SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(REVISION NO. 1)
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Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary proxy statement [ ] Confidential, for Use of
[ ] Definitive proxy statement the Commission Only (as
[ ] Definitive additional materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant
to Rule 14a-11(c) or Rule 14a-12
INTEGRATED DEVICE TECHNOLOGY, INC.
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(Name of Registrant as Specified in Its Charter)
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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 Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(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 is
determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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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* Previously paid by wire to the SEC on June 26, 1995 with the delivery of the
preliminary proxy statement.
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INTEGRATED DEVICE TECHNOLOGY, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 24, 1995
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Notice is hereby given that the 1995 Annual Meeting of the Stockholders
of Integrated Device Technology, Inc., a Delaware corporation (the "Company"),
will be held on Thursday, August 24, 1995, at 9:30 a.m., local time, at the
offices of the Company located at 2670 Seeley Road, San Jose, California, for
the following purposes:
1. To elect two Class II directors for a term to expire at the
1998 Annual Meeting of Stockholders;
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the authorized number of shares
issuable by the Company from 70,000,000 to 210,000,000;
3. To approve the adoption of the 1995 Executive Performance
Plan;
4. To approve an amendment to the Company's 1994 Stock Option
Plan to increase the number of shares reserved for issuance
thereunder from 1,625,000 to 3,625,000;
5. To ratify the appointment of Price Waterhouse LLP as
independent auditors of the Company for fiscal 1996; and
6. To transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Stockholders of record at the close of business on June 28, 1995 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof.
The majority of the Company's outstanding shares must be represented at
the Annual Meeting (in person or by proxy) to transact business. To assure a
proper representation at the Annual Meeting, please mark, sign and date the
enclosed proxy and mail it promptly in the enclosed self-addressed envelope.
Your proxy will not be used if you revoke it either before or at the Annual
Meeting.
Santa Clara, California
July 14, 1995
By Order of the Board of Directors
Jack Menache
Secretary
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. YOUR VOTE IS IMPORTANT.
<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
2975 STENDER WAY
SANTA CLARA, CALIFORNIA 95054
(408) 727-6116
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1995 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
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JULY 14, 1995
The accompanying proxy is solicited on behalf of the Board of Directors
of Integrated Device Technology, Inc., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
Thursday, August 24, 1995 at 9:30 a.m., local time, or at any adjournment or
postponement thereof. The Annual Meeting will be held at 2670 Seeley Road, San
Jose, California 95134. Only holders of record of the Company's Common Stock at
the close of business on June 28, 1995 (the "Record Date") are entitled to
notice of, and to vote at, the Annual Meeting. On the Record Date, the Company
had 38,300,433 shares of Common Stock outstanding and entitled to vote. A
majority of such shares, present in person or represented by proxy, will
constitute a quorum for the transaction of business. This Proxy Statement and
the accompanying form of proxy were first mailed to stockholders on or about
July 14, 1995. An annual report for the fiscal year ended April 2, 1995 is
enclosed with this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the above record date, except that in the election of
directors, each stockholder has cumulative voting rights and is entitled to a
number of votes equal to the number of shares held by such stockholder
multiplied by the number of directors to be elected. The stockholder may cast
these votes all for a single candidate or distribute the votes among any or all
of the candidates. No stockholder will be entitled to cumulate votes for a
candidate, however, unless that candidate's name has been placed in nomination
prior to the voting and the stockholder, or any other stockholder, has given
notice at the Annual Meeting, prior to the voting, of an intention to cumulate
votes. In such an event, the proxy holder may allocate among the Board of
Directors' nominees the votes represented by proxies in the proxy holder's sole
discretion.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. Proposal No. 2 requires for
approval the affirmative vote of a majority of all outstanding shares of Common
Stock entitled to vote. Proposal Nos. 3 and 4 each require for approval the
affirmative vote of the majority of shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on such
proposals. All votes will be tabulated by the inspector of election appointed
for the Annual Meeting who will separately tabulate, for each proposal,
affirmative and negative votes, abstentions and broker non-votes. Abstentions
will be counted towards a quorum and the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes will be counted towards a quorum but are not counted for any
purpose in determining whether a matter has been approved, and this will have
the same effect as negative votes with regard to Proposal No. 2.
The expenses of soliciting proxies to be voted at the Annual Meeting
will be paid by the Company. Following the original mailing of the proxies and
other soliciting materials, the Company and/or its agents may also solicit
proxies by mail, telephone, telegraph or in person. Following the original
mailing of the proxies and other soliciting materials, the Company will request
that brokers, custodians, nominees and other record holders of the Company's
Common Stock forward copies of the proxy and other soliciting materials to
persons for whom they hold shares of Common Stock and request authority for the
exercise of proxies. In such cases, the Company, upon request of the record
holders, will reimburse such holders for their reasonable expenses.
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REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy
Statement has the power to revoke it prior to the Annual Meeting or at the
Annual Meeting prior to the vote pursuant to the proxy. A proxy may be revoked
by (i) a writing delivered to the Company stating that the proxy is revoked,
(ii) by a subsequent proxy that is signed by the person who signed the earlier
proxy and is presented at the Annual Meeting or (iii) by attendance at the
Annual Meeting and voting in person. Please note, however, that if a
stockholder's shares are held of record by a broker, bank or other nominee and
that stockholder wishes to vote at the Annual Meeting, the stockholder must
bring to the Annual Meeting a letter from the broker, bank or other nominee
confirming that stockholder's beneficial ownership of the shares.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board of Directors consists of five members, divided into three
classes. Two Class II directors are to be elected at the Annual Meeting to serve
a three-year term expiring at the 1998 Annual Meeting of Stockholders or until a
successor has been elected and qualified. The remaining three directors will
continue to serve for the terms as set forth in the table below.
Federico Faggin and John C. Bolger have been nominated by the Board of
Directors to serve as the Class II directors.
Shares represented by the accompanying proxy will be voted for the
election of the two nominees recommended by the Board of Directors unless the
proxy is marked in such a manner as to withhold authority so to vote. In the
event that a nominee 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 present Board of Directors to fill the vacancy, or the Board
of Directors may reduce the authorized number of directors in accordance with
the Company's Restated Certificate of Incorporation, as amended, and its Bylaws.
The Board of Directors has no reason to believe that the nominees will be unable
to serve.
<TABLE>
DIRECTORS/NOMINEES
The names of the nominees and the other Directors of the Company, and
certain information about them, are set forth below:
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---- --- -------------------- --------------
<S> <C> <C> <C>
Class I Directors -- Term expiring
at the 1997 Annual Meeting:
LEONARD C. PERHAM 52 Chief Executive Officer and President of 1986
the Company
Class II Directors -- Term expiring
at the 1998 Annual Meeting:
FEDERICO FAGGIN 53 President and Chief Executive Officer of 1992
Synoptics, Inc.
JOHN C. BOLGER(1) 48 Private investor 1993
Class III Directors -- Term expiring
at the 1996 Annual Meeting:
D. JOHN CAREY 59 Chairman of the Board of Directors of 1980
the Company
CARL E. BERG(1) 58 Partner, Berg & Berg Industrial 1982
Developers
- ----------------------
<FN>
(1) Member of the Audit, Compensation and Stock Option Committees.
</FN>
</TABLE>
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Mr. Perham joined the Company in October 1983 as Vice President and
General Manager, SRAM Division. In October 1986, Mr. Perham was appointed
President and Chief Operating Officer and a director of the Company. In April
1991, Mr. Perham was elected Chief Executive Officer. Prior to joining the
Company, Mr. Perham held executive positions at Optical Information Systems
Incorporated and Zilog Inc.
