SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MICROCHIP TECHNOLOGY INCORPORATED
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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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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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):
--------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
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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<PAGE>
[LOGO]
MICROCHIP TECHNOLOGY INCORPORATED
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 18, 2000
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The Annual Meeting of Stockholders of Microchip Technology
Incorporated, a Delaware corporation (the "Company"), will be held at 9:00 a.m.
local time on Friday, August 18, 2000, at the Company's facilities at 2355 West
Chandler Boulevard, Chandler, Arizona, for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders and until their successors are elected and
qualified;
2. To vote on a proposed amendment to the Company's Restated
Certificate of Incorporation, as amended, to increase the number
of authorized shares of Common Stock, par value $0.001 per share
(the "Common Stock"), from 100,000,000 to 300,000,000;
3. To approve an amendment to the Company's 1993 Stock Option Plan
to extend the term of the Stock Option Plan;
4. To approve amendments to the Company's Employee Stock Purchase
Plan to: (a) increase by 200,000 the number of shares of Common
Stock reserved for issuance thereunder; and (b) extend the term
of the Employee Stock Purchase Plan;
5. To ratify the appointment of KPMG LLP as the independent auditors
of the Company for the fiscal year ending March 31, 2001; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on June 20, 2000
are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to personally attend the
meeting. To assure your representation at the meeting, however, you are urged to
mark, sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
Sincerely,
/s/ Mary K. Simmons
Mary K. Simmons
Secretary
Chandler, Arizona
July 7, 2000
<PAGE>
[LOGO]
MICROCHIP TECHNOLOGY INCORPORATED
2355 WEST CHANDLER BOULEVARD
CHANDLER, ARIZONA 85224-6199
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PROXY STATEMENT
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VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Microchip Technology
Incorporated, a Delaware corporation (the "Company"), by the Company's board of
directors (the "Board of Directors") for use at the Annual Meeting of
Stockholders to be held at 9:00 a.m. local time on Friday, August 18, 2000 (the
"Meeting"), or at any adjournment thereof, for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Stockholders. The Meeting will be held at the Company's facilities at 2355 West
Chandler Boulevard, Chandler, Arizona.
These proxy solicitation materials were first mailed on or about July
7, 2000, to all stockholders entitled to vote at the Meeting.
Unless otherwise noted, all references in this Proxy Statement to
numbers of shares of the Company's Common Stock, $0.001 par value per share (the
"Common Stock") and stock option information have been restated to reflect a
3-for-2 stock split of the Common Stock effected on February 7, 2000.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on June 20, 2000 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, 78,949,234 shares of Common Stock were issued and outstanding.
The presence, in person or by proxy, of the holders of a majority of
the total number of shares of Common Stock outstanding on the Record Date
constitutes a quorum for the transaction of business at the Meeting. Shares that
are voted "FOR," "AGAINST," or "WITHHELD FROM" a matter are treated as being
present at the Meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Meeting (the "Votes Cast") with
respect to such matter. Each stockholder voting at the Meeting, either in person
or represented by proxy, may cast one vote per share of Common Stock held on all
matters to be voted on at the Meeting. Assuming that a quorum is present, the
affirmative vote of a majority of the Votes Cast is required: (i) to amend the
Company's 1993 Stock Option Plan, as proposed; (ii) to amend the Company's
Employee Stock Purchase Plan, as proposed; and (iii) to ratify the appointment
of the Company's independent auditors. The affirmative vote of a majority of the
shares of Common Stock outstanding on the Record Date is required to approve the
proposed amendment to the Company's Restated Certificate of Incorporation (the
<PAGE>
"Certificate of Incorporation"). In the election of directors, the five nominees
receiving the highest number of affirmative votes shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence of a quorum, but have no other legal effect under Delaware law.
