<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>
PLANTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY COPY
PLANTRONICS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 20, 1999
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
Tuesday, July 20, 1999 at 12:00 noon, local time, at The Museum of Art and
History at the McPherson Center, 705 Front Street, 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 40,000,000 to 100,000,000 shares.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants of the Company for the fiscal year ending April 1,
2000.
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 4, 1999 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 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 has returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
John A. Knutson
Secretary
Santa Cruz, California
June , 1999
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
<PAGE> 3
PRELIMINARY COPY
PLANTRONICS, INC.
------------------------
PROXY STATEMENT
FOR 1999 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 Tuesday, July 20, 1999 at 12:00 noon, 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 The Museum of Art and History at the McPherson Center, 705 Front
Street, Santa Cruz, California. The Company's principal executive offices are
located at 345 Encinal Street, Santa Cruz, California 95060 and the telephone
number at that location is (831) 426-5858.
These proxy solicitation materials and the Annual Report to Stockholders
for the fiscal year ended March 27, 1999, including financial statements, were
first mailed on or about June , 1999 to all stockholders entitled to vote at
the meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on June 4, 1999 are
entitled to notice of and to vote at the meeting. At the record date, 16,716,917
shares of the Company's authorized Common Stock were issued and outstanding and
held of record by 91 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 facsimile.
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 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.
1
<PAGE> 4
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 and such brokers have no discretionary voting
authority) 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 2000 Annual Meeting of Stockholders must
be received by the Company no later than February 25, 2000 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, six 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."
2
<PAGE> 5
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 4,
1999 are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITIONS WITH THE COMPANY SINCE
--------------- ---- -------------------------- --------
<S> <C> <C> <C>
S. Kenneth Kannappan................... 39 Chief Executive Officer, President and 1999
Director
Robert F.B. Logan(1)................... 66 Director 1997
M. Saleem Muqaddam(1).................. 52 Director 1994
John Mowbray O'Mara(2)................. 71 Director 1994
Trude C. Taylor(2)..................... 78 Director 1989
David A. Wegmann(1).................... 52 Director 1988
[To be determined]..................... [ ] Director [ ]
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Kannappan serves as Chief Executive Officer and President and is a
member of the Board of Directors of Plantronics. He joined the Company in
February 1995 as Vice President -- Sales, responsible for OEM Sales and Asia
Pacific/Latin America Markets for Plantronics, Inc. He was promoted to Vice
President -- Sales, responsible for all United States, Asian and Latin American
Sales in September 1995. He was promoted to Managing Director -- Plantronics
Limited in England in March 1996. In March 1997, Mr. Kannappan returned from
England and was promoted to Senior Vice President responsible for Plantronics'
Worldwide Operations, Mobile Division, Walker Division and Plantronics Limited.
In March 1998, Mr. Kannappan was promoted to President and Chief Operating
Officer and in January 1999, he was promoted to Chief Executive Officer and
appointed to the Board of Directors. Prior to joining Plantronics, Mr. Kannappan
was Senior Vice President of Investment Banking for Kidder, Peabody & Co.
Incorporated, where he was employed from August 1985 through January 1995. Mr.
Kannappan has a Bachelor of Arts degree in Economics from Yale University and a
Masters of Business Administration from Stanford University. Mr. Kannappan is
also a Director of Mattson Technology, Inc., a supplier of advanced process
equipment for the semiconductor industry.
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, 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.
3
<PAGE> 6
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. 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 Innoserv Technologies, Inc.
[Once the newly nominated director is determined, such director's work
experience will be disclosed here]
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 6 meetings, and acted
by unanimous written consent twice, during the fiscal year ended March 27, 1999.
Except for director Muqaddam, who was unable to attend one Board meeting, each
director attended all 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 and O'Mara,
met once, and acted by unanimous written consent five 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 consists of directors Logan, Muqaddam, and
Wegmann, met once during the fiscal year. 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 Logan, Muqaddam, O'Mara, Taylor, and Wegmann each
received on January 15, 1999 an option to purchase 1,000 shares of Common Stock
at an exercise price of $81.25 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
4
<PAGE> 7
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) or (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 40,000,000 to 100,000,000 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 100,000,000 shares of Common Stock,
of which there were 16,716,917 shares outstanding on June 4, 1999. In addition,
as of June 4, 1999, options to purchase 2,532,349 shares of the Company's Common
Stock were outstanding under the Company's 1993 Stock Plan, and options to
purchase 48,500 shares of Common Stock were outstanding under the Company's 1993
Director Stock Option Plan. As of June 4, 1999, 769,160 shares of Common Stock
had been reserved to cover future grants (and subsequent exercise) of options
under the 1993 Stock Plan, 11,500 shares of Common Stock had been reserved to
cover future grants (and subsequent exercise) of options under the 1993 Director
Stock Option Plan, and 32,676 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 treasury shares of
Common Stock repurchased by the Company in Fiscal Year 1999. Issuances of these
treasury shares may be made pursuant to elections by participants in the
Company's Annual Profit Sharing/Individual Savings Plan (401k Plan) to purchase
Company Common Stock, under the Company's Basic Deferred Compensation Plan, and
under the Senior Executive Stock Purchase Plan.