Mr. Faggin has been a director of the Company since 1992. Mr. Faggin
has been President, Chief Executive Officer and a director of Synoptics, Inc., a
neural network research and development company, since 1986. He is a director of
Aptix, Inc., Atesla, Inc. and Orbit Semiconductor.
Mr. Bolger has been a director of the Company since January 1993. Mr.
Bolger is a private investor. He was Vice President-Finance and Administration
of Cisco Systems, Inc., an internetworking systems manufacturer, from 1989 to
1992 and Vice President-Finance and Administration of KLA Instruments, Inc., an
optical inspection equipment manufacturer, from 1988 to 1989. Mr. Bolger is a
director of Integrated Systems, Inc. and Teknekron Communications Systems, Inc.
Mr. Carey was elected to the Board of Directors in 1980 and has been
Chairman of the Board since 1982. He served as Chief Executive Officer of the
Company from 1982 until his resignation in April 1991 and was President of the
Company from 1982 until 1986. Mr. Carey was a founder of Advanced Micro Devices
in 1969 and was an executive officer there until 1978.
Mr. Berg has been a director of the Company since 1982. Mr. Berg has
been a partner of Berg & Berg Developers, a real estate development partnership,
since 1979. He is a director of Valence Technology and Videonics.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of ten (10) meetings
during the fiscal year ended April 2, 1995 and acted by unanimous written
consent two (2) times. The Board of Directors has Audit and Compensation
Committees, but does not have a Nominating Committee or any committee performing
this function. In addition, the Board has a Stock Option Committee that
administers the 1994 Stock Option Plan.
The Audit Committee, composed of Messrs. Berg and Bolger, recommends
engagement of the Company's independent auditors and is primarily responsible
for approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting practices and its systems
of internal accounting controls. Mr. Bolger is the Chair of the Audit Committee.
The Audit Committee held two (2) meetings during fiscal 1995.
The Compensation Committee, composed of Messrs. Berg and Bolger,
determines the salaries and incentive compensation for executive officers,
including the chief executive officer, and key personnel, other than stock
options. Mr. Berg is the Chair of the Compensation Committee. The Compensation
Committee held two (2) meetings during fiscal 1995.
The Stock Option Committee is composed of two directors who have not
received options under the Company's 1985 or 1994 Stock Option Plans in more
than one year, Messrs. Berg and Bolger. Mr. Berg is the Chair of the Stock
Option Committee. The Stock Option Committee administers the Company's stock
option plans, including determining the number of shares underlying options to
be granted to each employee and the terms of such options. The Stock Option
Committee held no meetings during fiscal 1995, but acted by unanimous written
consent 13 times during fiscal 1995.
Each director attended at least 75% of the aggregate of the total
number of meetings of the Board of Directors and the total number of meetings
held by all committees on which such director served during fiscal 1995.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not also officers or
employees of the Company are paid an annual retainer in the amount of $10,000
per fiscal year, $2,500 per board meeting attended (except telephone meetings)
and $500 per committee meeting attended if not conducted on the same day as a
Board meeting.
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The Company's 1994 Directors Stock Option Plan (the "Directors Plan"),
covering 54,000 shares of Common Stock, was adopted by the Board of Directors in
May 1994 and was approved by the stockholders in August 1994. All members of the
Board of Directors who are not also employees of the Company or of a parent or
subsidiary of the Company ("Nonemployee Directors") are eligible to receive
options under the Directors Plan.
The Directors Plan provides for the mandatory grant of options on an
annual basis to the Company's Nonemployee Directors. The exercise price of
options granted under the Directors Plan may not be less than the fair market
value of the Company's Common Stock at the close of business the day before the
grant.
Pursuant to the terms of the Directors Plan, each Nonemployee Director
is granted an option to purchase 16,000 shares of the Company's Common Stock on
the date of such Nonemployee Director's first election or appointment to the
Board. In addition, the Nonemployee Director who chairs the Audit Committee of
the Board of Directors is granted an option to purchase 4,000 shares of the
Company's Common Stock on the date of such Nonemployee Director's first election
or appointment as Chair of the Audit Committee. These options have a term of ten
years and become exercisable in cumulative increments of 25% per year,
commencing on the first anniversary of the date of grant.
Annually thereafter, each Nonemployee Director is granted an option to
purchase 4,000 shares of the Company's Common Stock and an additional 1,000
shares of the Company's Common Stock if the optionee is also Chair of the Audit
Committee. The annual grant is made on the anniversary date of the optionee's
receipt of the initial option granted under the Directors Plan. Such options
become exercisable in full on the fourth anniversary of the date of grant.
As of April 2, 1995, options to purchase 84,000 shares were outstanding
to three Nonemployee Directors, at an average exercise price of $11.42 per share
expiring in 1996 through 2005, and 36,000 shares remain available for future
grant under the Directors Plan. During fiscal 1995, Mr. Bolger purchased 11,000
shares upon exercise of options granted under the predecessor 1989 Directors
Stock Option Plan, for net value realized of $291,313.
In addition, Mr. Faggin was granted a nonstatutory option covering
64,000 shares of Common Stock at an exercise price of $3.625 per share on July
15, 1992, while he served as a consultant to the Company and before he became a
director. These options become exercisable in cumulative increments of 25% per
year beginning on the first anniversary of the date of grant.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
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NOMINATED DIRECTORS
PROPOSAL NO. 2 - AMENDMENT OF CERTIFICATE OF INCORPORATION
On May 3, 1995, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation, subject to stockholder approval, to
increase the authorized stock of the Company from 70,000,000 shares (of which
65,000,000 shares are designated as Common Stock, $0.001 par value per share,
and 5,000,000 shares are designated as Preferred Stock, $0.001 par value per
share) to 210,000,000 shares (of which 200,000,000 shares are designated as
Common Stock, $0.001 par value per share, and 10,000,000 shares are designated
as Preferred Stock, $0.001 par value per share).
As of June 28, 1995, the Company had fewer than 20,743,219 shares of
Common Stock available for issuance. At June 28, 1995, 38,300,433 shares of
Common Stock were issued and outstanding and 5,956,348 shares were reserved for
issuance upon exercise of outstanding options. There are no shares of Preferred
Stock outstanding. The proposed increase in the number of authorized shares of
Common Stock from 65,000,000 to 200,000,000 and of Preferred Stock from
5,000,000 to 10,000,000 would result in additional shares being available for
issuance from time to time for corporate purposes (such as possible stock
splits, stock dividends, acquisitions of companies or assets, sales of stock or
securities convertible into stock, stock options or other employee benefit
plans). The Company currently has no specific plans, arrangements or
understandings with respect to the issuance of these additional shares, if
authorized. The Company believes that the availability of the additional shares
will provide it with the flexibility to meet business needs as they arise, to
take advantage of favorable opportunities and to respond to a changing corporate
environment.
If the stockholders approve the amendment, the Company will file a
Certificate of Amendment of its Certificate of Incorporation with the Secretary
of State of the State of Delaware.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
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TO THE COMPANY'S CERTIFICATE OF INCORPORATION
PROPOSAL NO. 3 - ADOPTION OF 1995 EXECUTIVE PERFORMANCE PLAN
Stockholders are being asked to approve the adoption of the Company's
1995 Executive Performance Plan (the "EPP"). In May 1995, the Board of Directors
approved the adoption of the EPP.
