SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement [_]CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CIRRUS LOGIC, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CIRRUS LOGIC, INC.
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14a.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO OF CIRRUS LOGIC(R)]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 1, 1996
TO THE SHAREHOLDERS OF CIRRUS LOGIC, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Cirrus
Logic, Inc. (the "Company"), a California corporation, will be held on
Thursday, August 1, at 3:30 p.m., local time, at the offices of the Company,
3100 West Warren Avenue, Fremont, California 94538 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are duly elected.
2. To approve an amendment to the Company's 1989 Employee Stock Purchase
Plan that will increase the number of shares of Common Stock available
for grant under the plan by 600,000 shares.
3. To adopt the 1996 Stock Plan and approve the reservation and
authorization of 2,500,000 shares of Common Stock reserved for issuance
under the terms of the plan.
4. To ratify the appointment of Ernst & Young LLP as independent auditors of
the Company.
5. 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 shareholders of record at the close of business on June 3, 1996, are
entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
For the Board of Directors
Robert F. Donohue, Secretary
Fremont, California
June 14, 1996
YOUR VOTE IS IMPORTANT
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. RETURNING
YOUR PROXY WILL HELP THE COMPANY ASSURE A QUORUM AND AVOID THE ADDITIONAL
EXPENSE OF DUPLICATE PROXY SOLICITATIONS. IF YOU ATTEND THE MEETING, YOU
MAY VOTE IN PERSON EVEN IF YOU HAVE RETURNED THE PROXY.
[LOGO OF CIRRUS LOGIC(R)]
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PROXY STATEMENT
1996 ANNUAL MEETING OF SHAREHOLDERS
AUGUST 1, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Cirrus Logic, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held on Thursday, August 1, 1996, at 3:30 p.m., local time
(the "Annual Meeting"), or at any continuation or adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the principal offices of the
Company, located at 3100 West Warren Avenue, Fremont, California 94538. The
telephone number at this address is (510) 623-8300.
These proxy solicitation materials and the Company's Annual Report to
Shareholders for the fiscal year ended March 30, 1996, including financial
statements, were mailed on or about June 14, 1996 to all shareholders entitled
to vote at the Annual Meeting.
THE SHARE NUMBERS IN THIS PROXY STATEMENT HAVE BEEN ADJUSTED TO REFLECT THE
STOCK SPLIT WHICH WAS EFFECTIVE IN JULY 1995.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on June 3, 1996 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. As of the Record Date, the Company had 64,260,990 shares of Common
Stock outstanding. For information regarding holders of more than 5% of the
outstanding Common Stock, see "Share Ownership of Directors, Executive
Officers and Certain Beneficial Owners."
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before it is voted. It may be revoked by
filing, with the Secretary of the Company at the Company's principal offices,
3100 West Warren Avenue, Fremont, California 94538, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each shareholder voting for the election of directors may cumulate his or
her votes, giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares that the
shareholder is entitled to vote, or distributing the shareholder's votes on
the same principle among as many
candidates as the shareholder chooses, provided that votes may not be cast for
more than seven (7) candidates. However, no shareholder shall be entitled to
cumulate votes for any candidate unless the candidate's name has been properly
placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate votes. On all other matters, each share has one vote.
The cost of this solicitation will be borne by the Company. The Company has
retained Skinner & Co. to aid in the solicitation of proxies from
shareholders, banks and other institutional nominees. The fees and expenses of
this solicitation are not expected to exceed $6,000. 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. Original solicitation of proxies by mail may be
supplemented by telephone, telegram or personal solicitations by directors,
officers or employees of the Company. No additional compensation will be paid
for any such services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR", "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" (the "Votes Cast") at
the Annual Meeting with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions, 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.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted
for purposes of determining the number of Votes Cast with respect to the
proposal on which the broker has expressly not voted. Thus, a broker non-vote
will not affect the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1997 Annual Meeting of Shareholders must
be received by the Company no later than February 14, 1997, in order that they
may be considered for possible inclusion in the proxy statement and form of
proxy relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
A board of seven (7) directors is to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the Company's nominees named below. All nominees are currently
directors of the Company. Mr. David L. Lyon is not standing for reelection. 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, the proxies will be voted for any
nominee who shall be designated by the current Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies
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received by them in such a manner and in accordance with cumulative voting as
will assure the election of as many of the nominees listed below as possible,
and in such event the specific nominees to be voted for will be determined by
the proxy holders. The term of office of each person elected as a director
will continue until the next Annual Meeting of Shareholders or until a
successor has been duly elected and qualified.
NOMINEES FOR DIRECTOR
Set forth below is certain information regarding the nominees:
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
---- --- ------------------------- --------
Michael L. Hackworth
(1)(4).................. 55 President, Chief Executive Officer and Director 1985
Suhas S. Patil (1)(4)... 51 Chairman of the Board, Executive Vice President, 1984
Products and Technology, and Director
C. Gordon Bell (4)...... 61 Director 1990
D. James Guzy (1)(4).... 60 Director 1984
C. Woodrow Rea, Jr.
(2)(3)(4) 48 Director 1985
Walden C. Rhines (1)(3). 49 Director 1995
Robert H. Smith (2)(3).. 59 Director 1990
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(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Nominating Committee
Mr. Hackworth, a founder of the Company, has served as President, Chief
Executive Officer and a Director of the Company since January 1985.
Dr. Patil, a founder of the Company, has served as Chairman of the Board and
Director since the Company was founded in 1984. He served as Vice President,
Research and Development until March 1990, when he became Executive Vice
President, Products and Technology.
Dr. Bell has been a Senior Researcher with Microsoft Corporation since
August 1995. He was a computer consultant from November 1991 until August 1995
and Chief Scientist for Stardent Computer, a manufacturer of high-performance
graphics super-computers, from November 1987 until November 1991.
Mr. Guzy has been President of Arbor Company, a Nevada limited partnership
engaged in the electronics and computer industry, since 1969. He is also a
director of Intel Corporation, Micro Component Technology, Inc., Novellus
Systems, Inc., Davis Selected Advisors Group of Mutual Funds and Alliance
Capital Management Technology Fund.