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 4, 1999, approximately 21.9 million shares of Common Stock were issued
or
5
<PAGE> 8
reserved for issuance, (ii) that if the Company were to effect a two-for-one
stock split in the future, a minimum of approximately 43.8 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, 60,000,000
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 Company has no pending
or proposed acquisition of or strategic relationship with another company which
would require use of the additional shares to be authorized.
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 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 60,000,000 SHARES OF COMMON STOCK.
6
<PAGE> 9
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending April 1, 2000, 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.
PricewaterhouseCoopers LLP has audited the Company's financial statements
annually since 1988. Representatives of PricewaterhouseCoopers LLP will be
available at 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 PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
7
<PAGE> 10
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 April 30, 1999 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
FIVE PERCENT STOCKHOLDERS, DIRECTORS BENEFICIALLY APPROXIMATE
AND CERTAIN EXECUTIVE OFFICERS OWNED(1) PERCENTAGE OWNED(2)
------------------------------------ ------------ -------------------
<S> <C> <C>
Citigroup Inc.(3)........................................... 5,439,198 32.4%
153 East 53rd Street
New York, NY 10043
PRIMECAP Management Company(4).............................. 1,608,000 9.6
225 South Lake Ave., Suite 400
Pasadena, CA 91101-3005
Lord, Abbett & Co.(5)....................................... 1,324,665 7.9
767 Fifth Avenue
New York, NY 10153-0203
SMALLCAP World Fund, Inc.(6)................................ 1,000,000 6.0
333 South Hope Street
Los Angeles, CA 90071
FMR Corp.(7)................................................ 898,500 5.4
82 Devonshire Street
Boston, MA 02109
Robert S. Cecil(8).......................................... 628,696 3.6
345 Encinal Street
Santa Cruz, CA 95060
S. Kenneth Kannappan........................................ 109,680 *
Robert F.B. Logan........................................... 3,813 *
M. Saleem Muqaddam.......................................... 6,689 *
John Mowbray O'Mara......................................... 14,689 *
Trude C. Taylor............................................. 98,269 *
David A. Wegmann............................................ 298,281 1.8
[To be determined].......................................... [] []
Donald S. Houston........................................... 44,849 *
John A. Knutson............................................. 16,766 *
H. Craig May................................................ 463 *
Barbara V. Scherer.......................................... 45,508 *
All directors and executive officers as a group (16
persons).................................................. 1,288,766 7.3%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes stock subject to stock options held by directors and executive
officers that are exercisable within 60 days of April 30, 1999, as follows:
Mr. Cecil, 628,696 shares; Mr. Kannappan, 102,655 shares; Mr. Logan, 2,313
shares; Mr. Muqaddam, 6,689 shares; Mr. O'Mara, 6,689 shares; Mr. Taylor,
6,689 shares; Mr. Wegmann, 6,689 shares; Mr. Houston, 39,583 shares; Mr.
Knutson, 14,531 shares; Ms. Scherer, 43,333 shares, and all directors and
executive officers as a group (15 persons), 877,150 shares.
(2) Based on 16,774,996 shares of Common Stock outstanding on April 30, 1999.
8
<PAGE> 11
(3) Citibank, N.A. is the sole stockholder of Citicorp Venture Capital Ltd.
Citicorp is the sole stockholder of CitiBank, N.A. Citigroup Inc. is the
sole stockholder of Citicorp. Citigroup Foundation is a private charitable
foundation affiliated with Citigroup Inc. Information provided herein is
jointly based on the group filing of Schedule 13G/A on February 10, 1999 by
Citicorp Venture Capital Ltd., Citbank, N.A., Citcorp, Citigroup Foundation
and Citigroup Inc., and correspondence with Citigroup Foundation. Citigroup
Inc. disclaimed beneficial ownership of all Common Stock owned by Citigroup
Foundation, which was 193,548 shares as of June 4, 1999, pursuant to Rule
13d-4 under the Securities Exchange Act of 1934, as amended, on the Schedule
13G/A, dated February 10, 1999. If such beneficial ownership is discounted
from Citigroup Inc.'s above listed beneficially owned shares, Citigroup Inc.
would beneficially own 5,245,650 shares.
