies is made by the Company, and all related
costs will be borne by the Company. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation materials to such beneficial owners.
Proxies may also 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" with respect to a matter are treated as being
present at the meeting for
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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 authority in
Delaware as to the proper treatment of abstentions (i.e. votes of "WITHHELD"),
the Company believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the transaction of
business and (ii) the total number of Votes Cast with respect to a proposal
(other than the election of directors). In the absence of controlling precedent
to the contrary, the Company intends to treat abstentions in this manner.
Accordingly, abstentions will have the same effect as a vote against the
proposal.
Under current Delaware case law, while broker non-votes (i.e. the votes
of shares held of record by brokers as to which the underlying beneficial owners
have given no voting instructions) should be counted for purposes of determining
the presence or absence of a quorum for the transaction of business, broker
non-votes should not be counted for purposes of determining the number of Votes
Cast with respect to the particular proposal on which the broker has expressly
not voted. Accordingly, the Company intends to treat broker non-votes in this
manner. Thus, a broker non-vote will make a quorum more readily obtainable but
the broker non-vote will not otherwise affect the outcome of the voting on a
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 1998 Annual Meeting of
Stockholders must be received by the Company no later than February 23, 1998 in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of seven directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's seven nominees named below, all of
whom are presently directors of the Company. In the event that any nominee of
the Company is unable or declines to serve as a director at the time of the
Annual Meeting of Stockholders, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. The
Company is not aware of any nominee who will be unable or will decline to serve
as a director. The term of office for each person elected as a director will
continue until the next Annual Meeting of Stockholders or until a successor has
been elected and qualified.
Pursuant to the terms of a Board Designation Agreement between the
Company and Citicorp Venture Capital, Ltd. ("CVC"), the Company's largest
stockholder, the Company will nominate and support for election to the Board of
Directors three designees of CVC. Directors Logan, Muqaddam and O'Mara are the
nominees designated by CVC. See "Board Designation Agreement" below for a
description of the Board Designation Agreement. See also "Additional
Information--Security Ownership of Principal Stockholders and Management."
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED BELOW.
The names of the nominees and certain information about them as of June 3, 1997
are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITIONS WITH THE COMPANY SINCE
- ----------------------------- --- ------------------------------------- --------
<S> <C> <C> <C>
Robert S. Cecil.............. 62 Chairman of the Board of Directors, 1992
President and Chief Executive Officer
Robert F.B. Logan(1)......... 64 Director 1997
M. Saleem Muqaddam(1)........ 50 Director 1994
John Mowbray O'Mara(2)....... 69 Director 1994
Trude C. Taylor(2)........... 76 Director 1989
J. Sidney Webb(2)............ 77 Director 1990
David A. Wegmann(1).......... 50 Director 1988
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
MR. CECIL joined the Company in March 1992 as President, Chief
Executive Officer and Director, and in September 1993 he was elected Chairman of
the Board of Directors. From 1984 to December 1991, Mr. Cecil held a number of
positions with LIN Broadcasting Corporation, a subsidiary of McCaw Cellular
Communications Inc. that provides cellular services in North America, including
President of its Cellular Group. From 1977 to 1984, he held various positions
with Motorola. Inc., including Vice President and Corporate Director of
Marketing. Prior to that he held various senior sales and marketing management
positions with IBM Corporation. Mr. Cecil also serves on the Board of Directors
of Toll Free Cellular, Inc., a private cellular company, and TAB Products Co.,
which manufactures and markets a broad range of filing systems and supplies,
systems furniture, computer-related products and forms processing equipment.
MR. LOGAN joined the Board of Directors on April 29, 1997 replacing
Richard D. Banziger who resigned for business reasons on April 28, 1997. Mr.
Logan has more than 30 years of diverse senior executive experience. Most
recently, he was chairman and CEO of Banc One Arizona and Bank One Arizona from
April 1995 to March 1996. From May 1993 to March 1995 he served as director of
Banc One Arizona and from January 1990 to April 1993 he was President and Chief
Operating Officer of Valley National, the predecessor of Bank One Arizona. Prior
to 1990 Mr. Logan was President and Chief Executive Officer of Alexander
Hamilton Life Insurance Company, Chief Financial Officer for Continental Grain
Company of New York, and Executive Vice President of the Merchant Banking Group
at Citicorp. Mr. Logan currently is a member of the boards of directors of EABC,
a broadcasting company, York International Corporation, an air conditioning and
refrigeration products manufacturer, Bank One Arizona Corporation, a commercial
bank, and Banc One Capital Partners, an investment partnership.
MR. MUQADDAM has served as a Vice President of CVC and its affiliated
investment companies since 1989. Previously he spent 15 years with Citibank,
N.A. and its affiliates in senior management positions. Mr. Muqaddam is a
director of Pamida Holdings Corporation, Chromcraft Remington Inc. and Fairwood
Corporation.
MR. O'MARA has been a management consultant since May 1993. From May
1990 to May 1993, he served as Chairman of the Executive Committee of Quality
Care Systems, Inc., a provider of computer-based "expert" medical cost
containment systems. From August 1988 through December 1989, Mr. O'Mara served
as Chairman of the Board and Chief Executive Officer of Global Natural
Resources, Inc. Prior to 1988, Mr. O'Mara spent 22 years as an investment
banker, serving most recently as Managing Director for Chase Investment Bank, a
subsidiary of Chase Manhattan Bank, N.A. Mr. O'Mara is a director of Baldwin &
Lyons, Inc. and The Midland Company.
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MR. TAYLOR has been a private investor since 1987 and a principal in TC
Associates, a management consulting firm, since 1984. He served as a director of
the Company's former operating subsidiary, Plantronics, Inc., from 1969 until
its merger into the Company in January 1994. He was Chairman of the Board of
Directors and a Director of Zehntel, Inc. ("Zehntel"), a manufacturer of
automated test equipment and a former subsidiary of Plantronics, Inc., from 1984
to 1987, Chief Executive Officer of Zehntel from 1984 to 1985 and Chairman of
the Board of Directors, President and Chief Executive Officer of Electronic
Memories and Magnetics Corporation, a manufacturer of computer peripherals, from
1969 until 1984. He is also a director of Dense PAC Microsystems, Inc.
and Xylan Corporation.