Mr. Rea is a private investor. He was President and Chief Executive Officer
and a director of Spectrian, a communications electronics company, from
January 1992 until April 1996. From April 1984 to January 1992, he was a
general partner of the New Enterprise Associates group of venture capital
partnerships. He is also a director of Molecular Dynamics, Inc.
Dr. Rhines has been President and Chief Executive Officer and a director of
Mentor Graphics Corporation, a maker of electronic design automation products,
since October 1993. Previously, he was Executive Vice President, Semiconductor
Group at Texas Instruments, Inc. from May 1987 to October 1993. He is also a
director of TriQuint Semiconductor.
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Mr. Smith is currently retired. From June 1994 to September 1994, he was
Chairman of the Board of Micro Component Technology, Inc., an equipment
manufacturer. He was President of Maxwell Communication Corporation North
America, a printing, publishing, telecommunications and information management
company, from August 1988 to July 1990.
There are no family relationships between any directors or executive
officers of the Company.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended March 30, 1996 (the "Last Fiscal Year"), the
Board of Directors held ten (10) meetings. Each of the incumbent directors
attended at least 75% of the aggregate of all meetings of the Board of
Directors and of the committees, if any, upon which such director served.
The Board of Directors has four (4) standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee, and the Nominating
Committee.
The Executive Committee, which consists of directors Guzy, Hackworth, Patil
and Rhines, was established to work on special projects as may be designated
from time to time by the Board of Directors. During the Last Fiscal Year, the
Executive Committee met two (2) times.
The Audit Committee, which consists of directors Rea and Smith, was
established to review, in consultation with the independent auditors, the
Company's financial statements, accounting and other policies, accounting
systems and system of internal controls. The Audit Committee met four (4)
times during the Last Fiscal Year.
The Compensation Committee, which consists of directors Rea, Rhines and
Smith, was established to grant stock options under the Company's Option Plans
and to review the Company's programs relating to the recruitment, retention
and motivation of employees, the Variable Compensation Plans and other similar
programs for recommendation to the Board of Directors. The Compensation
Committee met eighteen (18) times during the Last Fiscal Year, twelve (12) of
which were regularly scheduled monthly telephonic meetings to approve stock
option grants.
The Nominating Committee, which consists of directors Bell, Guzy, Hackworth,
Patil and Rea, was established to seek qualified candidates for nomination to
the Board. There were no meetings of the Nominating Committee during the last
fiscal year. The Nominating Committee intends to conduct its evaluation of
potential candidates independently and confidentially; therefore, it does not
intend to accept shareholder recommendations of candidates.
COMPENSATION OF DIRECTORS
Non-employee directors are compensated as follows: a retainer of $4,000
shall be paid each quarter; a fee of $2,000 per day shall be paid for each
regular or special meeting of the Board of Directors or committee meetings
attended in person; a fee of $2,000 per day shall be paid for consulting
services; and travel expenses will be reimbursed for any director who travels
more than 50 miles to attend a meeting. During the Last Fiscal Year,
consulting fees in the amounts of $250 and $1,000 were paid to directors Guzy
and Bell, respectively, for Board of Directors related services performed at
the request of the Board or the President.
In addition, in January 1990 the Company adopted a Directors' Stock Option
Plan (the "Directors' Plan"), which was approved by the shareholders in July
1990. Under the terms of the Directors' Plan, each non-employee director is
automatically granted, on the date he or she first becomes a director, an
initial option to purchase 20,000 shares and, on the date of his or her annual
reelection to the Board, an additional option to purchase 5,000 shares. The
exercise price of the automatic options is the fair market value of the Common
Stock as determined by the closing price reported by the Nasdaq National Market
on the date of grant. Options granted under the Directors' Plan have a five-year
term and vest over four years: one-quarter (1/4) of the shares vest one year
from the date of grant and one forty-eighth (1/48th) of the total shares vest
each month thereafter.
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On August 1, 1995, automatic options were granted to C. Gordon Bell, D.
James Guzy, C. Woodrow Rea, Walden C. Rhines and Robert H. Smith to purchase
5,000 shares of Common Stock at an exercise price of $44.50 per share, the
fair market value on the date of grant.
VOTE REQUIRED
The seven (7) nominees receiving the highest number of affirmative votes of
the shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but have no
other legal effect in the election of directors under California law.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE 1989 EMPLOYEE
STOCK PURCHASE PLAN
The Company's 1989 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in March 1989 and approved by the
shareholders in May 1989. A total of 200,000 shares of Common Stock were
initially reserved for issuance thereunder. By subsequent amendments to the
Purchase Plan, the shares reserved have been increased to 2,800,000 shares.
PROPOSED AMENDMENT TO THE PURCHASE PLAN
On May 21, 1996, the Board of Directors approved an amendment to the
Purchase Plan to further increase the aggregate number of shares authorized
for issuance thereunder by 600,000 shares, bringing the total number of shares
reserved under the Purchase Plan to 3,400,000 shares. Proposal 2 seeks
shareholder approval of this amendment.
The Board considers the increase in shares necessary to meet the Company's
current needs. The Board further believes that the Purchase Plan is an
integral component of the Company's benefits program that is intended to
provide employees with an incentive to exert maximum effort for the success of
the Company and to participate in that success through the acquisition of the
Company's Common Stock. As of March 30, 1996, approximately 2,000 or 63% of
the Company's eligible employees were participating in the Purchase Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential provisions of the Purchase Plan are outlined below.
ADMINISTRATION
The Purchase Plan is administered by the Compensation Committee of the Board
of Directors.
ELIGIBILITY
Only employees may participate in the Purchase Plan. For this purpose, an
"employee" is any person who is regularly employed at least twenty (20) hours
per week and five (5) months per calendar year by the Company
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or any of its majority-owned subsidiaries. No employee shall be permitted to
subscribe for shares under the Purchase Plan if, immediately after the grant
of the option, the employee would own five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or its
subsidiaries (including stock issuable upon exercise of options held by him or
her), nor shall any employee be granted an option that would permit him or her
to buy more than $25,000 worth of stock (determined at the fair market value
of the shares at the time the option is granted) under the Purchase Plan in
any calendar year. As of December 31, 1995 (the last enrollment date), there
were approximately 3,230 employees eligible to participate in the Purchase
Plan, of whom approximately 2,300 were participants.