(4) PRIMECAP Management Company claims sole voting and sole dispositive power as
to 1,608,000 shares, which it owns on behalf of Vanguard/PRIMECAP Fund, Inc.
Vanguard/PRIMECAP Fund, Inc. claims shared dispositive and sole voting power
as to such shares. Information provided herein with respect to PRIMECAP
Management Company is based on PRIMECAP Management Company's Schedule 13G/ A
dated February 10, 1998 and Vanguard/PRIMECAP Fund, Inc.'s Schedule 13G/A
dated February 9, 1998. Neither PRIMECAP Management Company or
Vanguard/PRIMECAP Fund, Inc. have filed a Schedule 13G to indicate a change
in beneficial ownership of Common Stock subsequent to such Schedule 13G/As.
(5) Lord, Abbett & Co. claims sole voting power and sole dispositive power as to
the 1,324,665 shares. Information provided herein is based solely on Lord,
Abbett & Co.'s Schedule 13G dated February 16, 1999.
(6) Information provided herein is based solely on a joint Schedule 13G for
Capital Research and Management Company and SMALLCAP World Fund, Inc., dated
July 7, 1998. On such Schedule 13G, Capital Research and Management Company,
an investment management company, claimed sole dispositive power as to the
1,000,000 shares by serving as an investment adviser to SMALLCAP World Fund,
Inc., which claimed sole voting power as to the 1,000,000 shares. On
February 11, 1999, Capital Research and Management Company filed a Schedule
13G, whereby it claimed sole dispositive power as to 575,000 shares of
Common Stock. As of the date hereof, SMALLCAP World Fund, Inc. has not filed
a Schedule 13G to update its beneficial ownership of Common Stock that was
disclosed in the Schedule 13G, dated July 7, 1998. Capital Research and
Management Company disclaimed beneficial ownership of Common Stock pursuant
to Rule 13d-4 under the Securities Exchange Act of 1934, as amended, on both
Schedule 13Gs, dated July 7, 1998 and February 11, 1999.
(7) Fidelity Management and Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp., beneficially owns 664,800 shares as a result of
acting as an investment adviser to various investment companies that hold
shares and as a result of acting as sub-adviser to Fidelity American Special
Situations Trust ("FASST"). FMR Corp., through its control of Fidelity,
claims sole dispositive power with respect to the 650,000 of such shares
that Fidelity directly advises and claims sole voting and dispositive power
with respect to 14,300 shares held by FASST. Fidelity Management Trust
Company ("FMTC"), a wholly owned subsidiary of FMR Corp., beneficially owns
233,700 shares as a result of its serving as investment manager of various
institutional accounts. FMR Corp., through its control of FMTC, claims sole
voting and dispositive power with respect to all such 233,700 shares.
Information provided herein based on the joint filing of Schedule 13G on
February 12, 1999 by FMR Corp., Edward C. Johnson 3d, Abigail P. Johnson and
Fidelity. FMR Corp. filed such Schedule 13G on a voluntary basis as if an
additional 7,600 shares that are beneficially owned by Fidelity
International Limited ("FIL") are beneficially owned by FMR Corp. and FIL on
a joint basis. FMR Corp. and FIL are of the view that they are not acting as
a "group" for purposes of Section 13(d) under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and that they are not otherwise
required to attribute to each other the beneficial ownership of securities
beneficially owned by the other corporation within the meaning of Rule 13d-3
promulgated under the Exchange Act. If such 7,600 shares are added to FMR
Corp.'s above listed beneficially owned shares, FMR Corp. would beneficially
own 906,100 shares.
9
<PAGE> 12
(8) All shares beneficially owned by Mr. Cecil are owned by his wife, Louise M.