MR. WEBB has been Chairman of the Board of Directors of The Titan
Corporation since 1984. The Titan Corporation designs, manufactures and installs
high technology information and electronic products and systems for government,
commercial and international clients. Mr. Webb was a director of the Company's
former operating subsidiary, Plantronics, Inc., from 1983 to 1989, and rejoined
the boards of directors of that corporation and the Company in January 1990. He
was a private investor and consultant from 1981 to 1984. Prior to that, he was
Vice Chairman of TRW, Inc. until 1981. He is currently a director of EIP
Microwave, Inc., Amdahl Corporation and Visigenics Software, Inc.
MR. WEGMANN has been a private investor since August 1988. Prior to
that, he was a Vice President of CVC. Mr. Wegmann was the sole director of the
Company from its inception in August 1988 until March 1989. He also served as a
director of the Company's former operating subsidiary, Plantronics, Inc., from
March 1989 until its merger with the Company in January 1994. Mr. Wegmann is
also a director of Compression Labs, Incorporated and Innoserv Technologies,
Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings
during the fiscal year ended March 29, 1997. Each director attended 100% of the
meetings of the Board of Directors and committees thereof, if any, upon which
such director served. The Board of Directors has an Audit Committee and a
Compensation Committee. The Board of Directors has no nominating committee or
any committee performing such functions.
The Compensation Committee, which consists of directors Taylor, Webb
and O'Mara, met once, and acted by unanimous written consent four times, during
the fiscal year. This Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
highly compensated employees of the Company and administers various incentive
compensation and benefit plans. Mr. O'Mara was appointed to the Compensation
Committee as the designee of CVC pursuant to the terms of the Company's 1993
Stock Plan.
The Audit Committee, which consisted, as of the end of the Fiscal Year,
of directors Muqaddam, Wegmann and former director Banziger, met once during the
fiscal year. Mr. Logan replaced Mr. Banziger on April 29, 1997 due to Mr.
Banziger's resignation. This Committee is responsible for overseeing actions
taken by the Company's independent auditors and reviews the Company's internal
financial controls.
COMPENSATION OF DIRECTORS
The directors of the Company, other than directors who are also
executive officers, receive a retainer fee of $5,000 per quarter, plus a fee of
$1,000 for attendance at each meeting of the Board of Directors and the Audit
and Compensation Committees. Directors also are entitled to reimbursement of
expenses incurred in connection with attendance at meetings.
Each non-employee director of the Company is entitled to participate in
the Company's 1993 Director Stock Option Plan (the "Director Plan"). Pursuant to
the Director Plan, directors Muqaddam, O'Mara, Taylor, Webb,
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Wegmann and former director Banziger each received on January 15, 1997 an option
to purchase 500 shares of Common Stock at an exercise price of $47.75 per share.
BOARD DESIGNATION AGREEMENT
The Company and CVC are parties to a Board Designation Agreement under
which the Company will nominate for election to the Board of Directors of the
Company up to three designees of CVC and will solicit proxies in favor of the
election of such nominees. During the term of such agreement, for so long as CVC
owns at least 66-2/3% of the Common Stock held by it immediately following the
Company's initial public offering, the Company has agreed to nominate and
support the election of three CVC designees to the Board of Directors. During
any period that CVC owns more than 15% of the outstanding Common Stock of the
Company (on a fully diluted basis assuming exercise of all outstanding options
or warrants to purchase Common Stock and the conversion of all securities
convertible into Common Stock) but less than 66-2/3% of the Common Stock held by
it immediately following the Company's initial public offering, the Company will
nominate and support for election two CVC designees. For so long as CVC owns at
least 10% of the outstanding Common Stock of the Company on a fully diluted
basis, the Company will nominate and support for election at least one CVC
designee. Additionally, any interim term vacancy of any directorship held by a
CVC designee immediately prior to such vacancy shall be filled by a nominee
selected by a majority of the remaining CVC designee(s). Interim term vacancies
of any directorships held by non-CVC designees shall be filled by a nominee
selected by a majority of the remaining Board members that are neither CVC
designees nor the Company's Chief Executive Officer. The Agreement expires on
the earlier to occur of (i) January 19, 2004 (the tenth anniversary of the
Company's initial public offering) and (ii) the date on which CVC no longer has
the right under the agreement to designate a director for nomination to the
Company's Board of Directors.
VOTE REQUIRED
If a quorum is present and voting, the seven nominees receiving the
highest number of votes will be elected to the Board of Directors. Votes
withheld from any nominee will be counted for purposes of determining the
presence or absence of a quorum for transaction of business at the meeting, but
will have no other legal effect upon the election of directors under Delaware
law.
PROPOSAL TWO
INCREASE IN AUTHORIZED COMMON STOCK
The Company wishes to amend its restated certificate of incorporation
(the "Certificate"), as currently in effect, to increase the authorized Common
Stock of the Company from 25,000,000 to 40,000,000 shares.
As a result of the proposed change, the authorized capital stock of the
Company would consist of 1,000,000 shares of undesignated Preferred Stock, of
which there are no shares outstanding, and 40,000,000 shares of Common Stock, of
which there were 8,203,224 shares outstanding on June 3, 1997. In addition, as
of June 3, 1997, options to purchase 1,826,334 shares of the Company's Common
Stock were outstanding under the Company's 1993 Stock Plan, and options to
purchase 19,562 shares of Common Stock were outstanding under the Company's 1993
Director Stock Option Plan. As of June 3, 1997, 253,287 shares of Common Stock
had been reserved to cover future grants (and subsequent exercise) of options
under the 1993 Stock Plan, 10,438 shares of Common Stock had been reserved to
cover future grants (and subsequent exercise) of options under the 1993 Director
Stock Option Plan, and 19,419 shares of Common Stock had been reserved to cover
future share issuances under the Company's 1996 Employee Stock Purchase Plan.
The Company also currently anticipates issuing to employees up to an aggregate
of 350,613 treasury shares of Common Stock repurchased by the Company in Fiscal
Year 1997. Issuances of these treasury shares may be made pursuant to elections
by participants in the Company's Annual Profit Sharing/Individual Savings
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Plan (401k Plan) to purchase Company Common Stock, under the Company's Basic
Deferred Compensation Plan, and under the Senior Executive Stock Purchase Plan.