BACKGROUND AND REASONS FOR ADOPTION
The Company previously has maintained a performance-based bonus plan
similar to the EPP in order to reward key employees for achieving objectives for
the financial performance of the Company and its business units. However, under
Section 162(m), the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of its next four most highly
compensated executive officers may be limited to the extent that it exceeds
$1,000,000 in any one year. The Company can deduct compensation in excess of
that amount if it qualifies as "performance-based compensation" under Section
162(m). Accordingly, the EPP is intended to permit the Company to pay incentive
compensation which qualifies as performance-based compensation, thereby
permitting the Company to continue to receive a federal income tax deduction for
the payment of such incentive compensation.
DESCRIPTION OF THE EPP
The following paragraphs provide a summary of the principal features of
the EPP and its operation. The following summary is qualified in its entirety by
reference to the EPP.
PURPOSE OF THE EPP
The EPP is intended to motivate the Company's key employees to increase
stockholder value by (a) linking a portion of their cash compensation to the
Company's financial performance, (b) providing rewards for improving the
Company's financial performance, and (c) helping to attract and retain key
employees.
ADMINISTRATION OF THE EPP
The EPP will be administered by the Compensation Committee of the
Company's Board of Directors ("Committee"). The members of the Committee must
qualify as "outside directors" under Section 162(m) (for purposes of qualifying
the EPP as performance-based compensation under such Section).
Subject to the terms of the EPP, the Committee has the sole discretion
to determine the key employees who shall be granted awards, and the amounts,
terms and conditions of each award. The Committee may delegate its authority to
grant and administer awards to a separate committee appointed by the Committee,
but only the Committee can make awards to participants who are subject to
Section 162(m).
ELIGIBILITY TO RECEIVE AWARDS
Eligibility for the EPP is determined in the discretion of the
Committee. In selecting participants for the EPP, the Committee will choose key
employees of the Company and its affiliates who are likely to have a significant
impact on Company performance. The actual number of employees who will receive
awards under the EPP cannot be determined because eligibility for participation
in the EPP is in the discretion of the Committee. However, for fiscal year 1996,
there are currently 269 employees approved for participation in the EPP,
including the Company's Chief Executive Officer and other executive officers.
Participation in future years will be in the discretion of the Committee, but it
currently is expected that a similar number of employees will participate each
year.
AWARDS AND PERFORMANCE GOALS
Under the EPP, the Committee will establish (a) the performance goals
which must be achieved in order for the participant to actually be paid an
award, and (b) a formula or table for calculating a participant's award,
depending upon how actual performance compares to the pre-established
performance goals. A participant's award will increase or decrease as actual
performance increases or decreases. The Committee also will determine the period
for measuring actual performance ("performance period"). Performance periods may
be for a single fiscal year of the Company, or for a multi-fiscal year period.
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<PAGE>
The Committee may set performance periods and performance goals which
differ from participant to participant. For example, the Committee may choose
performance goals based on either Company-wise or business unit results, as
deemed appropriate in light of the participant's specific responsibilities. For
purposes of qualifying awards as performance based compensation under Section
162(m), the Committee may (but is not required to) specify performance goals for
the Company and/or one of its business units.
During any fiscal year of the Company, no Participant may receive an
award of more than $5,000,000. In addition, the total of all awards for any
fiscal year cannot exceed 10% of the Company's pre-tax operating earnings
(before incentive compensation) for the fiscal year. If total awards for a
performance period would exceed this amount, all such awards for that
performance period will be pro-rated.
DETERMINATION OF ACTUAL AWARDS
After the end of each performance period, a determination will be made
as to the extent to which the performance goals applicable to each participant
were achieved or exceeded. The actual award (if any) for each participant will
be determined by applying the formula to the level of actual performance which
was achieved. However, the Committee retains discretion to eliminate or reduce
the actual award payable to any participant below that which otherwise would be
payable under the applicable formula. Awards under the EPP generally will be
payable in cash either after the end of the fiscal year during which the award
was earned.
PRO FORMA BENEFITS FOR THE EPP
Given that payments under the EPP are determined by comparing actual
performance to the performance goals established by the Committee, it is not
possible to conclusively state the amount of benefits which will be paid under
the EPP. The following table sets forth the awards that would have been earned
by each of the following persons and groups if the EPP had been in effect for
fiscal 1995. Because the fiscal 1996 net income and net sales performance is not
yet determinable, the amounts in the table were calculated by applying the
performance goals and award formula adopted by the Committee for fiscal 1996 to
the fiscal 1995 actual net income and net sales performance. There can be no
assurance that the pre-established performance goals actually will be achieved,
and therefore there can be no assurance that the awards shown below actually
will be paid.
MANAGEMENT INCENTIVE PLAN
Name and Position Dollar Value
----------------- ------------
Leonard C. Perham ................................ $390,600
Chief Executive Officer and
President of the Company
Alan H. Huggins .................................. $272,650
Vice President - Memory Division
Chuen-Der Lien ................................... $186,550
Vice President - Technology Development
William B. Cortelyou ............................. $152,110
Vice President - Wafer Operations
Robin H. Hodge ................................... $143,500
Vice President - Assembly and Test
AMENDMENT AND TERMINATION OF THE EPP
The Committee may amend or terminate the EPP at any time and for any
reason, but as appropriate under Section 162(m), certain material amendments to
the EPP will be subject to stockholder approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION
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OF THE 1995 EXECUTIVE PERFORMANCE PLAN
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<PAGE>
PROPOSAL NO. 4 - APPROVAL OF AMENDMENT TO THE 1994 STOCK OPTION PLAN
Stockholders are being asked to approve an amendment to the Company's
1994 Stock Option Plan (the "1994 Option Plan") to increase the number of shares
of Common Stock reserved for issuance thereunder from 1,625,000 shares to
3,625,000 shares (an increase of 2,000,000 shares). The Board of Directors of
the Company approved the proposed amendment described above on May 3, 1995 to be
effective upon stockholder approval.
Below is a summary of the principal provisions of the 1994 Option Plan
assuming approval of the above amendment, which summary is qualified in its
entirety by reference to the full text of the 1994 Option Plan.
1994 OPTION PLAN HISTORY
In May 1994, the Board of Directors of the Company adopted the 1994
Option Plan and on August 25, 1994 it was approved by the stockholders of the
Company. 1,625,000 shares of Common Stock were originally reserved for issuance
under the 1994 Option Plan. In addition, up to 5,000,000 shares of Common Stock
issuable upon exercise of stock options available for future grant or currently
outstanding pursuant to the Company's 1985 Option Plan that expire or become
unexercisable for any reason without having been exercised in full are available
for issuance under the 1994 Option Plan. The 1994 Option Plan was intended to
replace the 1985 Option Plan, which the Board of Directors terminated upon
stockholder approval of the 1994 Option Plan.
DESCRIPTION OF THE 1994 STOCK OPTION PLAN
Purpose. The purpose of the 1994 Option Plan is to provide incentives
to attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company and its affiliates, by
offering them an opportunity to participate in the Company's future performance
through awards of stock options. The Board of Directors believes that the use of
stock options as a supplement to other forms of compensation paid by the Company
is desirable to secure for the Company and its stockholders the advantages of
stock ownership by participants, upon whose efforts, initiative and judgment the
Company is largely dependent for the successful conduct of its business.