OFFERING PERIOD
There is generally one offering under the Purchase Plan during each six (6)
month period. The first offering period commenced on June 8, 1989, and
terminated on December 31, 1989. Subsequent offering periods were January 1
through June 30 and July 1 through December 31. Since the Compensation
Committee has the power to change the duration of future offering periods, on
May 24, 1994, the offering periods were amended to coincide with the
accounting and payroll schedules and include thirteen pay periods per
offering. Accordingly, the current offering will end on June 29, 1996. The
offering periods shall continue until the Purchase Plan is terminated. The
first day of an offering period is referred to as the "Offering Date." The
last day of an offering period is referred to as the "Exercise Date."
PURCHASE PRICE
The purchase price per share at which shares will be sold in an offering
under the Purchase Plan is the lower of (i) eighty-five percent (85%) of the
fair market value of a share of Common Stock on the Offering Date or (ii)
eighty-five percent (85%) of the fair market value of a share of Common Stock
on the Exercise Date. The fair market value of the Common Stock on a given
date shall be the closing price as reported in the Wall Street Journal.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. The Purchase Plan provides that the aggregate of such
payroll deductions during the offering period shall not exceed fifteen percent
(15%) of total compensation during said offering period. However, beginning
with the offering of July 1, 1990, each participant was limited to ten percent
(10%) of base compensation and the right to purchase a maximum of 500 shares
in each offering. Such restrictions will apply until the Compensation
Committee takes further action. During the offering period, a participant may
discontinue his or her participation in the Purchase Plan, and may decrease
but not increase the rate of payroll deductions.
All payroll deductions made for a participant are credited to the
participant's account under the Purchase Plan and are included with the
general funds of the Company. Funds received upon sales of stock under the
Purchase Plan are used for general corporate purposes.
WITHDRAWAL
A participant may terminate his or her interest in a given offering by
signing and delivering to the Company a notice of withdrawal from the Purchase
Plan at least fifteen (15) days prior to the Exercise Date of the offering
period.
TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the Purchase Plan
immediately. In such event the payroll deductions credited to the
participant's account will be returned without interest to such participant or
his or her heirs.
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CAPITAL CHANGES
In the event of any changes in the capitalization of the Company effected
without receipt of consideration by the Company, such as stock splits or stock
dividends, resulting in an increase or decrease in the number of outstanding
shares of Common Stock, proportionate adjustments will be made by the Company
in the shares subject to purchase and in the price per share.
EFFECT OF LIQUIDATION, DISSOLUTION, SALE OF ASSETS OR MERGER
In the event of liquidation or dissolution of the Company, an employee's
participation in the Purchase Plan will be terminated immediately before
consummation of such event unless otherwise provided by the Board. In the
event of a sale of all or substantially all of the assets of the Company or a
merger of the Company with or into another corporation, the employee's rights
may be satisfied by assumption of the Company's obligations by such acquiring
or successor corporation. If such corporation refuses to assume those
obligations, the Board shall allow the immediate exercise of the employee's
rights for fifteen (15) days, after which the employee's rights under the
Purchase Plan shall terminate.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may at any time amend or terminate the Purchase Plan, except that
no such termination shall affect options previously granted and no amendment
shall make any change in an option granted prior thereto that adversely
affects the rights of any participant. Under the Purchase Plan, an amendment
to increase the number of shares reserved for issuance requires the approval
of the shareholders of the Company. The Plan will terminate in March 2009,
unless terminated earlier by the Board.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and
423 of the Internal Revenue Code of 1986, as amended (the "Code"). Under these
provisions, no income will be taxable to a participant until the shares
purchased under the Purchase Plan are sold or otherwise disposed of. Upon sale
or other disposition of the shares, the participant will generally be subject
to tax and the amount of the tax will depend upon the holding period. If the
shares are sold or otherwise disposed of more than two (2) years from the
Offering Date, the participant will recognize ordinary income measured as the
lesser of (a) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price, or (b) an amount equal to
15% of the fair market value of the shares as of the Offering Date. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of this holding period,
the participant will recognize ordinary income generally measured as the
excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company generally is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant, except to
the extent of ordinary income recognized by participants upon a sale or
disposition of shares prior to the expiration of the holding period(s)
described above and subject to the limitation on deductibility set forth in
Section 162(m) of the Code.
The foregoing is only a summary of the effect of federal income taxation
laws upon the participant and the Company with respect to the shares purchased
under the Purchase Plan. Reference should be made to the applicable provisions
of the Code. In addition, the summary does not discuss the tax consequences of
a participant's death or the income tax laws of any state or foreign country
in which the participant may reside.
PARTICIPATION IN THE PURCHASE PLAN
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her respective
determination as to the level of payroll deductions. Accordingly, future
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purchases under the Purchase Plan are not determinable. The following table
sets forth information with respect to the shares purchased during the Last
Fiscal Year by (i) the executive officers named in the Summary Compensation
Table below (the "Named Officers"), (ii) all current executive officers as a
group, and (iii) all other employees as a group who participated in the
Purchase Plan.
NUMBER OF DOLLAR
SHARES VALUE
NAME (OR GROUP) AND POSITION PURCHASED (#) ($)(1)
---------------------------- ------------ ----------
Michael L. Hackworth 1,329 $ 19,858
Chief Executive Officer and President
Sam S. Srinivasan 1,329 $ 19,858
Senior Vice President, Finance and Administration,
Chief Financial Officer, Treasurer and Secretary
Suhas S. Patil 1,329 $ 19,858
Chairman of the Board and Executive Vice
President, Products and Technology
Douglas J. Bartek 1,329 $ 19,858
President, Visual and Systems
Interface Products
William D. Caparelli 764 $ 10,882
Senior Vice President, Worldwide Sales
George N. Alexy 483 $ 1,431
Senior Vice President, Marketing
All current executive officers as a group
(14 persons) 13,587 $ 190,197
All other employees as a group (1,789 persons) 580,233 $7,678,644
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(1) Market value on the date of purchase, minus the purchase price under the
Purchase Plan.