As of June 3, 1997, 14,510 of such 350,613 shares had been issued to employees
of the Company.
PURPOSE AND EFFECT OF AMENDMENT
The purpose of the proposed amendment to the Certificate is to
authorize additional shares of Common Stock which will be available in the event
that the Board of Directors determines that it is necessary or appropriate to
effect future stock dividends or stock splits, to raise additional capital
through the sale of securities, to acquire another company or its business or
assets through the issuance of securities, to establish a strategic relationship
with a corporate partner through the exchange of securities, or to take such
other action necessitating additional shares of stock as deemed appropriate by
the Board of Directors. In determining the appropriate level of authorized
shares of Common Stock, the Board of Directors considered, among other factors
(i) that as of June 3, 1997, approximately 10.7 million shares of Common Stock
were issued or reserved for issuance, including the currently anticipated
issuance of the 350,613 treasury shares to employees (ii) that were the Company
to effect a two-for-one stock split in the future, a minimum of approximately
21.4 million authorized shares would be required, and (iii) that such splits
facilitate absolute increases in the employee stock option pool, which in turn,
provides for broader employee participation in the stock option program while
simultaneously reducing (on a percentage basis) the potential dilutive effect of
aggregate grants to existing shareholders. If the proposed amendment is adopted,
15,000,000 additional shares of Common Stock will be available for issuance by
the Board of Directors without any further stockholder approval, although
certain issuances of shares may require stockholder approval in accordance with
the requirements of the New York Stock Exchange or the Delaware General
Corporations Law. The holders of Common Stock have no preemptive rights to
purchase any stock of the Company. The additional shares might be issued at such
times and under such circumstances as to have a dilutive effect on earnings per
share and on the equity ownership of the present common stockholders.
The flexibility of the Board of Directors to issue additional shares of
stock could enhance the Board's ability to negotiate on behalf of the
stockholders in a takeover situation. Although it is not the purpose of the
proposed amendment, the authorized but unissued shares of Common Stock (as well
as the authorized but unissued shares of Preferred Stock) also could be used by
the Board of Directors to discourage, delay or make more difficult a change in
the control of the Company. For example, such shares could be privately placed
with purchasers who might align themselves with the board in opposing a hostile
takeover bid. The issuance of additional shares might serve to dilute the stock
ownership of persons seeking to obtain control and thereby increase the cost of
acquiring a given percentage of the outstanding stock. The Company has
previously adopted certain measures that may have the effect of helping to
resist an unsolicited takeover attempt, including: (A) provisions in the 1993
Stock Plan providing for the acceleration of exercisability of outstanding
options in the event of a "change in control" (defined to include (i)
acquisition by a party other than Citicorp Venture Capital, Ltd. ("CVC") of 40%
of the Company, (ii) a change in the composition of the Board of Directors
within a two-year period such that fewer than a majority of directors are
incumbent directors, and (iii) a merger in which securities of the Company prior
to such merger represent less than 70% of the surviving entity, or a plan or
agreement approved by the stockholders for liquidation of the Company or sale of
substantially all of the Company's assets); (B) provisions in the 1993 Director
Stock Option Plan providing for the acceleration of exercisability of
outstanding options in the event of a merger or sale of substantially all assets
of the Company upon which the surviving entity does not either assume or
substitute for such options; (C) provisions of the Certificate authorizing the
Board to issue up to 1,000,000 shares of Preferred Stock with terms, provisions
and rights fixed by the Board; (D) provisions in the Certificate requiring a
two-thirds vote of the Common Stock to amend the article of the Bylaws
concerning directors of the Company, provisions in the Certificate and the
Bylaws eliminating stockholder actions by written consent, and provisions in the
Bylaws requiring a two-thirds vote of the Board of Directors to approve a sale
of substantially all assets, the issuance of capital stock or rights to acquire
capital stock of the Company, or amend the Certificate or Bylaws; and (E)
provisions of the Board Designation Agreement dated as of October 22, 1993
between the Company and CVC pursuant to which CVC has the right to designate
three
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of the seven members of the Board of Directors currently provided for in the
Bylaws. The Board of Directors is not aware of any pending or proposed effort to
acquire control of the Company.
VOTE REQUIRED
The approval of the amendment to the Certificate requires the
affirmative vote of a majority of the outstanding shares of Common Stock of the
Company. An abstention or non-vote is not an affirmative vote and, therefore,
will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE
AN ADDITIONAL 15,000,000 SHARES OF COMMON STOCK.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending March 28, 1998, and recommends that
stockholders vote for ratification of such appointment. In the event of a
negative vote on ratification, the Board of Directors will reconsider its
selection.
Price Waterhouse has audited the Company's financial statements
annually since 1988. Representatives of Price Waterhouse will be available
before the meeting to respond to any appropriate questions, and such
representatives will have an opportunity to make a statement at the meeting if
they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
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ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of Common Stock of the Company as of June 3, 1997 as to (i)
each person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and each nominee for
director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table below, and (iv) all directors and executive officers
as a group. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed below have sole investment and
voting power with respect to such shares, subject to community property laws.
<TABLE>
<CAPTION>
COMMON
STOCK APPROXIMATE
FIVE PERCENT STOCKHOLDERS, DIRECTORS BENEFICIALLY PERCENTAGE
AND CERTAIN EXECUTIVE OFFICERS OWNED(1) OWNED(2)
- ------------------------------------------------------------ --------- --------
<S> <C> <C>
Citicorp Venture Capital Ltd. (3) .......................... 2,928,084 35.7%
399 Park Avenue, 6th Floor
New York, NY 10043
Vanguard/PRIMECAP Fund, Inc. (4) ........................... 804,000 9.8
P.O. Box 2600
Valley Forge, PA 19482-2600
Wellington Management Company, LLP (5) ..................... 554,600 6.8
75 State Street
Boston, MA 02109
The Capital Group Companies, Inc. (6) ...................... 500,000 6.1
333 South Hope Street
Los Angeles, CA 90071
Robert S. Cecil ............................................ 808,089 9.0
337 Encinal Street
Santa Cruz, CA 95060
Robert F.B. Logan .......................................... 0 *
M. Saleem Muqaddam ......................................... 2,251 *
John Mowbray O'Mara ........................................ 6,251 *
Trude C. Taylor ............................................ 48,041 *
J. Sidney Webb (7) ......................................... 13,814 *
David A. Wegmann ........................................... 154,197 1.9
Bruce Gregory .............................................. 23,636 *
David Huddart .............................................. 7,470 *
S. Kenneth Kannappan ....................................... 17,144 *
John A. Knutson ............................................ 1,780 *
All directors and executive officers as a group (15 persons) 1,095,295 12.1
</TABLE>
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* Less than 1%.