Plan Terms. The 1994 Option Plan provides for the grant of incentive
stock options ("ISOs") and nonstatutory stock options ("NSOs") to employees of
the Company and its affiliates and the grant of NSOs to independent contractors,
consultants and advisors of the Company and its affiliates, including directors
who are also employees or consultants. A maximum of 8,625,000 shares may be
issued pursuant to the 1994 Option Plan (assuming approval of the proposed
amendment). Each optionee will be eligible to receive options to purchase up to
an aggregate maximum of 1,000,000 shares of Common Stock per fiscal year under
the 1994 Option Plan. As of June 28, 1995, there were approximately 1,385
persons eligible to receive awards of stock options under the 1994 Option Plan.
The purchase price of the stock covered by all options may not be less
than 100% of the fair market value of the Common Stock on the date the option is
granted. The fair market value on the date of grant is defined as the closing
price of the Common Stock as reported by the Nasdaq National Market on the
trading day immediately preceding the date on which the fair market value is
determined. If an employee owns more than 10% of the total combined voting power
of all classes of the Company's stock, the exercise price of an ISO must be at
least 110% of such fair market value. If any option is forfeited or terminates
for any reason before being exercised, then the shares of Common Stock subject
to such option shall again become available for future awards under the 1994
Option Plan.
Plan Administration. The 1994 Option Plan is administered, subject to
its terms, by the Stock Option Committee, whose members are designated by the
Board of Directors. `The members of the Stock Option Committee, Carl E. Berg and
John C. Bolger, are "disinterested persons" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and "outside directors" within the meaning of the Internal Revenue Code
of 1986, as amended (the "Code"). Subject to the terms and conditions of the
1994 Option Plan, the Stock Option Committee, in its discretion, designates
those individuals who are to be granted options, whether the options will be
ISOs or NSOs, the number of shares for which an option or options will be
awarded, the exercise price of the option, the periods during which the option
may be exercised and other terms and conditions of the option. The
interpretation or construction by the Stock Option Committee of any provision of
the 1994 Option Plan or of any option granted under it is final and binding on
all optionees.
Stock Option Agreements. Each option is evidenced by a written stock
option agreement adopted by the Stock Option Committee. Each option agreement
states when and the extent to which options become exercisable,
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<PAGE>
and the agreements need not be uniform. Options expire ten years after the date
of grant (five years in the case of an ISO granted to a 10% stockholder), or
sooner upon an optionee's termination of employment. With respect to options
granted as ISOs, option agreements contain such other provisions as necessary to
comply with Section 422 of the Code. The exercise price may be paid in cash or
check or, at the discretion of the Stock Option Committee, by delivery of fully
paid shares of Common Stock of the Company that have been owned by the optionee
for more than six months, by waiver of compensation, through a "same day sale,"
through a "margin commitment" or by any combination of the foregoing.
Termination of Employment. Options granted under the 1994 Option Plan
terminate three months after the optionee ceases to be employed by the Company
unless (i) the termination of employment is due to permanent and total
disability, in which case the option may, but need not, provide that it may be
exercised at any time within 12 months of termination to the extent the option
was exercisable on the date of termination; (ii) the optionee dies while
employed by the Company or within three months after termination of employment,
in which case the option may, but need not, provide that it may be exercised at
any time within 18 months after death to the extent the option was exercisable
on the date of death; or (iii) the option by its terms specifically provides
otherwise. In no event will an option be exercisable after the expiration date
of the option.
Amendment and Termination. The Board of Directors may at any time
terminate or amend the 1994 Option Plan. Rights and obligations under any award
granted before amendment shall not be materially changed or adversely affected
by such amendment except with the consent of the optionee. Amendments to the
1994 Option Plan are subject to the approval of the Company's stockholders only
to the extent required by applicable laws, regulations or rules. The 1994 Option
Plan will continue in effect until May 2004, subject to earlier termination by
the Board of Directors.
Accelerated Vesting. In the event of (i) a merger or acquisition in
which the Company is not the surviving entity (except for a transaction to
change the state in which the Company is incorporated), (ii) the sale, transfer
or other disposition of all or substantially all of the assets of the Company or
(iii) any other corporate reorganization or business combination that is not
approved by the Board of Directors and in which the beneficial ownership of 50%
or more of the Company's voting stock is transferred, all options outstanding
under the 1994 Option Plan shall become fully exercisable immediately before the
effective date of the transaction. Options will not become fully exercisable,
however, if and to the extent that options are either to be assumed by the
successor corporation or parent thereof or to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation or
parent thereof. Upon the effective date of such transaction, all options
outstanding will terminate and cease to be exercisable, except to the extent
they were previously exercised or assumed by the successor corporation or its
parent. In the event of (i) a tender or exchange offer that is not recommended
by the Company's Board of Directors for 25% or more of the Company's voting
stock by a person or related group of persons other than the Company or an
affiliate of the Company or (ii) a contested election for the Board of Directors
that results in a change in a majority of the Board within any period of 24
months or less, all options outstanding under the 1994 Option Plan will become
fully exercisable 15 days following the effective date of such event. In such
event, all options outstanding under the 1994 Option Plan will remain
exercisable until the expiration or sooner termination of the option term
specified in the option agreement. Acceleration of the exercisability of options
may have the effect of depressing the market price of the Company's Common Stock
and denying stockholders a control premium that might otherwise be paid for
their shares in such a transaction and may have the effect of discouraging a
proposal for merger, a takeover attempt or other efforts to gain control of the
Company.
Adjustments Upon Changes in Capitalization. If the number of shares of
Common Stock outstanding is changed by a stock dividend, stock split, reverse
stock split, recapitalization, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration or
by certain types of acquisitions of the Company, the Stock Option Committee will
make appropriate adjustments in the aggregate number of securities subject to
the 1994 Option Plan and the number of securities and the price per share
subject to outstanding options. In the event of the proposed dissolution or
liquidation of the Company, the Board of Directors must notify optionees at
least 15 days before such proposed action. To the extent that options have not
previously been exercised, such options will terminate immediately before
consummation of such proposed action.
Nontransferability. The rights of an optionee under the 1994 Option
Plan are not assignable by such optionee, by operation of law or otherwise,
except by will or the applicable laws of descent and distribution or in the
event of an optionee's divorce or dissolution of marriage. Options granted under
the 1994 Option Plan are exercisable during the optionee's lifetime only by the
optionee or the optionee's guardian or legal representative.
8
<PAGE>
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. An optionee does not recognize income upon the
grant of an ISO and incurs no tax on its exercise (unless the optionee is
subject to the alternative minimum tax described below). If the optionee holds
the stock acquired upon exercise of an ISO (the "ISO Shares") for more than one
year after the date the option was exercised and for more than two years after
the date the option was granted, the optionee generally will realize long-term
capital gain or loss (rather than ordinary income or loss) upon disposition of
the ISO Shares. This gain or loss will be equal to the difference between the
amount realized upon such disposition and the amount paid for the ISO Shares. If
the optionee disposes of ISO Shares before the expiration of either required
holding period (a "disqualifying disposition"), then gain realized upon such
disqualifying disposition, up to the difference between the fair market value of
the ISO Shares on the date of exercise (or, if less, the amount realized on a
sale of such ISO Shares) and the option exercise price, will be treated as
ordinary income. Any additional gain will be long-term or short-term capital
gain, depending upon the length of time the optionee held the ISO Shares. The
Company will be entitled to a deduction in connection with the disposition of
ISO Shares only to the extent that the optionee recognizes ordinary income on a
disqualifying disposition of the ISO Shares.