Cecil.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
the fiscal years ended March 29, 1997, March 28, 1998 and March 27, 1999 to the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (the CEO and such other officers collectively
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- AWARDS
NAME AND OTHER ANNUAL ------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) OPTIONS(#) COMPENSATION(3)
------------------ ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cecil(4)............... 1999 $526,350 $526,350 $ -- -- $256,181
Chairman of the Board of 1998 489,504 489,504 48,255(5) -- 199,602
Directors and Chief 1997 478,500 478,500 2,097(5) -- 172,059
Executive Officer
S. Kenneth Kannappan(6).......... 1999 267,304 228,451 2,986(5) 50,000 127,797
Director, President and 1998 208,333 179,576 18,387(5) 80,000 91,164
Chief Executive Officer 1997 161,253 92,487 18,580(7) 30,000 58,402
Donald S. Houston................ 1999 200,000 136,831 -- 10,000 84,070
Senior Vice President -- 1998 200,000 122,212 59,549(8) 10,000 82,154
Sales 1997 73,077 37,833 -- 100,000 9,392
John A. Knutson.................. 1999 157,012 157,012 1,063(5) -- 76,563
Vice President -- Legal, Senior 1998 145,275 145,275 4,683(5) 20,000 59,794
General Counsel and Secretary 1997 133,538 158,538 795(5) 10,000 48,559
H. Craig May..................... 1999 157,907 156,942 64,635(9) 100,000 57,924
Senior Vice President -- 1998 -- -- -- -- --
Marketing 1997 -- -- -- -- --
Barbara V. Scherer............... 1999 167,339 147,336 -- 10,000 80,835
Senior Vice President -- 1998 140,667 120,025 9,893(5) 100,000 56,993
Finance and Administration and 1997 $ -- $ -- $ -- -- $ --
Chief Financial Officer
</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) $830 (except for Mr. Houston who received $277),
$830 and $2808 (except for Mr. Kannappan who received $297, Mr. Houston who
received $486, Mr. Knutson who received $1,152, Mr. May who received $233
and Ms. Scherer who received $408) in life and disability payments by the
Company in fiscal years 1997, 1998 and 1999, respectively; (ii) the
following contributions by the Company under the quarterly profit sharing
plan in fiscal years 1997, 1998 and 1999, respectively: Mr. Cecil ($80,609,
$95,762 and $126,442), Mr. Kannappan ($27,143, $47,139 and $63,734), Mr.
Houston ($9,115, $39,113 and $35,353), Mr. Knutson ($22,486, $28,424 and
$37,669), Mr. May (none, none and $21,462) and Ms. Scherer (none, $27,356
and $40,143); and (iii) the following contributions by the Company under the
Annual Profit Sharing/Individual Savings Plan for fiscal years 1997, 1998
and 1999, respectively: Mr. Cecil ($90,620, $103,010, and $126,931), Mr.
Kannappan ($30,429, $43,195 and $63,766), Mr. Houston (none, $42,211 and
$48,231), Mr. Knutson ($25,243, $30,540, and $37,741), Mr. May (none, none
and $36,229) and Ms. Scherer (none, $28,807 and $40,283).
(4) Mr. Cecil resigned as Chief Executive Officer of the Company effective
January 4, 1999.
(5) Reflects the dollar value of the difference between the price paid 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.
(6) Mr. Kannappan replaced Mr. Cecil as Chief Executive Officer of the Company
on January 4, 1999.
10
<PAGE> 13
(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 the dollar value of the difference between the price paid by Mr.
Houston 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, which was $26,635. Amounts shown also
reflect other personal benefits, including a relocation payment of $16,932
to Mr. Houston.
(9) Amount shown reflects other personal benefits, including a relocation
payment of $56,465 to Mr. May.
OPTION GRANTS
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning stock options granted during
the fiscal year ended March 27, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------- POTENTIAL REALIZABLE VALUE OF
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE(S) 5%($) 10%($)
---- ---------- ------------ -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cecil............ -- --% $ -- -- $ -- $ --
S. Kenneth Kannappan....... 50,000 7.6 59.75 11/6/08 1,878,823 4,761,306
Donald S. Houston.......... 10,000 1.5 65.25 2/8/09 410,354 1,039,917
John A. Knutson............ -- -- -- -- -- --
H. Craig May............... 100,000 15.2 52.625(3) 5/22/08 3,309,526(4) 8,386,846(4)
and
7/31/08
Barbara V. Scherer......... 10,000 1.5% $ 65.25 2/8/09 $ 410,354 $1,039,917
</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 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.
(3) Reflects weighted average of shares for Mr. May who was granted 50,000
shares at $44.125 (that expire on May 22, 2008) and 50,000 shares at $61.125
(that expire on July 31, 2008).
(4) Exercise price calculated as a weighted average based on 50,000 options at
an exercise price of $44.125 per share and 50,000 options at an exercise
price of $61.125 per share, expiring on May 22, 2008 and July 31, 2008,
respectively.