VOTING OF PROXIES; ABSTENTIONS; BROKER NON-VOTES
Votes cast in person or by proxy at the Meeting will be tabulated by
the election inspector(s) appointed for the Meeting. When a proxy is properly
executed and returned, the shares it represents will be voted at the Meeting as
directed. Any proxy that is returned using the form of proxy enclosed and that
is not marked as to a particular item will be voted: (i) "FOR" the election of
each of the nominees set forth in this Proxy Statement; (ii) "FOR" approval of
each of the other matters presented to stockholders in this Proxy Statement; and
(iii) as the proxy holders deem advisable on other matters that may come before
the Meeting. A stockholder may indicate on the enclosed proxy or its substitute
that it is abstaining from voting on a particular matter (an "abstention"). A
broker may indicate on the enclosed proxy or its substitute that it does not
have discretionary authority as to certain shares to vote on a particular matter
(a "broker non-vote"). Abstentions and broker non-votes are each tabulated
separately. The election inspector(s) will determine whether a quorum is present
at the Meeting. In general, Delaware law provides that a majority of the shares
entitled to vote, present in person or represented by proxy, constitutes a
quorum. Abstentions and broker non-votes of shares that are entitled to vote are
treated as shares that are present in person or represented by proxy for
purposes of determining the presence of a quorum. In determining whether a
proposal has been approved, abstention of shares that are entitled to vote are
treated as Votes Cast with respect to such proposal, but not as voting for such
proposal and hence have the same effect as votes against such proposal; broker
non-votes of shares that are entitled to vote are not treated as Votes Cast with
respect to the particular proposal on which the broker has expressly not voted,
and hence have no effect on the outcome of the voting on a proposal that
requires a majority of the Votes Cast (such as the approval of a plan
amendment). However, with respect to a proposal that requires a majority of the
outstanding shares of Common Stock, a broker non-vote has the same effect as a
vote against the proposal.
REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its
use by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
SOLICITATION
The Company will pay all expenses of this solicitation. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies also may be solicited by certain of
the Company's directors and officers, personally or by telephone, without
additional compensation. The Company may also, at its sole expense, retain a
proxy solicitation firm to assist in the distribution of proxy solicitation
materials and in the collection of proxies. If so, the Company believes that the
expense will not exceed $15,000.
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<PAGE>
ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for each of the nominees named below. All of the nominees are currently
directors of the Company. In the event that any such nominee is unable or
declines to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee 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. The term of office of each person elected as a director at
the Meeting will continue until the next annual meeting of stockholders and
until a successor has been elected and qualified.
The following table sets forth certain information regarding the
nominees for director of the Company:
NAME AGE POSITION(S) HELD
---- --- ----------------
Steve Sanghi ..................... 44 Chairman of the Board, President
and Chief Executive Officer
Albert J. Hugo-Martinez(l)(2)..... 54 Director
L.B. Day(1) ...................... 55 Director
Matthew W. Chapman(2) ............ 49 Director
Wade F. Meyercord (2) ............ 59 Director
----------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
MR. SANGHI is currently, and has been since August 1990, President of
the Company, since October 1991, Chief Executive Officer and since October 1993,
Chairman of the Board of Directors. He has served as a director of the Company
since August 1990. Mr. Sanghi served as the chairman of the board of directors
of ADFlex Solutions, Inc., a U.S. supplier of flexible circuit-based
interconnect solutions, until September 1999 when he resigned his position upon
the sale of ADFlex.
MR. HUGO-MARTINEZ has served as a director of the Company since October
1990. Since February 2000, he has served as Chief Executive Officer of
Hugo-Martinez Associates, a consulting and advisory firm. From February 1999 to
February 2000, he served as Chairman and Chief Executive Officer of Network
Webware, Inc., an Internet software company. From March 1996 until November
1999, he served as President and Chief Executive Officer and a member of the
board of directors of GTI Corporation, a manufacturer of ISDN-ADSL and local
area network subcomponents. From 1987 to 1995, he served as President and Chief
Executive Officer of Applied Micro Circuits Corporation, a manufacturer of
high-performance bipolar and BiCMOS gate arrays. Mr. Hugo-Martinez is also a
member of the board of directors of Ramtron International Corporation, a
manufacturer of specialty high-performance semiconductor devices, and of SCG
Holding Corporation, doing business as ON Semiconductor, a supplier of
semiconductor components.
3
<PAGE>
MR. DAY has served as a director since December 1994. Since 1976, he
has served as President of L.B. Day & Company, Inc., a management consulting
firm specializing in organizational development and strategic planning. Mr. Day
is also a member of the board of directors of Concentrex Incorporated, formerly
called CFI ProServices, Inc., a supplier of integrated software solutions and
services to financial institutions throughout the United States.
MR. CHAPMAN has served as a director since May 1997. Since 1988, he has
served as Chief Executive Officer of Concentrex Incorporated, formerly called
CFI ProServices, Inc., a supplier of integrated software solutions and services
to financial institutions throughout the United States, and since 1991, he has
also served as Chairman of Concentrex Incorporated.
MR. MEYERCORD has served as a director since June 1999. Since June
1999, he has served as Senior Vice President and Chief Financial Officer of
Rioport.com, an Internet applications service provider for the music industry.