PROPOSAL 3
APPROVAL OF THE 1996 STOCK PLAN
The 1987 Stock Option Plan currently in effect terminates on May 1, 1997.
Consequently, on May 21, 1996, the Board of Directors adopted, subject to
shareholder approval at the 1996 Annual Meeting, the 1996 Stock Plan (the
"1996 Stock Plan") with 2,500,000 shares of Common Stock initially reserved
for issuance under the 1996 Stock Plan.
Stock options play a key role in the Company's ability to recruit, reward
and retain executives and key employees. Technology companies have
historically used stock options as an important part of recruitment and
retention packages. The Company competes directly with these technology
companies for experienced executives and engineers and must be able to offer
comparable packages to attract the caliber of individual that the Company
believes is necessary to provide the growth that shareholders desire. The 1996
Stock Plan provides for the grant of options and stock purchase rights to
employees and consultants to provide additional incentive to encourage their
continued service to the Company.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the 1996 Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
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The essential provisions of the 1996 Stock Plan are outlined below.
SUMMARY OF THE 1996 STOCK PLAN
GENERAL. The purpose of the 1996 Stock Plan is to attract and retain the
best available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consultants of
the Company and to promote the success of the Company's business. Options and
stock purchase rights may be granted under the 1996 Stock Plan. Options
granted under the 1996 Stock Plan may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonstatutory stock options.
ADMINISTRATION. The 1996 Stock Plan may generally be administered by the
Board or the Committee appointed by the Board. However, with respect to grants
of options to employees who are also officers or directors of the Company
("Insiders"), the 1996 Stock Plan will be administered by: (i) the Board if
the Board may administer the 1996 Stock Plan in a manner complying with Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any successor rule thereto ("Rule 16b-3") with respect to a
plan under which discretionary grants and awards of equity securities are to
be made to Insiders; or (ii) a committee designated by the Board to administer
the 1996 Stock Plan, which committee shall be constituted to comply with the
rules under Rule 16b-3 governing a plan under which discretionary grants and
awards of equity securities are to be made to Insiders. The administrators of
the 1996 Stock Plan are referred to herein as the "Administrator".
ELIGIBILITY; LIMITATIONS. Nonstatutory stock options and stock purchase
rights may be granted under the 1996 Stock Plan to employees and consultants
of the Company and any parent or subsidiary of the Company. Incentive stock
options may be granted only to employees. The Administrator, in its
discretion, selects the employees and consultants to whom options and stock
purchase rights may be granted, the time or times at which such options and
stock purchase rights shall be granted, and the number of shares subject to
each such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options granted to such persons, the 1996 Stock Plan
provides that no employee may be granted, in any fiscal year of the Company,
options to purchase more than 400,000 shares of Common Stock. Notwithstanding
this limit, however, in connection with an employee's initial employment, he
or she may be granted options to purchase up to an additional 800,000 shares
of Common Stock.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the
following additional terms and conditions;
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value of
the Common Stock on the date such option is granted. The fair market value of
the Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported) on
the date the option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator determines
when options become exercisable, and may in its discretion, accelerate the
vesting of any outstanding option. Stock options granted under the 1996 Stock
Plan generally vest and become exerciseable over four years. The means of
payment for shares issued upon exercise of an option is specified in each
option agreement. The 1996 Stock Plan permits payment to be made by cash,
check, promissory note, other shares of Common Stock of the Company (with some
restrictions), cashless exercises, a reduction in the amount of any Company
liability to the optionee, any other form of consideration permitted by
applicable law, or any combination thereof.
(c) TERM OF OPTION. The Administrator determines the terms of each option,
provided that the term of an incentive stock option may be no more than ten
(10) years from the date of grant. No option may be exercised after the
expiration of its term.
9
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or consulting
relationship terminates for any reason (other than death or disability), then
all options held by the optionee under the 1996 Stock Plan expire on the
earlier of (i) the date set forth in his or her notice of grant or (ii) the
expiration date of such option. To the extent the option is exercisable at the
time of such termination, the optionee may exercise all or part of his or her
option at any time before termination.
(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the 1996 Stock Plan expire on the earlier of (i)
12 months from the date of such termination or (ii) the expiration date of
such option. The optionee (or the optionee's estate or the person who acquires
the right to exercise the option by bequest or inheritance), may exercise all
or part of the option at any time before such expiration to the extent that
the option was exercisable at the time of such termination.
(f) NONTRANSFERABILITY OF OPTIONS: Options granted under the 1996 Stock Plan
are not transferable other than by will or the laws of descent and
distribution, and may be exercisable during the optionee's lifetime only by
the optionee.
(g) OTHER PROVISIONS: The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the 1996 Stock Plan as may be
determined by the Administrator.
STOCK PURCHASE RIGHTS. A stock purchase right gives the purchaser a period
of no longer than 90 days from the date of grant to purchase Common Stock. A
stock purchase right is accepted by the execution of a restricted stock
purchase agreement between the Company and the purchaser, accompanied by the
payment of the purchase price of the shares. Unless the Administrator
determines otherwise, the restricted stock purchase agreement shall give the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment or consulting relationship with the
Company for any reason (including death and disability). The purchase price
for any shares repurchased by the Company shall be the original price paid by
the purchaser. The repurchase option lapses at a rate determined by the
Administrator. A stock purchase right is nontransferable other than by will or
the laws of descent and distribution, and may be exercisable during the
optionee's lifetime only by the optionee. The aggregate number of shares
subject to grants or stock purchase rights may not exceed 10% of the shares
subject to the 1996 Stock Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of
stock subject to the 1996 Stock Plan, the number and class of shares of stock
subject to any option or stock purchase right outstanding under the 1996 Stock
Plan, and the exercise price of any such outstanding option or stock purchase
right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the successor corporation refuses to assume the
options and stock purchase rights or to substitute substantially equivalent
options and stock purchase rights, the optionee shall have the right to
exercise the option or stock purchase right as to all the optioned stock,
including shares not otherwise exercisable. In such event, the Administrator
shall notify the optionee that the option or stock purchase right is fully
exercisable for fifteen (15) days from the date of such notice and that the
option or stock purchase right terminates upon expiration of such period.