11
<PAGE> 14
OPTION EXERCISES AND VALUES
The following table sets forth certain information regarding option
exercises and the value of options held by the Named Executive Officers.
FISCAL YEAR-END OPTION EXERCISES AND VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT MARCH 27, 1999(#) MARCH 27, 1999($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Cecil(2)....... 802,422 $50,812,585 -- -- $ -- $ --
S. Kenneth Kannappan..... -- -- 98,280 139,920 4,374,345 2,847,644
Donald S. Houston........ 25,000 1,167,069 33,333 61,667 1,433,336 2,007,332
John A. Knutson.......... -- -- 13,072 20,000 562,939 615,661
H Craig May.............. -- -- -- 100,000 -- 881,300
Barbara V. Scherer....... -- $ -- 38,333 81,667 $1,550,110 $2,331,820
</TABLE>
- ---------------
(1) Based on market value of the Company's Common Stock at March 27, 1999 of
$61.438, minus the exercise price.
(2) On September 17, 1998, Mr. Cecil transferred options to purchase 639,422
shares of the Company's Common Stock to his wife, Louise M. Cecil. Mrs.
Cecil acquired 10,726 shares on February 4, 1999 when she excercised an
option to purchase such shares. Mrs. Cecil realized $713,815 on such
exercise. As of March 27, 1999, all 628,696 shares that Mrs. Cecil has an
option to purchase are exercisable, with an in the money value of
$37,349,382.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In January 1994, the Company entered into a three-year employment agreement
with Robert S. Cecil, then 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, as amended from
time to time, provided for an initial annual base salary of $375,000, which was
subsequently increased to $435,000 as of January 1994, to $478,500 in January
1996, and to $526,350 in January 1998, and which will be reviewed at least
annually. The agreement also provides for an annual performance bonus of up to
100% of base salary if the Company 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
12
<PAGE> 15
enforceable under California law. Mr. Cecil has advised the Company that he is
voluntarily terminating his employment with the Company, effective June 30,
1999.
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.
Mr. Knutson joined the Company in March 1994 as Vice President -- Legal,
Senior General Counsel and Secretary and entered into an employment agreement
with the Company at that time. 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.
The Company entered into employment agreements with Mr. Houston, Mr.
Kannappan, Mr. May and Ms. Scherer in November 1996, March 1996, May 1998 and
April 1997, respectively. 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 27,
1999. 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
13
<PAGE> 16
managing the Company from the 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 1999, 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 0% to 7.5%.
Incentive Bonus Awards. Under the Company's Executive Bonus Plan for fiscal
1999, incentive cash payments (regular and supplemental bonuses) 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 1999 and fourth
quarter and supplemental bonus awards were paid in April and May 1999 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 Mr. Cecil 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 day the bonus
is paid. 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
Executive Officer determines that an
14
<PAGE> 17
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
1999.
The Company's operating profits improved by 33.9% in fiscal year 1999 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.
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 senior executives 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 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
15
<PAGE> 18
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 1999 of $45.75 per
share. 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 Mr. Cecil as Chief Executive Officer. The compensation of
Mr. Cecil in fiscal 1999 was approved by the Compensation Committee pursuant to
an employment agreement (the "Employment Agreement") between the Company and Mr.
Cecil (described in this Proxy Statement under the caption "Additional
Information -- Employment Agreements and Change-in-Control Arrangements"). In
making compensation decisions with respect to Mr. Cecil, the Compensation
Committee refers to Mr. Cecil's Employment Agreement, and also generally applies
the compensation philosophy described above. Mr. Cecil did not receive an
increase in his base salary in fiscal year 1999. Mr. Cecil received 100% of the
bonus amount for fiscal 1999 for which he was eligible under the Company's
regular and supplemental bonus plans. Mr. Cecil's fiscal 1999 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 1997,
1998 or 1999.
Compensation of Mr. Kannappan as Chief Executive Officer. Mr Kannappan was
promoted to Chief Executive Officer of the Company on January 4, 1999. With the
exception of determining Mr. Kannappan's bonus award under the Company's
Executive Bonus Plan, Mr. Kannappan's employment agreement with the Company is
similar to Mr. Cecil's Employment Agreement. Mr. Kannappan can earn up to 35%
and 65% of his annual base salary under the Company's regular and supplemental
bonus plans, respectively, whereas Mr. Cecil can earn up to 60% and 40% of his
annual base salary under the Company's regular and supplemental bonus plans,
respectively.