(1) Includes stock subject to stock options held by directors and executive
officers that are exercisable within 60 days of June 3, 1997, as follows:
Mr. Cecil, 800,922 shares; Mr. Logan, 0 shares; Mr. Muqaddam, 2,251
shares; Mr. O'Mara, 2,251 shares; Mr. Taylor, 2,251 shares; Mr. Webb,
2,251 shares; Mr. Wegmann, 2,251 shares; Mr. Gregory, 23,636 shares; Mr.
Huddart, 7,470 shares; Mr. Kannappan, 14,823 shares; Mr. Knutson, 1,251
shares; and all directors and executive officers as a group, 871,127
shares.
(2) Based on 8,203,224 outstanding shares of Common Stock on June 3, 1997.
(3) Citicorp Venture Capital, Ltd. is a wholly-owned subsidiary of Citibank,
N.A., which is in turn a wholly-owned subsidiary of Citicorp. Information
provided herein is based solely on Citicorp's Schedule 13G dated
February 14, 1997.
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(4) Vanguard/PRIMECAP Fund, Inc. claims sole voting power and shared
dispositive power as to the 804,000 shares. Information provided herein is
based solely on Vanguard/PRIMECAP Fund, Inc.'s Schedule 13G dated February
10, 1997.
(5) Wellington Management Company, LLP, in its capacity as investment advisor,
may be deemed to beneficially own 554,600 shares which are held of record
by its clients. Wellington Management Company, LLP claims shared
dispositive power as to the 554,600 shares and shared voting power as to
430,600 shares. Information provided herein is based solely on Wellington
Management Company's Schedule 13G dated January 24, 1997.
(6) The Capital Group Companies, Inc. wholly owns Capital Research and
Management Company, an investment management company, which along with The
Capital Group Companies, Inc. claims sole dispositive power as to the
500,000 shares. Capital Research and Management Company serves as an
investment adviser to SMALLCAP World Fund, Inc., which claims sole voting
power as to the 500,000 shares. The Capital Group Companies, Inc. and
Capital Research and Management Company disclaim beneficial ownership of
such shares pursuant to Rule 13d-4 under the Securities Exchange Act of
1934, as amended. Information provided herein is based solely on joint
Schedules 13G for these three entities dated February 12, 1997 and a
letter to the Company from such entities also dated February 12, 1997.
(7) Includes 11,563 shares held in the name of the Webb Family Trust.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company
during the fiscal years ended April 1, 1995, March 30, 1996 and March 29, 1997
to the Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------- LONG-TERM
COMPENSATION
OTHER ANNUAL AWARDS ALL OTHER
NAME AND COMPENSATION ---------- COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) ($)(2) OPTIONS(#) ($)(3)
- -------------------------------------------- ---- ------------ -------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cecil............................. 1997 $478,500 $478,500 $ 2,097(4) -- $ 172,059
Chairman of the Board of Directors, 1996 445,875 515,875 52,522(5) -- 160,434
Presidebt and Chief Executive Officer 1995 435,000 435,000 33,371(5) -- 140,228
Bruce Gregory(6)............................ 1997 179,237 69,226 -- 10,000 80,301
Vice President--Marketing 1996 190,622 44,862 -- -- --
1995 188,732 48,988 -- -- --
David Huddart(6)............................ 1997 124,433 58,144 -- 10,000 --
Vice President--Worldwide Engineering 1996 72,085 28,865 -- 21,000 --
and Technology 1995 35,446 6,272 -- 4,000 --
S. Kenneth Kannappan........................ 1997 161,253 92,487 18,580(7) 15,000 58,402
Senior Vice President 1996 179,883(8) -- -- 22,340 45,722
1995 19,846 -- -- 17,660 2,421
John A. Knutson............................. 1997 133,538 158,538 795(4) 5,000 48,559
Vice President--Legal, Senior General 1996 125,775 125,775 -- -- 46,008
Counsel and Secretary 1995 116,500 116,500 -- 20,000 37,907
</TABLE>
- ---------------------------
(1) Includes salary deferred at the election of the executive officer.
(2) Includes perquisites only where the aggregate amount thereof equals or
exceeds the lesser of $50,000 or 10% of the salary plus bonus for the
executive officer.
(3) Amounts shown include (i) $1,039 (except for Messrs. Gregory and Huddart
who received $0 and Mr. Kannappan who received $168), $987 (except for
Messrs. Gregory and Huddart who received $0 and Mr. Kannappan who received
$964) and $830 (except for Mr. Gregory who received $530 and Mr. Huddart
who received $0) in life and disability payments paid by the Company in
fiscal years 1995, 1996 and 1997, respectively; (ii) the following
contributions by the Company under the quarterly profit sharing plan in
fiscal years 1995, 1996 and 1997, respectively: Mr. Cecil ($64,062,
$75,609 and $80,609), Mr. Gregory (none, none and $32,575), Mr. Huddart
(none, none and none), Mr. Kannappan ($2,253, $21,208 and $27,143) and Mr.
Knutson ($16,981, $21,346 and $22,486); and (iii) the following
contributions by the Company under the annual profit sharing/individual
saving plan for fiscal years 1995, 1996 and 1997, respectively: Mr. Cecil
($75,127, $83,838 and $90,620), Mr. Gregory (none, none and $47,196), Mr.
Huddart (none, none and none), Mr. Kannappan (none, $23,550 and $30,429)
and Mr. Knutson ($20,926, $23,675 and $25,243).
-10-
<PAGE> 12
(4) Reflects the dollar value of the difference between the price paid by
Messrs. Cecil and Knutson for shares of the Company's stock,
purchased pursuant to the Company's Senior Executive Stock Purchase Plan,
and the fair market value of such stock at the date of purchase.