Alternative Minimum Tax. The difference between the exercise price and
fair market value of the ISO Shares on the date of exercise of an ISO is an
adjustment to income for purposes of the alternative minimum tax ("AMT"). The
AMT (imposed to the extent it exceeds the taxpayer's regular tax) is 26% of an
individual taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items and reducing this
amount by the applicable exemption amount ($45,000 in the case of a joint
return, subject to reduction in certain circumstances). If a disqualifying
disposition of the ISO Shares occurs in the same calendar year as exercise of
the ISO, there is no AMT adjustment with respect to those ISO Shares. Also, upon
a sale of ISO Shares that is not a disqualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the fair
market value of the ISO Shares at exercise over the amount paid for the ISO
Shares.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time an NSO is granted. However, upon exercise of an NSO, the
optionee must include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
(or, in the case of exercise for stock subject to a substantial risk of
forfeiture, at the time such forfeiture restriction lapses) and the amount paid
for that stock upon exercise of the NSO. In the case of stock subject to a
substantial risk of forfeiture, if the optionee makes an 83(b) election, the
included amount must be based on the difference between the fair market value on
the date of exercise and the option exercise price. The included amount must be
treated as ordinary income by the optionee and will be subject to income tax
withholding by the Company. Upon resale of the shares by the optionee, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss. The Company will be entitled to a deduction in
connection with the exercise of an NSO by a domestic optionee to the extent that
the optionee recognizes ordinary income and the Company withholds tax.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
---
TO THE 1994 STOCK OPTION PLAN
PROPOSAL NO. 5 - RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending March 31, 1996, and
the stockholders are being asked to ratify such selection. Price Waterhouse LLP
has been engaged as the Company's independent accountants since 1993.
Representatives of Price Waterhouse LLP are expected to be present at the Annual
Meeting, will be given an opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF PRICE
---
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 28,
1995, with respect to the beneficial ownership of the Company's Common Stock by:
(a) each stockholder known by the Company to be the beneficial owner of more
than five percent of the Company's Common Stock; (b) each director and nominee;
(c) each Named Executive Officer (as defined below); and (d) all officers and
directors as a group.
NAME AND ADDRESS SHARES BENEFICIALLY PERCENT OF BENEFICIAL
OF BENEFICIAL OWNER OWNED (1)(2) OWNERSHIP
- ------------------- ------------------- ---------------------
FMR Corp. (3)............................ 4,807,645 12.6%
Carl E. Berg(4).......................... 1,397,354 3.6
D. John Carey(5)......................... 806,238 2.1
Leonard C. Perham(6)..................... 184,546 *
Frederico Faggin(7)...................... 35,000 *
Robin H. Hodge(8)........................ 17,711 *
William B. Cortelyou(9).................. 12,145 *
Chuen-Der Lien(10)....................... 11,096 *
Alan H. Huggins(11)...................... 8,285 *
John C. Bolger(12)....................... 1,000 *
All executive officers and directors
as a group (15 persons) (13)......... 2,530,750 6.5
- ----------------------
* Less than 1%.
(1) Unless otherwise indicated below, the Company believes that the persons
named in the table have sole voting and sole investment power with
respect to all shares of Common Stock shown in the table to be
beneficially owned by them, subject to community property laws where
applicable.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options. Each
stockholder's percentage ownership is determined by assuming that options
that are held by such person (but not those held by any other person) and
that are exercisable within 60 days of June 28, 1995, have been
exercised.
(3) FMR Corp. controls various Fidelity funds and has sole power to dispose
of all of the shares but has sole power to vote only 78,775 of the
shares. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(4) Represents 812,454 shares held of record by Mr. Berg, 115,000 shares held
of record by West Coast Venture Capital, Inc., of which Mr. Berg is
President and a shareholder, 389,500 shares held of record by West Coast
Venture Capital, L.P., of which Mr. Berg is a general partner, 43,900
shares held of record by a trust for Mr. Berg's child, 12,500 shares held
of record by Mr. Berg's spouse and 24,000 shares subject to options
exercisable within 60 days of June 28, 1995.
(5) Represents 556,637 shares held of record by Mr. Carey, 3,639 shares held
of record by Mr. Carey's 401(k) plan account and 245,962 shares subject
to options exercisable within 60 days of June 28, 1995.
(6) Represents 5,500 shares beneficially owned by Mr. Perham, 4,143 shares
held of record by Mr. Perham's 401(k) plan account and 174,903 shares
subject to a option to Mr. Perham exercisable within 60 days of June 28,
1995.
(7) Represents 35,000 shares subject to options exercisable within 60 days of
June 28, 1995.
(8) Includes 15,628 shares subject to options exercisable within 60 days of
June 28, 1995.
(9) Includes 10,501 shares subject to options exercisable within 60 days of
June 28, 1995.
(10) Includes 9,000 shares subject to options exercisable within 60 days of
June 28, 1995.
(11) Includes 5,001 shares subject to options exercisable within 60 days of
June 28, 1995.
(12) Represents 1,000 shares subject to options exercisable within 60 days of
June 28, 1995.
10
<PAGE>
(13) Includes 573,807 shares subject to options exercisable within 60 days of
June 28, 1995.
<TABLE>
EXECUTIVE COMPENSATION
The following table shows certain information concerning the
compensation of each of the Company's Chief Executive Officer and the Company's
four most highly compensated executive officers other than the Chief Executive
Officer of the Company who were serving as executive officers at the end of
fiscal 1995 for services rendered in all capacities to the Company for the
fiscal years ended 1995, 1994 and 1993 (together, the "Named Executive
Officers"). This information includes the dollar values of base salaries, bonus
awards, the number of stock options granted and certain other compensation, if
any, whether paid or deferred. The Company does not grant stock appreciation
rights and has no long term compensation benefits other than stock options.
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------- ----------------
SHARES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)(2)
- ----------------------- -------- ----------- ----------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Leonard C. Perham .......... 1995 $277,776 $947,329 $ 0 80,000 $ 677
Chief Executive Officer 1994 277,776 401,295 0 140,000 4,162
1993 241,764 26,330 0 65,000 1,763
Alan H. Huggins ............ 1995 172,788 395,607 0 22,000 677
Vice President - 1994 160,950 166,549 0 58,000 2,552
Memory Division 1993 136,172 13,271 0 0 1,032
Chuen-Der Lien ............. 1995 155,124 378,710 0 16,000 677
Vice President - 1994 138,250 177,391 0 22,000 2,231
Technology Development 1993 107,160 13,804 0 32,000 857
William B. Cortelyou ....... 1995 141,240 295,234 0 10,000 677
Vice President - 1994 127,000 188,780 0 12,500 2,132
Wafer Operations 1993 115,056 5,815 0 0 868
Robin H. Hodge ............. 1995 151,697 250,267 0 14,000 677
Vice President - 1994 144,474 110,950 0 14,000 2,394
Assembly and Test 1993 127,828 5,921 0 29,000 983
- --------
<FN>
(1) Amounts listed in this column for 1995, 1994 and 1993 include cash paid
under the Company's Profit Sharing Plan, as follows: Mr. Perham, $30,729,
$14,745 and $1,130; Mr. Huggins, $18,957, $8,669 and $671; Mr. Lien,
$17,160, $7,391 and $554; Mr. Cortelyou, $15,624, $6,774 and $565; and
Mr. Hodge, $16,767, $7,710, $645.