10
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the 1996 Stock Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any
amendment to the 1996 Stock Plan to the extent necessary and desirable to
comply with Rule 16b-3, Section 162(m) and Section 422 of the Code, or any
similar rule or statute. No such action by the Board or shareholders may alter
or impair any option or stock purchase right previously granted under the 1996
Stock Plan without the written consent of the optionee. Unless terminated
earlier, the 1996 Stock Plan shall terminate ten years from the date of its
approval by the shareholders or the Board of the Company, whichever is
earlier.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain
or loss is treated as long-term capital gain or loss. If these holding periods
are not satisfied, the optionee recognizes ordinary income at the time of
disposition generally measured as the difference between the exercise price
and the lower of (i) the fair market value of the shares at the date of the
option exercise or (ii) the amount realized on the sale of the shares. Any
gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% shareholder of the
Company. The Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price.
Any taxable income recognized in connection with an option exercise by an
employee of the Company is subject to tax withholding by the Company. The
Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the optionee,
any difference between the sale price and the optionee's exercise price, to
the extent not recognized as taxable income as provided above, is treated as
long-term or short-term capital gain or loss, depending on the holding period.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time
of purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject
to a substantial risk of forfeiture. The stock will generally cease to be
subject to a substantial risk of forfeiture when it is no longer subject to
the Company's right to repurchase the stock upon the purchaser's termination
of employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding
period by timely filing an election pursuant to Section 83(b) of the Code. In
such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock
on the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% shareholder of the Company.
Subject to the limitation on deductibility set forth in Section 162(m) of
the Code, the Company is entitled to a tax deduction in the same amount as the
ordinary income recognized by a purchaser in connection with a purchase of
stock under a stock purchase right.
11
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS, AND THE COMPANY WITH RESPECT
TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE 1996
STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE OR CONSULTANT MAY RESIDE.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the current fiscal year
ending March 29, 1997. Ernst & Young LLP has audited the Company's financial
statements annually since 1984. In the event that a majority of the Votes Cast
are against the ratification, the Board of Directors will reconsider its
selection.
A representative of Ernst & Young LLP will be present at the meeting to make
a statement if such representative desires to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF PROPOSAL 4.
12
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of March
30, 1996 by (i) each shareholder known to the Company to be a beneficial owner
of more than 5% of the Company's Common Stock; (ii) each director; (iii) each
of the Named Executive Officers and (iv) all current executive officers and
directors of the Company as a group. Unless otherwise indicated in the
footnotes, the beneficial owner has sole voting and investment power with
respect to the securities beneficially owned, subject only to community
property laws, if applicable.
NUMBER OF
BENEFICIAL OWNER SHARES (1) PERCENT
---------------- ---------- -------
Merrill Lynch Asset Management, L. P. (2)(3) ............. 6,317,000 9.88%
P.O. Box 9011
Princeton, NJ 08543
Suhas S. Patil (4)........................................ 1,301,657 2.04
Michael L. Hackworth (5).................................. 1,213,784 1.90
George N. Alexy (6)....................................... 520,259 *
David L. Lyon (7)......................................... 338,568 *
Douglas J. Bartek (8)..................................... 247,953 *
William D. Caparelli (9).................................. 205,566 *
D. James Guzy (10)........................................ 182,782 *
Sam S. Srinivasan (11).................................... 93,398 *
C. Gordon Bell (12)....................................... 45,000 *
C. Woodrow Rea, Jr. (13).................................. 26,000 *
Walden C. Rhines (14)..................................... 25,000 *
Robert H. Smith (15)...................................... 12,500 *
All current executive officers and directors as a group
(19 Persons) (16)........................................ 5,583,437 8.73%
- --------
* Less than 1%
(1) All options are immediately exercisable, but shares issued upon exercise
of unvested options are subject to vesting restrictions. Accordingly, all
outstanding options are exercisable within sixty (60) days of the Record
Date. See "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year
End Option Values" table for vested and unvested shares.
(2) As reported in the most recent filings with the Securities and Exchange
Commission.
(3) Merrill Lynch & Co., Inc. shares voting and dispositive power with respect
to 6,317,000 shares with Merrill Lynch Group, Inc., Princeton Services,
Inc., Merrill Lynch Asset Management, L.P. and Merrill Lynch Growth Fund
for Investment and Retirement.
(4) Includes (i) 480,000 shares issuable upon exercise of options held by Dr.
Patil exercisable within sixty (60) days of March 30, 1996 and (ii) 73,400
shares held by family members and trusts for the benefit of family
members, with respect to which Dr. Patil disclaims beneficial ownership.
(5) Includes 940,000 shares issuable upon exercise of options held by Mr.
Hackworth exercisable within sixty (60) days of March 30, 1996.
(6) Includes 384,750 shares issuable upon exercise of options held by Mr.
Alexy exercisable within sixty (60) days of March 30, 1996.
(7) Includes 199,372 shares issuable upon exercise of options held by Dr. Lyon
exercisable within sixty (60) days of March 30, 1996.
(8) Includes 73,266 shares issuable upon exercise of options held by Mr.
Bartek exercisable within sixty (60) days of March 30, 1996.
(9) Includes 156,226 shares issuable upon exercise of options held by Mr.
Caparelli exercisable within sixty (60) days of March 30, 1996.
13
(10) Includes 25,000 shares issuable upon exercise of options held by Mr. Guzy
exercisable within sixty (60) days of March 30, 1996. Also includes
132,782 shares held by Arbor Company, of which Mr. Guzy is President and
may therefore be deemed to be the beneficial owner.
(11) Includes 66,667 shares issuable upon exercise of options held by Mr.
Srinivasan exercisable within sixty (60) days of March 30, 1996.
(12) Includes 20,000 shares issuable upon exercise of options held by Dr. Bell
exercisable within sixty (60) days of March 30, 1996.
(13) Includes 25,000 shares issuable upon exercise of options held by Mr. Rea
exercisable within sixty (60) days of March 30, 1996.