(5) Represents amounts reimbursed for taxes on certain benefits and $2,500
and $37,645 paid by the Company in 1995 and 1996, respectively, in
connection with the relocation of Mr. Cecil.
(6) Amounts calculated based on an exchange rate of 0.637145, 0.64008, and
0.6268 British pounds to one United States dollar, for 1995, 1996 and
1997, respectively.
(7) Represents a $14,683 foreign assignment premium and $3,897, which is the
dollar value of the difference between the price paid by Mr. Kannappan for
shares of the Company's stock, purchased pursuant to the Company's Senior
Executive Stock Purchase Plan, and the fair market value of such stock at
the date of purchase.
(8) Reflects $53,998 in commissions paid by the Company to Mr. Kannappan in
1996.
OPTION GRANTS
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning stock options granted during
the fiscal year ended March 29, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------ --- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bruce Gregory ....... 10,000 3.2% $43.75 01/03/07 $275,141 $697,262
David Huddart ....... 10,000 3.2 36.875 11/08/06 231,905 587,692
S. Kenneth Kannappan. 15,000 4.8 36.875 11/08/06 347,857 881,539
John A. Knutson ..... 5,000 1.6 43.75 01/03/07 137,571 348,631
</TABLE>
- ----------
(1) These options were granted pursuant to the Company's 1993 Stock Plan. The
option exercise prices were at the fair market value of the Company's
Common Stock on the date of grant. All options expire 10 years from the
date of grant, are not transferable by the optionee (other than by will or
the laws of descent and distribution), and are exercisable during the
optionee's lifetime only by the optionee. The options become exercisable
at the rate of 37.5% of the total grant 18 months after the date of grant
and 2.083% of the total grant each month thereafter. The options are fully
vested at four years from the date of grant. To the extent exercisable at
the time of employment termination, options may be exercised for an
additional two months.
(2) Potential gains are net of exercise price, but before taxes associated
with exercise. The amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock, overall market conditions and the option holders'
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved and do not reflect the
Company's estimate of future stock price growth.
-11-
<PAGE> 13
The following table sets forth certain information regarding the value
of options held by the Named Executive Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT MARCH 29, 1997(#) AT MARCH 29, 1997($)(1)
ACQUIRED ON VALUE --------------------------- ------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cecil .... -- $ -- 800,922 -- $31,576,753 $ --
Bruce Gregory ...... 4,000 159,000 19,956 19,199 733,383 330,563
David Huddart ...... 500 9,625 7,167 27,333 72,849 214,151
S. Kenneth Kannappan 900 18,338 14,251 39,849 176,451 350,431
John A. Knutson .... 13,465 302,690 834 10,701 22,205 148,039
</TABLE>
- ----------------
(1) Based on market value of the Company's Common Stock at March 29, 1997
of $43.00, minus the exercise price.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In January 1994, the Company entered into a three-year employment
agreement with Robert S. Cecil, President and Chief Executive Officer, that
amended and restated Mr. Cecil's prior employment agreement. The term of the
agreement automatically extends for additional one-year periods unless either
the Company or the employee gives advance notice of termination. The agreement
provides for an initial annual base salary of $375,000, which was subsequently
increased to $435,000 as of January 1994 and $478,500 in January 1996, and which
will be reviewed at least annually. Mr. Cecil did not receive an increase in
annual base salary in Fiscal Year 1997. The agreement also provides for an
annual performance bonus of up to 100% of base salary if the Company
significantly exceeds certain performance targets established by its Board of
Directors. Under the terms of his employment agreement, Mr. Cecil is entitled to
reimbursement of certain expenses in connection with his employment with the
Company, including temporary living expenses and reimbursement for taxes. He is
also entitled to participate in most Company benefit plans.
In the event that (i) the Company terminates Mr. Cecil's employment
(other than for cause) or (ii) Mr. Cecil terminates his employment voluntarily
or as a result of his constructive discharge, or (iii) Mr. Cecil's employment
terminates because of death or disability, he (or his beneficiaries in the case
of death) will receive continuation of base salary and, in the case of
termination other than for cause, certain fringe benefits for two years. If Mr.
Cecil's employment ends other than for cause, he will receive up to $100,000 in
relocation expenses. Upon termination of Mr. Cecil's employment for any reason
other than for cause, he will receive a prorated portion of his bonus. Upon
termination of Mr. Cecil's employment for any reason, the Company will provide
certain medical benefits to Mr. Cecil and his spouse for their joint lives,
provided that the cost of such benefits will not exceed $11,000 per year plus an
annual adjustment to reflect increases in the cost of such benefits. In the
event his employment terminates due to death or disability, his benefits will be
offset to the extent of any disability or death benefits payable under any
Company benefit plan. For a period of 60 months following Mr. Cecil's
termination of employment with the Company, Mr. Cecil may not perform services
for any direct competitor of the Company and may not solicit any of the
Company's employees to become employed by any other business enterprise.
Covenants not to compete are generally not enforceable under California law.
Effective January 1996, the Company and Mr. Cecil amended his
employment agreement to provide for immediate vesting for all of Mr. Cecil's
options; provided that if Mr. Cecil terminates his employment voluntarily or is
terminated by the Company for cause, then (i) all unexercised options that would
not have been vested but for the amendment will be canceled, (ii) the Company
will be entitled to repurchase all shares acquired by Mr. Cecil upon exercise of
options that would not have been purchasable by Mr. Cecil but for the amendment
("Restricted Shares"), and (iii) the Company shall be entitled to reimbursement
from Mr. Cecil for all Restricted Shares disposed of by Mr. Cecil prior to the
date of termination.
-12-
<PAGE> 14
Under the employment agreement, the Company has agreed to indemnify Mr.
Cecil to the fullest extent permitted by law so long as Mr. Cecil acts in good
faith. Failure by the Company to provide such indemnification is deemed to be a
breach of the employment agreement and may be deemed a termination of Mr.
Cecil's employment other than for cause.