(2) Amounts listed in this column for 1993 are the cash value of
contributions made in the Common Stock of the Company to the Long-Term
Incentive Plan ("LTIP") for each of the Named Executive Officers. LTIP
contributions are aggregated and held in trust and paid out to Named
Executive Officers (or any plan participant) only upon retirement,
termination, disability or death. Amounts listed in this column for 1994
are the cash value of contributions to the LTIP for the first half of
1994. During the last half of 1994, the LTIP was terminated and the value
of participants' share balances were transferred to individual
participant 401(k) accounts. Effective the second half of 1994, the
Company made contributions to individual 401(k) accounts of 1% of net
profit before taxes, allocated equally to all United States plan
participants. For the second half of 1994, that amounted to $234 per
participant and is included in this column for 1994. Amounts listed in
this column for 1995 are the Company's contributions to the individual
401(k) accounts of each of the Named Executive Officers for 1995.
</FN>
</TABLE>
11
<PAGE>
<TABLE>
The following table contains information concerning the grant of stock
options under the Company's 1985 Option Plan (terminated in 1994) and the 1994
Option Plan to the Named Executive Officers during fiscal 1995. In addition,
there are shown the hypothetical gains or "option spreads" that would exist for
the respective options based on assumed rates of annual compound stock
appreciation of 5% and 10% from the date of grant over the full option term.
Actual gains, if any, on option exercises are dependent on the future
performance of the Company's Common Stock. The hypothetical gains shown in this
table are not intended to forecast possible future appreciation, if any, of the
stock price.
OPTION GRANTS IN FISCAL 1995
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- ----------------------------------------------------------------------------------------- --------------------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(2) IN FISCAL 1995 ($/SHARE)(2) DATE 5% 10%
- -------------------- ------------ --------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leonard C. Perham ......... 80,000 5.3% $ 20.3125 10/15/04 $1,021,954 $2,589,831
Alan H. Huggins ........... 22,000 1.5 28.6250 11/15/04 396,046 1,003,659
Chuen-Der Lien ............ 16,000 1.1 21.0000 08/15/04 211,309 535,497
William B. Cortelyou ...... 10,000 0.7 20.3125 10/15/04 127,744 323,729
Robin H. Hodge ............ 14,000 0.9 28.1250 04/15/04 207,627 627,536
- ------------------
<FN>
(1) In accordance with Securities and Exchange Commission (the "SEC") rules,
these columns show gains that might exist for the respective options over
a period of ten years. This valuation model is hypothetical. If the stock
price does not increase over the exercise price, compensation to the
Named Executive Officer would be zero.
(2) All stock options are granted at the fair market value on the date of
grant. These options generally become exercisable as to all shares on the
fourth anniversary of the date of grant. The terms of the 1994 Option
Plan provide that these options may become exercisable in full in the
event of a change in control (as defined in the 1994 Option Plan). The
exercise price and tax withholding obligations related to exercise may be
paid by delivery of shares already owned and tax withholding obligations
related to exercise may be paid by offset of the underlying shares,
subject to certain conditions.
</FN>
</TABLE>
12
<PAGE>
<TABLE>
The following table shows the number of shares of Common Stock acquired
by each of the Named Executive Officers upon the exercise of stock options
during fiscal 1995, the net value realized upon exercise, the number of shares
of Common Stock represented by outstanding stock options held by each of the
Named Executive Officers as of April 2, 1995 and the value of such options based
on the closing price of the Company's Common Stock at fiscal year-end ($37.00).
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END (#)(1) AT FISCAL YEAR-END ($)(2)
---------------------------------- -----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED(1) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
- ---------------------- --------------- ------------- ---------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Leonard C. Perham ..... 110,000 $3,244,375 159,903 / 320,000 $5,056,479 / $8,360,625
Alan H. Huggins ....... 27,170 639,577 2,000 / 86,000 60,050 / 1,986,625
Chuen-Der Lien ........ 17,256 502,136 5,500 / 57,000 173,875 / 1,416,250
William B. Cortelyou .. 10,249 250,023 10,500 / 32,500 322,908 / 785,625
Robin H. Hodge ........ 5,000 171,250 20,628 / 47,000 686,694 / 1,178,375
- --------------------
<FN>
(1) "Value Realized" represents the fair market value of the shares
underlying the options on the date of exercise less the aggregate
exercise price.
(2) These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized, and are based on
the positive spread between the respective exercise prices of outstanding
options and the closing price of the Company's Common Stock on March 31,
1995, the last day of trading for fiscal 1995.
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Company has a Compensation Committee of the Board of Directors,
comprised of Carl E. Berg and John C. Bolger, both of whom are outside
directors. The Stock Option Committee, which makes decisions regarding option
grants to employees including executive officers, consists of Carl E. Berg and
John C. Bolger. Leonard C. Perham, the Chief Executive Officer and a director of
the Company, assigns the "performance units" assigned to executive officers
(other than the Chief Executive Officer) and key employees for purposes of
determining the amount of the annual cash bonus to each. See "Certain
Transactions" below.
13
<PAGE>
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEES
ON EXECUTIVE COMPENSATION
The Report of the Compensation and Stock Option Committees on Executive
Compensation shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
This report is provided by the Compensation and Stock Option Committees of the
Board of Directors of Integrated Device Technology, Inc. to assist stockholders
in understanding the objectives and procedures in establishing the compensation
of the Company's Chief Executive Officer, Leonard C. Perham, and other executive
officers. During the Company's fiscal year ended April 2, 1995, the Company's
compensation program was administered by the Compensation Committee and the
Stock Option Committee of the Board of Directors. The role of the Compensation
Committee was to review and approve salaries, cash bonuses and other
compensation of the executive officers. The role of the Stock Option Committee
was to administer the 1994 Option Plan, including review and approval of stock
option grants to the executive officers. The Compensation Committee and the
Stock Option Committee each consist solely of outside directors, Messrs. Berg
and Bolger.
Compensation Philosophy
The Compensation Committee believes that the compensation of the
Company's executive officers should be:
* competitive in the market place;
* directly linked to the Company's profitability and to the value
of the Company's Common Stock; and
* sufficient to attract, retain and motivate well-qualified
executives who will contribute to the long-term success of the
Company.
The Company's Human Resources Department, working with an independent
outside consulting firm, developed executive compensation data from a nationally
recognized survey for a group of similar size high technology companies and
provided this data to the Compensation Committee and the Stock Option Committee.
The factors used to determine the participants in the survey included annual
revenue, industry, growth rate and geography. The Company's executive level
positions, including the Chief Executive Officer, were matched to comparable
survey positions and competitive market compensation levels to determine base
salary, target incentives and target total cash compensation. Practices of such
companies with respect to stock option grants are also reviewed and compared.
In preparing the performance graph for this Proxy Statement, the
Company used the S&P Electronic (Semi/Components) Index ("S&P Index") as its
published line of business index. The companies in this survey are substantially
similar to the companies contained in the S&P Index. Approximately two thirds of
the companies included in the survey group are included in the S&P Index. The
remaining companies included in the survey group were felt to be relevant by the
Company's independent compensation consultants because they compete for
executive talent with the Company notwithstanding that they are not included in
the S&P Index. In addition, certain companies in the S&P Index were excluded
from the survey group because they were determined not to be competitive with
the Company for executive talent, or because compensation information was not
available.
This competitive market data is reviewed with the Chief Executive
Officer for each executive level position and with the Compensation Committee
and the Stock Option Committee as to the Chief Executive Officer. In addition,
each executive officer's performance for the last fiscal year and objectives for
the subsequent year are viewed, together with the executive's responsibility
level and the Company's fiscal performance versus objectives and potential
performance targets for the subsequent year.