(14) Includes 25,000 shares issuable upon exercise of options held by Mr.
Rhines exercisable within sixty (60) days of March 30, 1996.
(15) Includes 12,500 shares issuable upon exercise of options held by Mr.
Smith exercisable within sixty (60) days of March 30, 1996.
(16) Includes 3,342,766 shares issuable upon exercise of options held by
executive officers and directors exercisable within sixty (60) days of
March 30, 1996.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed only of non-employee directors. The Committee is responsible for
reviewing and recommending the Company's compensation practices, executive pay
levels, and variable compensation programs to the Board of Directors for
approval. The Committee also grants stock options within guidelines approved
by the Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is to pay for performance. As such,
the Committee believes that total cash compensation should vary with the
performance of the Company and long-term incentives should be used to ensure
the alignment of executive and shareholder interests. Consistent with this
philosophy, the Company provides significant annual incentive opportunities
and utilizes stock options as a long-term incentive vehicle.
Cash compensation for the executives in fiscal 1996 consisted of the
following components:
. Base salary
. Variable compensation based on achievement of Company or business-unit
income before income tax, and/or operating income, income before income
tax and/or operating income as a percent of revenue, revenue growth,
gross margin as a percent of revenue, and/or measures related to
profitability above the cost of capital, and the achievement of strategic
objectives appropriate to each executive (e.g., development of new
products, inventory turns, and manufacturing yield improvements).
The Committee sets compensation levels for executives based on a review of
competitive information. Competitive compensation information is gathered from
published surveys of high technology company compensation levels (the "Survey
Group") and from proxy statements of particular companies that are considered
generally comparable to the Company (the "Proxy Group"). The Proxy Group
includes companies used in the peer performance graph as well as other
semiconductor or high technology companies that are high growth, profitable,
and similar in revenue size to the Company. Recommendations by Company
management are examined in light of this information, with the intention of
establishing and maintaining competitive total cash compensation levels. In
general, the Company has attempted to establish a strong relationship between
total cash
14
compensation and Company and individual performance by maintaining base
salaries at approximately the 50th percentile of the Survey Group and Proxy
Group data, and providing additional incentive opportunity so that total cash
compensation (salary plus bonus) approaches 50th percentile levels when the
Company's performance is near the middle of the semiconductor companies in the
Proxy Group, and has the potential to pay at or near the top of the
semiconductor companies in the Proxy Group for commensurate levels of
performance. The Company's executive officers have not received salary
increases for fiscal 1997.
Long-term incentives are provided through stock option grants to key
employees, including the Named Executive Officers. The number of shares
subject to each stock option grant is based on the employee's current and
anticipated future performance and ability to affect achievement of strategic
goals and objectives. The Company grants options in order to directly link a
significant portion of each executive's total compensation to the long-term
interests of shareholders. Since options are granted at the fair market value
of the Company's common stock and vest over a multi-year period, executives
will only receive value from the options to the extent that they remain
employed by the Company and the Company's common stock price increases during
the term of the options, thus generating returns for both shareholders and the
executives.
The Company maintains a qualified employee stock purchase plan subject to
provisions of the Internal Revenue Code, which is generally available to all
employees, and pursuant to which employees can purchase Company stock through
payroll deductions of up to 10% of their base salaries. This plan allows
participants to buy Company common stock at a discount from the market price.
In response to the enactment of Section 162(m) of the Internal Revenue Code
and its related proposed regulations that limit deductibility by a corporation
of certain executive officer compensation in excess of $1 million per Named
Executive Officer per year, the Committee amended the Company's 1987 Stock
Option Plan in order to qualify compensation relating to options granted
thereunder as "performance-based", which is not subject to the $1 million
limit. The amended 1987 Stock Option Plan was approved by shareholders in July
1994. The Committee has evaluated the Senior Executive Variable Compensation
Plan the ("SEVCP") in light of the $1 million limit, and in August 1995
qualified that plan as "performance-based" under Section 162(m) of the Code.
It is the Committee's intention that, so long as it is consistent with it's
overall compensation objectives, virtually all executive compensation will be
deductible for federal income tax purposes.
The Company has adopted a 1996 Stock Plan, which is being presented to the
Shareholders for approval at this meeting. See Proposal 3 for a discussion of
the new plan.
BASE SALARY
In accordance with the Company's compensation philosophy, the base salary
rates of the executive officers are generally below the 50th percentile levels
of the Survey Group and Proxy Group. For fiscal 1996, the executive officers
received salary increases of 6% which was the same percentage rate used to
establish the fund for all employee salary increases. Executive officers have
not received salary increases for fiscal 1997.
INCENTIVE COMPENSATION
The SEVCP is designed to motivate and reward the executive officers by
making a significant portion of their cash compensation directly dependent
upon achieving predetermined corporate and/or business unit financial goals.
The performance measures are based on the Company's annual business plan, and
are established for quarterly, semi-annual or annual performance periods. In
addition, an executive's variable compensation award may be reduced or
increased based on achievement of key strategic goals and objectives
previously agreed-upon for each executive. Cash payments are made after the
end of the performance period for services rendered and performance levels
achieved during the performance period.
Because of the Company's financial performance during fiscal year 1996,
there was no Variable Compensation payment to executive officers pursuant to
terms of the SEVCP, advances made in Quarter 1 and Quarter 2 are to be repaid
from future SEVCP payments.
15
STOCK OPTIONS
Stock options are granted to align the interests of key employees with those
of the shareholders. Stock options are granted at a price equal to the fair
market value of the Company's Common Stock on the date of grant. Eligible
employees are granted stock options on their date of hire which generally vest
over a four-year period from the date of grant. Certain key employees are
granted stock options on an annual basis that vest four years from the date of
grant. They are granted to key employees, including the Named Executive
Officers, based on current performance, anticipated future contribution based
on that performance, and ability to affect corporate and/or business unit
results. In fiscal 1996, stock options for the executive officers were granted
upon recommendation of management and approval of the Committee within
guidelines approved by the Board of Directors, and were granted at an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant.