The Company entered into an employment agreement with John A. Knutson
in March 1994. The agreement provides that if, within two years of a change of
control of the Company, the Company terminates Mr. Knutson's employment other
than for cause, or he is constructively discharged, or his employment terminates
due to death or disability, he, or his beneficiaries, will receive continuation
of base salary and fringe benefits for six months or up to 12 months if the
executive is unable to obtain subsequent employment. For purposes of the
agreement, fringe benefits exclude bonus, profit sharing, deferred compensation
or incentive compensation plans. In the event Mr. Knutson's employment is
terminated by the Company for cause, he will receive no benefits except as may
be provided by the Company's employee benefit plans generally. Under the
agreement, a termination is "for cause" only if such termination results from
gross misconduct of the executive that is materially injurious to the Company.
The agreement also contains a two-year non-compete covenant which takes effect
upon termination of Mr. Knutson's employment. However, such covenants are
generally not enforceable under California law. Mr. Knutson joined the Company
in March 1994 as Vice President--Legal, Senior General Counsel and Secretary.
The Company entered into employment agreements with Mr. Huddart and Mr.
Gregory in March 1996 and November 1993, respectively, and with Mr. Kannappan in
March 1996. Such agreements are similar to the agreement with Mr. Knutson.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Board of Directors
is responsible for reviewing and approving the Company's executive compensation
policies and the compensation paid to the executive officers. The Committee is
comprised of the members named below, all of whom are non-employee directors.
Following is the report of the Committee describing compensation
policies and rationale applicable to the Company's executive officers with
respect to the compensation paid to such executive officers for the fiscal year
ended March 29, 1997. The information contained in such report shall not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates it by reference into such filing.
COMPENSATION POLICIES. The Company's basic compensation philosophy is
founded on the idea that compensation should be tied to performance. This
philosophy is reflected in the structure of the Company's compensation program,
which is designed to link executive compensation to the performance of the
Company as well as to the individual contribution of each executive and to make
a certain portion of each executive's compensation variable as opposed to fixed.
The Company's performance-based compensation program is a total system
consisting of base salary and "at risk" incentives that reward executives for
the achievement of performance levels designed to increase the stockholder value
of the Company. A significant portion of each executive's compensation is
dependent upon meeting certain financial goals of the Company and individual
performance objectives.
The guiding principles which form the basis for the Company's
compensation program are to (i) provide a total compensation package that will
attract highly qualified executives to the Company, motivate such individuals to
perform at their highest levels, reward outstanding performance, and retain
executives whose skills are essential for building the Company's business and
long-term stockholder value; (ii) establish annual incentives for senior
executives that are directly tied to the overall financial performance of the
Company as well as to individual performance goals; and (iii) implement
long-term incentives to focus executives on managing the Company from the
-13-
<PAGE> 15
perspective of an owner with an equity stake in the business and align executive
compensation with benefits realized by the Company's stockholders.
There are five basic components of the Company's compensation program:
(i) annual cash compensation in the form of base salary; (ii) annual incentive
bonuses which reward executives for achievement against preestablished goals;
(iii) long-term incentive stock options, which are designed to align
compensation incentives with the interests of the Company's stockholders; (iv)
compensation and employee benefits generally available to employees of the
Company, such as the Company's nonqualified cash quarterly profit sharing plan
and qualified defined contribution savings plan, including an annual profit
sharing component and a qualified salary deferral program under Section 401 (k)
of the Internal Revenue Code; and (v) discounted sales of Company Common Stock
to senior executive officers pursuant to the Senior Executive Stock Purchase
Plan in order to increase investment by such executive officers in the Company
and align their interests with other stockholders.
BASE SALARIES. Base salaries for the Company's executive officers are
determined by evaluating each executive's scope of responsibility, prior
experience and salary history with a focus on such executive's past performance
with the Company and/or expected contribution to the Company's future success.
For reference, the Company participates in various executive compensation
surveys covering similar industries and publicly-held companies in the San
Francisco Bay Area and uses this data to assist it in analyzing competitive
salary information in connection with determining appropriate salary levels for
the Company's executive officers. After analyzing the surveys, the Chief
Executive Officer recommends an annual salary increase budget for approval by
the Compensation Committee and further recommends salary increases within such
budget for the individual executives on the basis of individual performance
during the preceding 12 months as measured against preestablished objectives
related to each individual's respective area of responsibility. Performance
objectives are proposed by the individual executive, and, thereafter, negotiated
and agreed to between the executive and the Chief Executive Officer. For fiscal
year 1997, individual adjustments in annualized base salary for the four Named
Executive Officers (other than the Chief Executive Officer) named in this proxy
statement ranged from 5.0% to 25.0%.
INCENTIVE BONUS AWARDS. Under the Company's Executive Bonus Plan for
fiscal 1997, incentive cash payments were based on the achievement of certain
Company operating profit targets as well as individual objectives. A portion of
the bonus awards earned under the plans described below were paid on a quarterly
basis during fiscal 1997 and fourth quarter and supplemental bonus awards were
paid in May 1997 after the close of the fiscal year. The plan is composed of two
programs consisting of a regular and a supplemental bonus plan, each designed to
reward the performance of officers and certain key employees designated by the
Chief Executive Officer, subject to the approval of the Compensation Committee.
Under either plan, no bonuses are earned unless the Company meets the
profitability targets set by the Board of Directors, regardless of the
achievement of individual performance goals by the participants. Under the
regular bonus plan, a participant becomes eligible to earn up to a certain
percentage of base salary if the Company achieves certain operating profit
targets defined by the Board of Directors, provided such executive achieves
certain individual performance objectives. Such percentage varies among
executives depending upon position, but in no case exceeds 40% except with
respect to the Chief Executive Officer for whom the percentage is 60%.
Individual performance objectives are proposed by the individual executive and,
thereafter, negotiated and agreed to between the executive and the Chief
Executive Officer. A portion of such bonus is paid on a quarterly basis to the
eligible participants who must be employed by the Company on the last day of the
applicable quarter. Such bonuses are paid only after the Company achieves the
established targets as follows: when the year-to-date operating profit achieved
equals at least 75% of the year-to-date operating profit target set by the Board
of Directors, eligible participants may receive up to 50% of eligible bonus
awards, or some smaller percentage of such bonus depending upon achievement of
individual performance objectives. The percentage payout of bonus may be
increased to 75% of eligible bonus if the year-to-date operating profit achieved
equals at least 90% of the year-to-date operating profit target and up to 100%
of eligible bonus if the year-to-date operating profit achieved equals at least
100% of the year-to-date operating profit target. In all cases, the actual bonus
percentage paid to an individual executive depends on the percentage achievement
of such executive's individual performance objectives. For example, if the Chief
-14-
<PAGE> 16
Executive Officer determines that an executive has achieved 80% of his or her
predetermined performance objectives, the executive will receive 80% of the
bonus award for which he or she is eligible.