14
<PAGE>
Key Elements of Executive Compensation
The Company's executive compensation program consists of a cash and an
equity-based component. Base pay and, if warranted, an annual bonus and a
semi-annual award under the Company's Profit Sharing Plan constitute the cash
components. Grants of stock options under the Company's 1994 Option Plan
comprise the equity-based component. The Vice President of Sales is also
eligible to receive a commission-based bonus, which is paid quarterly.
Cash Components. Cash compensation is designed to fluctuate with
Company performance. In years that the Company exhibits superior financial
performance, cash compensation is designed to be above average competitive
levels; when financial performance is below goal, cash compensation is designed
generally to be below average competitive levels. Essentially, this is achieved
through the cash bonus and Profit Sharing Plan awards, which fluctuate generally
with pre-tax profitability.
Base Pay: Base pay guidelines are established for executive officers
after a review of compensation survey data referred to above. Individual base
pay within the guidelines is based on sustained individual performance toward
achieving the Company's goals and objectives. Executive salaries are reviewed
annually. In January 1992, all executive officers took a base pay decrease of
6%, which was restored in April 1993. Executive officer salaries increased by
approximately 6% in fiscal 1995.
Bonus: The Company pays an annual cash bonus to certain executive
officers and other key employees based on the pre-tax earnings of the Company
and the employee's individual performance. Payment of these bonuses is normally
made in the first quarter of each fiscal year for performance during the
previous year.
At the beginning of each fiscal year, each eligible employee is
assigned a specific number of "performance units." The number of performance
units assigned to the Chief Executive Officer is determined by the Compensation
Committee. The number of performance units assigned to the other executive
officers and key employees is recommended by the Chief Executive Officer and
determined by the Compensation Committee. The specific number of performance
units assigned is based, in part, on the importance of the individual's job and
area of responsibility relative to the Company's goals. Two-thirds of the cash
amount of the bonus for each eligible employee is based on a value per
performance unit equal to the pre-tax earnings per share of the Company's Common
Stock for the fiscal year. In addition, at the end of the fiscal year, the
Compensation Committee allocates 2% of pre-tax earnings between the Chief
Executive Officer and all eligible employees as a group. The portion not
allocated by the Compensation Committee is allocated by the Chief Executive
Officer to eligible employees on the basis of their respective contributions.
The aggregate amount of all bonuses paid for any single fiscal year may not
exceed 6% of pre-tax profits for the year. The Compensation Committee approves
Company performance objectives to be used for bonus determination and approves
the overall structure and mechanics of the bonus program. For fiscal 1995,
bonuses aggregating $6,248,098 were paid to a total of 269 individuals.
Profit Sharing Plan: The Profit Sharing Plan is available to all
employees who have at least six months of service with the Company. The Board of
Directors determines the amount of annual contributions under the Profit Sharing
Plan. In fiscal 1995, the Board set aside 7.0% of pre-tax earnings to be
contributed to the Profit Sharing Plan. Additionally, 1% of pre-tax profit is
contributed semiannually to each employee's Section 401(k) Plan account.
Contributions to the Profit Sharing Plan and Section 401(k) Plan are made in
cash and distributed to employees semi-annually. The amount of each
participating employee's distribution is that portion of the total funds
available for distribution equal to such employee's base salary divided by the
aggregate base salaries of all participating employees. An aggregate of $189,279
was paid to executive officers under the Profit Sharing Plan and Section 401(k)
Plan for fiscal 1995 performance.
Equity-Based Component. Stock options are an essential element of the
Company's executive compensation package. The Stock Option Committee believes
that equity-based compensation in the form of stock options links the interests
of management and stockholders by focusing employees and management on
increasing stockholder value. The actual value of such equity-based compensation
depends entirely on appreciation of the Company's stock. Approximately 46% of
the Company's employees participate in the Company's 1994 Option Plan.
During fiscal 1995, the Stock Option Committee made stock option grants
to certain executives including the Chief Executive Officer. See "Executive
Compensation - Option Grants in the Fiscal 1995." Generally, for executive
officers, the stock option grants were higher than the grants made by the survey
companies. Stock options typically have been granted to executive officers when
the executive first joins the Company, annually thereafter, in connection with
significant changes in responsibilities, and, occasionally, to achieve equity
within a peer group. The
15
<PAGE>
number of shares subject to each stock option granted takes into account or is
based on anticipated future contribution and ability to impact corporate and/or
business unit results, past performance or consistency within the executive's
peer group, prior option grants to the executive officer and the level of vested
and unvested options. The purpose of these options is to provide greater
incentives to those officers to continue their employment with the Company and
to strive to increase the value of the Company's Common Stock. Options have been
granted at exercise prices of not less than fair market value of the Company's
Common Stock on the date of grant. These options generally vest at an annual
rate of 25% of the total shares granted commencing one year from the date of
grant. In addition, the Committee has also granted "fourever" options, which
vest in full four years from the date of grant. The "fourever" program is
intended to provide continuing incentive to employees to remain with the
Company.
1995 CEO Compensation
In evaluating the compensation of Mr. Perham, President and Chief
Executive Officer of the Company, for services rendered in fiscal year 1995, the
Compensation Committee examined both quantitative and qualitative factors. In
looking at quantitative factors, the Compensation Committee reviewed the
Company's fiscal 1995 financial results and compared them with the Company's
financial results in fiscal 1994 and with the companies in the S&P Electronics
Index. The Compensation Committee reviewed the Company's net income of
$78,302,000 for fiscal 1995, the Company's increase in earnings per share in
fiscal 1995, the Company's increase in net sales for fiscal 1995, and other
quantitative factors. The Compensation Committee did not apply any specific
quantitative formula which could assign weights to those performance measures or
establish numerical targets for any given factor.
Based on the foregoing, and the factors considered in determining the
sizes of the stock option awards discussed above, the Compensation Committee
made the following determinations with respect to Mr. Perham's compensation for
fiscal 1995.
In fiscal 1995, Mr. Perham's base salary was $277,776 (compared to
$277,776 in fiscal 1994). Mr. Perham's base salary was not increased in fiscal
1995.
Mr. Perham received a $912,600 bonus in fiscal 1995. The bonus was
based in part on the payout of 140,000 performance units and the attainment of
$2.79 in pre-tax profit per share in fiscal 1995. The remainder of the bonus was
a discretionary cash award of 0.5% of pre-tax profit. For fiscal 1995, Mr.
Perham also received an aggregate of $30,729 under the Profit Sharing Plan and
the Section 401(k) Plan.
During fiscal 1995, Mr. Perham was granted an option for 80,000 shares.
The Stock Option Committee believes such option is appropriate for Mr. Perham's
level of responsibility and is well within competitive practice, taking into
account prior option grant history, the level of vested versus unvested shares
and the number of shares Mr. Perham already owned. The Stock Option Committee
determined that this new option grant provided the necessary incentive to Mr.
Perham.
16
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Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Section 162(m)"), generally provides that publicly held corporations may not
deduct in any taxable year certain compensation in excess of $1 million paid to
the chief executive officer and the next four most highly compensated executive
officers. The Compensation Committee and the Board of Directors approved, and
are with this Proxy Statement submitting to the Company's stockholders for
approval, the adoption of the Executive Performance Plan in order to qualify for
continued tax deductibility all cash and stock-related incentive compensation to
be paid to the Company's executive officers under that Plan. (See below under
the captions "Proposal No. 3 - Adoption of 1995 Executive Performance Plan").