CEO COMPENSATION
As described above, the Company's executive pay program is highly leveraged
toward variable compensation plans that reward achievement of pre-determined
corporate goals and objectives. This principle of pay-for-performance is
exemplified by the pay package of the Company's Chief Executive Officer.
The Committee reviews Mr. Hackworth's base salary annually, considering
Company performance, individual performance, and external pay practices. For
fiscal year 1996, Mr. Hackworth's base salary was set at $397,488, an increase
of 6%, which is the same percentage rate used to establish the fund for all
employee salary increases.
Other than the advances paid in Quarter 1 and Quarter 2 which are to be
repaid from future SEVCP payments, there were no Variable Compensation
payments to Mr. Hackworth for Fiscal Year 1996.
During fiscal year 1996, there were no stock options granted to Mr.
Hackworth.
Compensation Committee
C. Woodrow Rea, Jr., Chairman
Walden C. Rhines
Robert H. Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of directors
Rea, Rhines and Smith. No executive officer of the Company served on the
compensation committee of another entity or on any other committee of the
board of directors of another entity performing similar functions during the
Last Fiscal Year.
16
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned during the fiscal
years ended March 30, 1996, April 1, 1995 and April 2, 1994, by the Company's
Chief Executive Officer, the four highest-paid executive officers and the
former Senior Vice President, Finance and Administration.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------- ------------
SECURITIES ALL OTHER
SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) OPTIONS (#) ($)(2)(3)
--------------------------- ---- ------- --------- ------------ ------------
Michael L. Hackworth 1996 397,488 -- -- 313,078
President and Chief 1995 375,000 1,073,980 300,000 1,000
Executive Officer 1994 313,721 570,604 400,000 1,000
Sam S. Srinivasan (4) 1996 235,956 -- 60,000 274,458(5)
Senior Vice President, 1995 222,600 461,496 108,000 1,000
Finance and Administration, 1994 201,048 278,959 97,250 1,000
Chief Financial Officer,
Treasurer and Secretary
Suhas S. Patil 1996 270,504 -- 70,000 213,383
Chairman, Executive Vice 1995 255,200 713,186 70,000 1,000
President, Products and
Technology 1994 213,885 390,532 200,000 1,000
Douglas J. Bartek (4) 1996 269,325 -- 50,000 160,258
President, Visual and Systems 1995 249,400 494,771 50,000 1,000
Interface 1994 210,132 388,612 148,000 1,000
William D. Caparelli 1996 223,418 -- 36,000 167,556(6)
Senior Vice President, 1995 205,062 415,511 36,000 1,000
Worldwide Sales 1994 182,044 224,790 63,750 1,000
George N. Alexy 1996 231,504 -- 50,000 133,093
Senior Vice President, 1995 218,400 439,878 50,000 1,000
Marketing 1994 199,298 250,772 89,750 1,000
- --------
(1) Amounts shown are before salary reductions resulting from employee
contributions to the Cirrus Logic, Inc. 401(k) Profit Sharing Plan.
(2) Under the terms of the Senior Executive Variable Compensation Plan
("SEVCP"), in the first and second quarters of fiscal 1996, partial
payment of the performance bonus based on each quarter's performance was
made to Mr. Hackworth, Mr. Srinivasan, Dr. Patil, Mr. Bartek, Mr.
Caparelli and Mr. Alexy in the amounts of $312,078, $139,759, $212,383,
$159,258, $106,556 and $132,093, respectively. Such amounts have been
reported in the "All Other Compensation" column. At year end, no bonuses
were payable for fiscal 1996 due to the loss in the third and fourth
quarters. Consequently, the amounts advanced to participants in the SEVCP
in the first and second quarters of fiscal 1996 are being treated as
short-term loans and such amounts shall be withheld from any future
payment under the SEVCP to the Named Executive Officers and all other
participants in the SEVCP. See "Employment Agreements and Certain
Transactions." Employees who are no longer with the Company, including Mr.
Srinivasan and Mr. Bartek, will not be required to repay amounts paid to
them under the SEVCP.
(3) Additional amounts included in the "All Other Compensation" column for the
Last Fiscal Year are matching contributions by the Company of $1,000 with
respect to each Named Executive Officer under the 401(k) plan.
(4) See "Employment Agreements and Certain Transactions" for further
information regarding agreements with Mr. Srinivasan and Mr. Bartek.
17
(5) Also includes $100,000 forgiven on an outstanding loan and $33,699 for tax
gross-up on the related interest.
(6) Includes a special commission payment of $60,000 related to fiscal 1995
sales.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to options granted in
the Last Fiscal Year to the Named Executive Officers.
INDIVIDUAL GRANTS
---------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED (1) YEAR (2) ($/SH) DATE 5% ($) (3) 10% ($)(3)
---- ---------- ---------- -------- ---------- ---------- ----------
Michael L. Hackworth.... -- -- -- -- -- --
Sam S. Srinivasan....... 60,000 1.96% $35.125 07/18/05 $1,325,395 $3,358,812
Suhas S. Patil.......... 70,000 2.29% $35.125 07/18/05 $1,546,295 $3,918,614
Douglas J. Bartek....... 50,000 1.63% $35.125 07/18/05 $1,104,496 $2,799,010
William D. Caparelli.... 36,000 1.18% $35.125 07/18/05 $ 795,237 $2,015,287
George N. Alexy......... 50,000 1.63% $35.125 07/18/05 $1,104,496 $2,799,010
- --------
(1) All options were granted under the 1987 Stock Option Plan and have
exercise prices equal to the fair market value of the Company's Common
Stock on the date of grant. All options vest on July 18, 1999. The
Compensation Committee has the discretion and authority to amend and
reprice the outstanding options. To date, the Company has not repriced any
options.
(2) Based on 3,061,175 options granted under all option plans to employees
during the Last Fiscal Year.
(3) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the 10-year term of the option. These
values are calculated based on requirements promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate or
projection of future stock price. Actual gains, if any, on stock option
exercises will be dependent on the future performance of the Common Stock.
18
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information with respect to option exercises in
the Last Fiscal Year by the Named Executive Officers and the value of their
unexercised options at Fiscal Year End.