In addition to the regular bonus plan, the Company maintains a
supplemental bonus plan pursuant to which participants may earn up to 100% of
base salary (including amounts earned under the regular bonus plan described
above) if the Company significantly exceeds operating profit targets established
by the Board of Directors. The supplemental bonus amounts are payable from a
pool comprised of 25% of the operating profits, if any, which the Company earns
beyond the operating profit targets established under the regular bonus plan.
Participants are eligible to share in the supplemental bonus pool pro-rata based
on the ratio of such participant's annual base salary to the aggregate base
salaries received by all eligible participants. Total bonuses paid under both
the regular and supplemental bonus plans cannot exceed 100% of a participant's
annual base salary paid. The percentage of bonus earned by each participant
under the supplemental bonus plan, as is the case under the regular bonus plan,
is based on such participant's percentage achievement measured against
pre-established individual performance objectives as determined by the Chief
Executive Officer. Supplemental bonus amounts are payable within 90 days after
completion of the Company's audited financial statements at fiscal year end to
participants who must be employed by the Company on the payment date. In the
event of death of a participant during the second half of the fiscal year, in
which case such participant will be treated as having been employed on the
payment date and any supplemental bonus earned will be paid to such
participant's estate. Additionally, the plan provides for the payment prior to
the end of a calendar year (at the option of the Compensation Committee) of 75%
of estimated bonus awards under both the regular and the supplemental bonus
plans based on a forecast by the Chief Executive Officer of operating profits
for the fiscal year and an estimate of bonus attainments. If such early payment
is made, participants who elect to receive the early payout of bonus awards
under this feature of the plan are required to sign a written agreement
promising to repay any amount paid that exceeds the amount ultimately determined
that the participant is entitled to receive under the plans based on final
audited operating profits. No such early payments were approved or made during
fiscal 1997.
The Company's operating profits improved by 6% in fiscal year 1997 and
the Company achieved better than 100% of the operating profit targets as defined
by the Board of Directors for purposes of the regular and supplemental bonus
plans. Accordingly, participants were eligible to receive, and bonuses were
paid, up to 100% of eligible bonus amounts under both bonus plans. Additional
bonus amounts, primarily from the operating profit pool, were paid to certain
participants at the discretion of the Board of Directors.
STOCK OPTIONS. The Company provides long-term incentives to executive
officers through its 1993 Stock Plan, adopted by the Board of Directors in
September 1993. In order to attract and retain highly qualified executives and
to ensure that the interests of the executive officers will coincide with the
interests of the Company's stockholders, stock options constitute a significant
portion of the Company's incentive compensation program for executives. Options
granted under the 1993 Stock Plan incorporate vesting schedules to encourage
employees to remain with the Company. Generally, in granting options to
executives, the Compensation Committee takes into consideration the individual's
position with the Company, responsibilities, past performance and future
potential to influence the long-term growth and profitability of the Company, as
well as the individual's existing equity interest in the Company, giving primary
weight to position, responsibilities and performance.
SENIOR EXECUTIVE STOCK PURCHASE PLAN. On November 4, 1996 the Board of
Directors adopted the Company's Senior Executive Stock Purchase Plan (the "SEP")
effective as of January 1, 1997 to facilitate purchases of Company stock by
senior executives and thus create long-term incentives to focus executives on
managing the Company and align executive compensation with benefits realized by
the Company's stockholders. The SEP is a voluntary plan and its goal is to
encourage the Chief Executive Officer and all vice presidents who participate in
the Company's Supplemental Bonus Plan to acquire, over a five year period,
Company stock with a value, in the case of the CEO, of twice annual base salary,
and in the case of the other participants, equal to annual base salary. For
purposes of evaluating whether the target ownership levels are met, stock
purchases, exercise of options, and stock held in the Company's Basic Deferred
Compensation Plan, the Company's Annual Profit Sharing/Individual Savings
-15-
<PAGE> 17
Plan (401k Plan) and the executive's Individual Retirement Account are
aggregated. To encourage such purchases, the Company offers treasury shares to
the participating senior executives at a discount. Shares are sold under the SEP
at a price equal to the greater of (i) 95% of the price set by the Board of
Directors on an annual basis or (ii) 85% of the fair market value of the stock
on the date of the transaction. However, if the fair market value falls below
the Board's annual set price, then a 5% discount off the fair market value on
the date of the transaction applies. The Board has set an annual price for 1997
of $36.875 per share, the Company's closing stock price on the date the Board
adopted the SEP. To facilitate purchases necessary to achieve the target levels
of stock ownership, the Company also offers a loan program, with the amounts
borrowed to be repaid on a periodic basis within five years or less, to be
evidenced by a promissory note, and secured by the stock purchased and by a
personal guarantee. To date no such loans have been made.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The compensation of the Chief
Executive Officer in fiscal 1997 was approved by the Compensation Committee
pursuant to an employment agreement (the "Employment Agreement") between the
Company and the Chief Executive Officer (described in this Proxy Statement under
the caption "Additional Information--Employment Agreements and Change-in-Control
Arrangements"). In making compensation decisions with respect to the Chief
Executive Officer, the Compensation Committee refers to Mr. Cecil's Employment
Agreement, and also generally applies the compensation philosophy described
above. Mr. Cecil received 100% of the bonus amount for fiscal 1997 for which he
was eligible under the Company's regular and supplemental bonus plans. Mr.