From October 1997 to June 1999, he served as Senior Vice President, e-commerce
and Quality Assurance of Diamond Multimedia Systems, Inc., a supplier of
Internet multimedia appliances. From 1987 to 1997, he served as President of
Meyercord & Associates, a management consulting firm specializing in strategy
and infrastructure improvement. Mr. Meyercord is also a member of the board of
directors of California Micro Devices Corporation, an integrated passive
electronics components manufacturer. He also served on the board of directors of
ADFlex Solutions, Inc., a U.S. supplier of flexible circuit-based interconnect
solutions, until September 1999 when he resigned his position upon the sale of
ADFlex.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's By-Laws authorize the Board of Directors to appoint from
among its members one or more committees comprised of one or more directors. The
Board of Directors has appointed a standing Audit Committee and a standing
Compensation Committee. The Company does not have a nominating committee or any
committee that performs the functions of a nominating committee.
The Audit Committee is primarily responsible for appointing the
Company's independent accounting firm and for reviewing and evaluating the
Company's accounting principles and its systems of internal controls. The Audit
Committee also reviews the annual financial statements, significant accounting
and tax issues and the scope of the annual audit with the Company's independent
auditors. Messrs. Hugo-Martinez, Chapman and Meyercord currently serve on the
Audit Committee.
The Compensation Committee reviews and acts on all matters relating to
compensation levels and benefit plans for the Company's key executives. See
"Board Compensation Committee Report on Executive Compensation," below. Messrs.
Day and Hugo-Martinez currently serve on the Compensation Committee.
The Board of Directors met seven times during the fiscal year ended
March 31, 2000. The Company's Audit Committee met twice, and the Company's
Compensation Committee met three times, during the fiscal year ended March 31,
2000. No director attended fewer than 75% of the aggregate number of Board of
Directors' and committee meetings held during fiscal 2000 (for those meetings
that were held during the period each director served as a director or committee
member).
4
<PAGE>
DIRECTOR COMPENSATION AND OTHER INFORMATION
DIRECTOR FEES
Directors currently receive a $12,500 annual retainer, paid in
quarterly installments, and $1,500 per meeting for each regular and special
Board of Directors meeting that a director attends in person. No compensation is
paid for telephonic meetings of the Board of Directors or for meetings of
committees of the Board of Directors.
Commencing July 1, 2000, directors will receive a $13,000 annual
retainer, payable in quarterly installments (prorated for the three remaining
quarters of fiscal 2001), and $1,600 per meeting for each regular and special
Board of Directors meeting that a director attends in person. No compensation
will be paid for telephonic meetings of the Board of Directors or for meetings
of committees of the Board of Directors.
STOCK OPTIONS
Under the terms of the Company's 1993 Stock Option Plan, each
non-employee director is automatically granted an option to purchase 10,000
shares of Common Stock upon his or her first election to the Board of Directors,
and an additional option to purchase 5,000 shares of Common Stock as of the
first business day of the month in which the annual stockholders' meeting is
held. On August 2, 1999, each of directors Hugo-Martinez, Day, Chapman and
Meyercord was granted an option to acquire 5,000 shares of Common Stock at an
exercise price of $50(1), such options to vest in a series of 12 equal and
successive monthly installments commencing one month after the grant date.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth the compensation for the three fiscal
years ended March 31, 2000, 1999 and 1998 earned by the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers whose salary plus bonus for fiscal 2000 exceeded $100,000 for
services rendered in all capacities to the Company (collectively, the "Named
Executive Officers"):
--------
(1) Neither the number of shares nor the option exercise price set forth above
have been adjusted to reflect the 3-for-2 stock split of the Common Stock
effected on February 7, 2000. To the extent such options had not been
exercised on February 7, 2000, the number of unexercised options and the
exercise price were adjusted to reflect the 3-for-2 stock split.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ----------------
AWARDS
----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS/SARS (#) COMPENSATION($)(2)
--------------------------- ---- ---------- ------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Steve Sanghi, 2000 414,595 15,041 188,321 332,565
President and Chief 1999 390,056 3,601 106,819 158,027
Executive Officer 1998 365,548 40,607 85,000 191,166
Timothy B. Billington, 2000 206,473 89,603 51,252 0
Vice President, 1999 193,983 40,394 30,433 0
Manufacturing and 1998 181,490 59,695 24,000 0
Technology Group
George P. Rigg, 2000 185,545 6,683 27,056 60,899
Vice President, 1999 179,092 1,686 3,475 27,362
Advanced Microcontroller 1998 175,350 5,396 20,000 38,587
and Systems Group
C. Philip Chapman, 2000 185,237 6,701 44,264 69,117
Vice President, Chief 1999 175,667 1,627 26,416 33,718
Financial Officer 1998 165,449 5,107 24,000 51,336
and Secretary (3)
Mitchell R. Little, 2000 189,342 66,804 44,270 9,400
Vice President, 1999 175,760 33,204 26,418 2,160
Americas Sales 1998 164,996 27,953 24,000 25,825
</TABLE>
----------
(1) Includes portion of bonus under the Management Incentive Compensation Plan,
referred to as "MICP," and cash bonus payments under the Company's cash
bonus plan earned in year shown but not paid until the following year. See
"Board Compensation Committee Report on Executive Compensation," below for
descriptions of the MICP bonus program and the cash bonus plan.