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, other than performance-based
compensation within the meaning of Section 162(m), 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. 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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company appointed directors Taylor and O'Mara
to the Compensation Committee in September 1993 and March 1994, respectively.
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> 19
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 April 1, 1994 and ending on March 31, 1999.
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 April 1, 1994 in
the Company's Common Stock and in each index (based on prices from the close of
trading on March 31, 1994), and that all dividends were reinvested. No cash
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 Saturday, March 27, 1999. Under the assumptions stated above, over the
period from April 1, 1994 to March 31, 1999 the total return on an investment in
the Company would have been 820.5%, as compared to 277% for the NYSE Stock
Market index and 249.2% for the NYSE/Amex/Nasdaq Communications Equipment Stocks
index shown below.
COMPARISON OF CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
PLANTRONICS, INC.
Provided by the Center for Research in Security Prices. Produced on May 27,
1999, including data through March 31, 1999.
<TABLE>
<CAPTION>
PLANTRONICS, INC. NYSE/AMEX/NASDAQ
----------------- NYSE STOCK MARKET (U.S. STOCKS/COMMUNICATIONS
COMPANIES) EQUIPMENT
----------------------- ---------------------
<S> <C> <C> <C>
03/31/94 100.00 100.00 100.00
03/31/95 181.10 113.30 126.40
03/29/96 247.50 149.00 172.60
03/31/97 282.00 174.00 175.40
03/31/98 536.90 255.50 214.80
03/31/99 820.50 277.00 249.20
</TABLE>
17
<PAGE> 20
CERTAIN TRANSACTIONS
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.
In connection with the commencement of her employment, the Company made an
interest-free term loan due in December 1999 to Barbara V. Scherer, a Senior
Vice President and Chief Financial Officer of the Company, of $200,000 for use
in the purchase of and improvements to a residence. The largest amount of such
loan outstanding at any time during fiscal 1999 was $100,000, and the total
amount of such loan outstanding as of June 4, 1999 was $100,000.
In connection with the commencement of his employment, the Company made an
interest free term loan to H. Craig May, a Senior Vice President of the Company,
of $200,000 for use in the purchase of a primary residence. The $200,000 loan is
interest free until July 2, 2001. The loan is secured by a second Deed of Trust
on Mr. May's primary residence. The total amount of such loan outstanding as of
June 4, 1999 was $200,000.
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 1999, 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 4, 1999
18
<PAGE> 21
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLANTRONICS, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
JULY 20, 1999
The undersigned stockholder of PLANTRONICS, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated June __, 1999, and hereby appoints S. Kenneth
Kannappan and John A. Knutson, and each 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 1999 Annual Meeting of
Stockholders of PLANTRONICS, INC. to be held on July 20, 1999 at 12:00 p.m.
local time, at The Museum of Art and History at the McPherson Center, 705 Front
Street, 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 SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE> 22
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE
<TABLE>
<S> <C> <C>
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 OF THE COMPANY FROM 40,000,000 TO 100,000,000 SHARES AND FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS AND AS SAID PROXIES DEEM ADVISABLE
ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
FOR AGAINST ABSTAIN
1. Election of Directors. 2. PROPOSAL TO INCREASE THE AUTHORIZED NUMBER
Nominee: S. Kenneth Kannappan, Robert F.B. Logan; OF SHARES OF COMMON STOCK OF THE COMPANY [ ] [ ] [ ]
M. Salsam Muqoddam; John Mowbray O'Mara; FROM 40,000,000 to 100,000,000
Trudo C. Taylor [To Be Determined]; and David A. Wegmann
FOR WITHHOLD
[ ] ALL [ ] FROM ALL
NOMINEES NOMINEES FOR AGAINST ABSTAIN
MARK HERE 3. PROPOSAL TO RATIFY THE APPOINTMENT
FOR ADDRESS [ ] OF PRICEWATERHOUSECOOPERS LLP AS [ ] [ ] [ ]
CHANGE AND THE INDEPENDENT PUBLIC ACCOUNTANTS
[ ] NOTE BELOW OF THE COMPANY FOR FISCAL 2000
------------------------
for all nominees and, in their discretion, upon such other matter or matters which
except as noted may properly come before the meeting or any adjournment or
above 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 signing in a
fiduciary capacity should so indicate. If shares are held by
joint tenant's or as community property, both should sign.)
Signature:_________________________________ _Date:__________________ Signature:____________________________ Date:________________
</TABLE>