Cecil's fiscal 1997 bonus was determined (pursuant to his Employment Agreement)
in accordance with the Company's Executive Bonus Plan approved by the Board of
Directors. The Company did not issue any new stock option grants to Mr. Cecil
during fiscal years 1995, 1996 or 1997.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Beginning in 1994, Section
162 of the Internal Revenue Code of 1986, as amended (the "Code"), limits the
federal income tax deductibility of compensation paid to the Company's Chief
Executive Officer and to each of the other four most highly compensated
executive officers. The Company may deduct such compensation only to the extent
that during any fiscal year the compensation paid to any such individual does
not exceed $1 million or meets certain specified conditions (including
stockholder approval and pre-Initial Public Offering plan exception). Based on
the Company's current compensation plans and policies, the Company and the
Committee believe that, for the near future, there is little risk that the
Company will lose any material tax deduction for executive compensation.
Members of the Compensation Committee:
John Mowbray O'Mara
Trude C. Taylor
J. Sidney Webb
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In September 1993, the Board of Directors of the Company appointed a
Compensation Committee consisting of directors Taylor and Webb. Mr. O'Mara was
appointed to the Compensation Committee in March 1994. Mr. Taylor is a former
officer and director of Zehntel, a former subsidiary of the Company's former
operating subsidiary, Plantronics, Inc. He served as Chairman of the Board of
Zehntel from 1984 to 1987 and as Chief Executive Officer of Zehntel from 1984 to
1985.
-16-
<PAGE> 18
COMPANY'S STOCK PERFORMANCE
Set forth below is a line graph comparing the annual percentage change
in the cumulative return to the stockholders of the Company's Common Stock with
the cumulative return of the NYSE Stock Market index and a peer group index for
the period commencing on the morning of January 20, 1994 and ending on March 27,
1997. The information contained in the performance graph shall not be deemed to
be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates it by
reference into such filing.
The graph assumes that $100 was invested on the morning of January 20,
1994 in the Company's Common Stock at the initial public offering price of
$12.50 per share and in each index (based on prices from the close of trading on
January 19, 1994), and that all dividends were reinvested. No dividends have
been declared or paid on the Company's Common Stock. Stockholder returns over
the indicated period should not be considered indicative of future stockholder
returns. The Company operates on a 52 or 53 week fiscal year which ended on
March 29, 1997. Under the assumptions stated above, over the period from January
20, 1994 to March 27, 1997 the total return on an investment in the Company
would have been 244.0%, as compared to only 68.5% for the NYSE Stock Market
index and 64.7% for the NYSE/AMEX/NASDAQ Communications Equipment Stocks index
shown below.
-17-
<PAGE> 19
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
PLANTRONICS, INC.
Prepared by the Center for Research in Security Prices and by Plantronics, Inc.
Produced on 06/12/97 including data to 03/27/97
[PERFORMANCE GRAPHIC]
<TABLE>
<CAPTION>
Legend
CRSP Total Returns Index for: 01/19/94 04/01/94 03/31/95 03/29/96 03/27/97
- ----------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Plantronics, Inc. 100.0 122.0 221.0 302.0 344.0
NYSE Stock Market (US Companies) 100.0 94.8 107.5 141.4 168.7
NYSE/AMEX/NASDAQ Stocks (SIC 3660-3669 US 100.0 92.3 116.7 159.4 166.1
Companies) Communications Equipment
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.0 on 01/19/94 (for the NYSE
and Communications Equipment comparison series based on the close of market
on 01/19/94, and for Plantronics, Inc. based on its initial public offering
price of $12.50).
-18-
<PAGE> 20
CERTAIN TRANSACTIONS
During fiscal year 1995, Mr. Hindmarch became indebted to the Company
in the principal amount of $200,000. The loan was extended to Mr. Hindmarch for
the purpose of assisting Mr. Hindmarch in connection with the relocation of his
personal residence. The note bore interest at a rate of five percent (5%) per
annum, was secured by a deed of trust on real estate in California and was due
on or before November 16, 1999. In August 1996, Mr. Hindmarch paid in full the
note and all interest accrued thereon.
The Company has entered into indemnification agreements with each of
its directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware law.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's executive officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange.
Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation 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, or written representations from certain reporting persons, the
Company believes that, during fiscal year 1997, all filing requirements
applicable to its executive officers and directors were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted at 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.
FOR THE BOARD OF DIRECTORS
John A. Knutson
Secretary
Dated: June 23, 1997
-19-
<PAGE> 21
DETACH HERE Preliminary Copy
This Proxy is solicited on behalf of the Board of Directors
PLANTRONICS, INC.
1997 ANNUAL MEETING OF STOCKHOLDERS
P July 30, 1997
R The undersigned stockholder of PLANTRONICS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
O Stockholders and Proxy Statement, each dated June 23, 1997, and hereby
appoints Robert S. Cecil and John A. Knutson, and each of them, proxies and
X 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 1997
Y Annual Meeting of Stockholders of PLANTRONICS, INC. to be held on July 30,
1997 at 3:00 p.m. local time, at Plantronics, Inc., 375 Encinal Street,
Second Floor, Santa Cruz, California, and at any adjournment or
adjournments 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
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE> 22
DETACH HERE
Please mark votes
[X] as indicated 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 FOR THE INCREASE IN
THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 25,000,000 TO
40,000,000, AND FOR THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Election of Directors 2. PROPOSAL TO INCREASE THE AUTHORIZED [ ] [ ] [ ]
Nominees: Robert S. Cecil; Robert NUMBER OF SHARES OF COMMON STOCK FROM
F.B. Logan; M. Saleem Muqaddam; 25,000,000 TO 40,000,000 SHARES.
John Mowbray O'Mara; Trude C.
Taylor; J. Sidney Webb; and David
A. Wegmann
FOR WITHHELD
[ ] ALL [ ] FROM ALL
NOMINEES NOMINEES
FOR AGAINST ABSTAIN
MARK HERE 3. PROPOSAL TO RATIFY THE APPOINTMENT OF
[ ] FOR ADDRESS [ ] PRICE WATERHOUSE LLP AS THE INDEPENDENT [ ] [ ] [ ]
--------------------------- CHANGE AND PUBLIC ACCOUNTANTS OF THE COMPANY FOR
For all nominees except as NOTE BELOW FOR FISCAL 1998.
noted above
and, in their discretion, upon such other matter or matters
which may properly come before the meeting or any adjournment
or adjournments thereof.
(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 acting 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:
------------------------------------- ---------- ----------------------------------------- ----------
</TABLE>