The 1994 Option Plan is already in compliance with Section 162(m). The
Compensation Committee considers one of its primary responsibilities to be
providing a compensation program that will attract, retain and reward executive
talent necessary to maximize shareholder returns. Accordingly, the Compensation
Committee believes that the Company's interests are best served in some
circumstances to provide compensation (such as salary and perquisites) which
might be subject to the tax deductibility limitation of Section 162(m).
COMPENSATION COMMITTEE
Carl E. Berg
John C. Bolger
STOCK OPTION COMMITTEE
Carl E. Berg
John C. Bolger
17
<PAGE>
PERFORMANCE GRAPH
The Performance Graph shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line-graph presentation comparing cumulative,
five-year stockholder returns on an indexed basis with (i) a broad equity market
index and (ii) an industry index or peer group. Set forth below is a line graph
comparing the percentage change in the cumulative total stockholder return on
the Company's Common Stock against the cumulative total return of the Standard &
Poors 500 Index and the Standard & Poors Electronics (Semi/Components) Index for
a period of five fiscal years. The Company's fiscal year ends on a different day
each year because the Company's year ends at midnight on the Sunday nearest to
March 31 of each calendar year. However, for convenience, the amounts shown
below are based on a March 31 fiscal year end. "Total return," for the purpose
of this graph, assumes reinvestment of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among Integrated Device Technology, Inc., the S & P 500 Index
and the S & P Electronic (Semi/Components) Index
3/90 3/91 3/92 3/93 3/94 3/95
---- ---- ---- ---- ---- ----
INTEGRATED DEVICE TECHNOLOGY .... $100 $105 $ 82 $109 $356 $519
S & P 500 ....................... 100 114 127 146 149 172
S & P ELEC (SEMI/COMPNTS) ....... 100 102 123 231 309 372
* $100 Invested on 3/31/90 in Stock or Index Including
Reinvestment of Dividends.
Fiscal Year Ending March 31.
18
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CERTAIN TRANSACTIONS
The Company leases its Salinas facility from Carl E. Berg, a director
of the Company. The Company paid rental expense of $1,527,000 during fiscal
1995, under a lease agreement that expired in July 1995 and was renewed through
June 2005, with options to renew for successive five-year periods through 2015.
In September 1994 the Company exercised its option to renew the lease at an
annual rental expense of $927,000 from July 1995 through July 2005. In
connection with the lease renewal, the Company was granted a right of first
refusal to purchase the Salinas facility on the same terms as a third party
offeree and an option to purchase the facility for a purchase price of
approximately $8,509,000 in a tax-free stock exchange. The Company's option is
exercisable for six months beginning on July 1, 2000. In October 1994, the
Company purchased from Mr. Berg a 5.5 acre parcel of undeveloped land adjacent
to its Salinas facility for $653,000.
The Company holds an approximately 56% equity interest in Quantum
Effect Design, Inc., ("QED"), a corporation formed in 1991. Leonard C. Perham,
the President and Chief Executive Officer and a director of the Company, and
Carl E. Berg are members of the board of directors of QED. Mr. Berg also holds
an approximately 5.6% equity interest in QED. Pursuant to a development
agreement between the Company and QED, QED is developing for the Company
derivative products based on MIPS' 64-bit microprocessor architecture. During
fiscal 1995, the Company paid QED a total of $2,625,000 for product development
and nonrecurring engineering expenses. During fiscal 1995, the Company also
incurred royalties of $1,544,000 to QED.
The Company holds an approximately 16% equity interest in Monolithic
System Technology, Inc. ("MoSys"). Leonard C. Perham and Carl E. Berg are
members of the board of directors of MoSys. Mr. Berg also holds an equity
interest of approximately 18% of MoSys. MoSys is developing certain technology
that, if successfully reduced to practice, could relate to the Company's
business. During fiscal 1995, the Company purchased 400,000 shares of MoSys
preferred stock for a total of $2,000,000 and paid MoSys $125,000 for technical
support.
The Company has from time to time retained Phillip Perham, a contractor
and the brother of Leonard C. Perham, as an independent contractor to perform
certain construction services in connection with improvements and repairs to
various Company facilities. The Company paid Phillip Perham an aggregate of
approximately $134,250 for such services in fiscal 1995.
In April 1995, the Company loaned $100,000 to L. Robert Phillips, Vice
President, Manufacturing of the Company, pursuant to a promissory note to secure
a salary advance. The note is due and payable in April 1998 and Mr. Phillips is
obligated to pay interest annually at the rate of 6.69%. In the event that Mr.
Phillips exercises any stock options and sells the underlying shares or receives
a bonus or cash compensation other than salary, then one half of the net
proceeds of such receipts shall be used for repayment of the outstanding
principal.
COMPLIANCE UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the SEC and the Nasdaq National Market. Such persons
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on the Company's review of the copies of such forms
furnished to it and written representations from the executive officers and
directors, the Company believes that all Section 16(a) filing requirements were
met.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1996 Annual Meeting must be received by the
Company no later than March 16, 1996.
19
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. However, if any other matters properly come before the Annual Meeting
or any adjournment or postponement thereof, 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.
By Order of the Board of Directors
Jack Menache
Secretary
Dated: July 14, 1995
Santa Clara, California
20
<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 24, 1995
The undersigned hereby appoints Leonard C. Perham and William D. Snyder, or
either of them, each with power of substitution, to represent the undersigned at
the Annual Meeting of Stockholders of Integrated Device Technology, Inc. (the
"Company") to be held at 2670 Seeley Road, San Jose, California 95054 on August
24, 1995, at 9:30 a.m. P.D.T., and any adjournment thereof, and to vote the
number of shares the undersigned would be entitled to vote if personally present
at the meeting on the following matters:
SEE REVERSE
SIDE
<PAGE>
PLEASE MARK
X YOUR CHOICES
LIKE THIS
<TABLE>
<CAPTION>
- -------------------------------- -------------------------------
ACCOUNT NUMBER COMMON
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WITHHELD
1. ELECTION FOR FOR ALL FOR AGAINST ABSTAIN
OF CLASS II [ ] [ ] 2. AMENDMENT TO CERTIFICATE [ ] [ ] [ ]
DIRECTORS OF INCORPORATION
Nominees: John C. Bolger FOR AGAINST ABSTAIN
Federico Faggin 3. APPROVAL OF 1995 [ ] [ ] [ ]
EXECUTIVE
PERFORMANCE PLAN
Instruction: To withhold authority to vote for any 4. AMENDMENT OF 1994 FOR AGAINST ABSTAIN
individual nominee, write that nominee's STOCK OPTION PLAN [ ] [ ] [ ]
name on the space provided below:
- -----------------------------------------------------
FOR AGAINST ABSTAIN
5. RATIFICATION OF [ ] [ ] [ ]
SELECTION OF PRICE
WATERHOUSE LLP AS THE
COMPANY'S INDEPENDENT
AUDITORS
</TABLE>
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees for election and FOR
Proposals 2, 3, 4 and 5.
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. IN THE ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR THE COMPANY'S NOMINEES FOR ELECTION AND FOR PROPOSALS 2,
3, 4 AND 5. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment
thereof to the extent authorized by Rule 14a-4(c) promulgated by the Securities
and Exchange Commission.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated: , 1995
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Signature(s)
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares are held of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators, or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title.
Please date the proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THIS PROXY IN THE ENCLOSED, POSTAGE PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING.