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED FISCAL YEAR AT FISCAL YEAR
ON VALUE END (#)(2) END ($)(2)(3)
EXERCISE REALIZED ---------------- ---------------------
NAME (#) ($)(1) VESTED UNVESTED VESTED UNVESTED
---- -------- ---------- ------- -------- ---------- ----------
Michael L. Hackworth.... -- -- 494,169 145,831 $4,183,307 $1,024,193
Sam S. Srinivasan....... 87,753 $3,030,822 16,667 161,250 $ 165,628 $1,041,359
Suhas S. Patil.......... -- -- 217,508 192,492 $1,985,302 $1,182,511
Douglas J. Bartek....... 37,400 $1,561,451 22,600 138,000 $ 152,900 $ 925,750
William D. Caparelli.... 69,524 $2,657,328 37,353 82,873 $ 371,195 $ 609,581
George N. Alexy......... 5,000 $ 123,750 215,502 119,248 $2,612,649 $ 889,089
- --------
(1) Market value of the shares on date of exercise, less the exercise price.
(2) All options are immediately exercisable, but shares issued upon exercise
are subject to vesting restrictions. Accordingly, there were no
unexercisable options outstanding at fiscal year end.
(3) Value is based on fair market value of the Company's common stock of
$18.625 per share on March 29, 1996 (the last trading day of the Last
Fiscal Year), less the exercise price.
EMPLOYMENT AGREEMENTS AND CERTAIN TRANSACTIONS
Sam S. Srinivasan retired from the Company in April 1996. The Company
entered into a Retirement Agreement with Mr. Srinivasan in connection
therewith. Under the retirement agreement, Mr. Srinivasan will receive a lump-
sum payment equal to one year's salary, $235,956, plus forgiveness of an
outstanding loan and tax reimbursement therefor totaling $410,281. Mr.
Srinivasan's stock options continue to vest through September 30, 1996. In
addition, Mr. Srinivasan has a consulting agreement to provide services to the
Company for a transition period of three months.
The Company has currently proposed to enter into an agreement with Douglas
J. Bartek who resigned from his position of President, Visual and Systems
Interface Company on April 19, 1996 to assume the CEO position of a divested
operation. Under the proposed agreement, Mr. Bartek will receive a lump-sum
payment equal to one year's salary, $264,368. He will provide consulting
services to the Company for a period of up to one year. During the consulting
period, certain stock options held by Mr. Bartek will vest based on the
attainment of specific goals as stated in the consulting agreement and he may
receive relocation benefits in connection with the divested operation.
Under the terms of the Senior Executive Variable Compensation Plan
("SEVCP"), in the first and second quarters of fiscal 1996, partial payment of
the performance bonus based on each quarter's performance was made to Mr.
Hackworth, Mr. Srinivasan, Dr. Patil, Mr. Bartek, Mr. Caparelli and Mr. Alexy
in the amounts of $312,078, $139,759, $212,383, $159,258, $106,556 and
$132,093, respectively. At year end, no bonuses were payable for fiscal 1996
due to the loss in the third and fourth quarters. Consequently, the amounts
advanced to participants in the SEVCP in the first and second quarters of
fiscal 1996 are being treated as short-term loans and such amounts shall be
withheld from any future payment under the SEVCP to the Named Executive
Officers and all other participants in the SEVCP. No interest will be charged
on these loans. However, imputed interest will be added to each participant's
income. Employees who are no longer with the Company will not be required to
repay the amounts advanced to them under the SEVCP.
19
PERFORMANCE GRAPH
The following graph shows a comparison of five-year cumulative total
shareholder return, calculated on a dividend reinvestment basis, from March
31, 1991 (the last day of the Company's 1991 fiscal year) through March 29,
1996 (the last trading day of fiscal 1996) for Cirrus Logic, Inc., the S&P 500
Composite Index (the "S&P 500") and the Semiconductor Subgroup of the S&P
Electronics Index (the "Semiconductor Index"). The graph assumes that $100 was
invested in each of these three on March 31, 1991. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.
[GRAPH COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN]
20
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act of 1934 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 an initial report
of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Executive officers, directors
and greater than ten percent shareholders are also required by SEC rules 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 the Last Fiscal Year, all filing requirements applicable to its
officers, directors and ten percent shareholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying proxy to vote the shares represented thereby
on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Robert F. Donohue, Secretary
Fremont, California
June 14, 1996
21
DETACH HERE CIR 2
CIRRUS LOGIC, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P PROXY FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
R The undersigned shareholder of CIRRUS LOGIC, INC., a California corpora-
tion hereby acknowledges receipt of the Notice of Annual Meeting of
O Shareholders and Proxy Statement, each dated June 14, 1996 and the Company's
Annual Report for its fiscal year ended March 30, 1996, and hereby appoints
X Robert F. Donohue and Michael L. Hackworth and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
Y the name of the undersigned, to be held on August 1, 1996 at 3:30 p.m.,
local time at 3100 West Warren Avenue, Fremont, California 94538 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
-----------
DETACH HERE CIR 3
[X] Please mark
votes as in
this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, IT WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS, AND FOR
PROPOSALS 2, 3, 4 AND 5.
1. Election of Directors
Nominees: Michael L. Hackworth, Suhas S. Patil,
C. Gordon Bell, D. James Guzy, C. Woodrow Rea, Jr.,
Walden C. Rhines, Robert H. Smith
FOR WITHHOLD MARK HERE
[_] [_] FOR ADDRESS [_]
CHANGE AND
[_]______________________________________ NOTE BELOW
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's 1989 [_] [_] [_]
Employee Stock Purchase Plan to increase the
number of shares of Common Stock available for
grant under the Plan by 600,000 shares.
FOR AGAINST ABSTAIN
3. To adopt the 1996 Stock Plan and approve the [_] [_] [_]
reservation and authorization of 2,500,000
shares of Common Stock reserved for issuance
under the terms of the Plan.
FOR AGAINST ABSTAIN
4. To ratify the appointment of Ernst & Young [_] [_] [_]
LLP as independent auditors of the Company.
5. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Signature:___________________________________________ Date:____________________
Signature:___________________________________________ Date:____________________