(2) Except as otherwise noted, consists of: (i) the Company-matching
contributions to the Company's 401(k) retirement savings plan, which were
$2,892 for Mr. Sanghi, $0 for Mr. Billington, $2,989 for Mr. Rigg, $3,006
for Mr. Chapman, and $3,010 for Mr. Little; and (ii) an additional payment
by the Company in connection with a split-dollar life insurance program
which is distributable to the individual executive officer when he is no
longer an employee of the Company, in the amount of $329,673 for Mr.
Sanghi, $0 for Mr. Billington, $57,900 for Mr. Rigg, $66,111 for Mr.
Chapman and $6,390 for Mr. Little. See "Board Compensation Committee Report
on Executive Compensation," below for a description of the split-dollar
life insurance program.
(3) Mr. Chapman resigned from the Company effective May 19, 2000.
6
<PAGE>
EQUITY COMPENSATION PLANS
THE 1993 STOCK OPTION PLAN AND THE 1997 NONSTATUTORY STOCK OPTION PLAN (THE
"PLANS")
Under the Plans, the Company's primary equity incentive program,
employees, executive officers, non-employee members of the Board of Directors
and independent contractors who provide valuable services to the Company may be
granted stock options to purchase shares of Common Stock at a price not less
than 100% of the fair market value of the option shares on the grant date.
Options granted under the Plans vest over the period determined by the Board of
Directors at the date of grant, at periods generally ranging from one year to
four years. Generally, if the Company is acquired by merger, consolidation or
asset sale, outstanding options that are not assumed by the successor
corporation or otherwise replaced with a comparable option will automatically
accelerate and become exercisable in full. Any options so assumed may be
accelerated if the optionee's employment is terminated within a designated
period following the acquisition. In connection with a change in control of the
Company by tender offer or proxy contest for board membership, the Stock Option
Committee of the Board of Directors can accelerate outstanding options. At March
31, 2000, options to acquire 9,820,894 shares of Common Stock were outstanding
at a weighted average exercise price of $15.22, and options to acquire 5,977,140
shares of Common Stock were available for grant under the Plans.
The 1993 Stock Option Plan is more fully described below at "Proposal
to Amend the Company's 1993 Stock Option Plan."
THE EMPLOYEE STOCK PURCHASE PLAN (THE "PURCHASE PLAN")
The Purchase Plan allows eligible employees of the Company to purchase
shares of Common Stock at semi-annual intervals through periodic payroll
deductions. The purchase price per share for an eligible employee who
participates in the Purchase Plan is the lower of (i) 85% of the fair market
value of a share of Common Stock on the employee's entry date into the Purchase
Plan's then-current offering period or (ii) 85% of the fair market value of a
share of Common Stock on the semi-annual purchase date.
The Purchase Plan is more fully discussed below at "Proposals to Amend
the Company's Employee Stock Purchase Plan."
OPTION GRANTS
The following table contains information concerning the grant of stock
options to the Named Executive Officers during the fiscal year ended March 31,
2000:
7
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT POTENTIAL REALIZABLE
NUMBER OF OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM
GRANTED IN FISCAL BASE PRICE EXPIRATION ------------------------
NAME (#)(1) YEAR ($/SH) DATE 5% ($)(4) 10% ($)(4)
---- ------ ---- ------ ---- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steve Sanghi.............. 135,000 (1) 5.6% 22.58 4/14/09 1,917,314 4,858,851
53,321 (2) 2.2% 22.58 4/14/09 757,275 1,919,084
Timothy B. Billington..... 37,500 (1) 1.6% 22.58 4/14/09 532,587 1,349,681
13,752 (2) 0.6% 22.58 4/14/09 195,310 494,955
George P. Rigg............ 18,000 (3) 0.7% 22.58 4/14/09 255,642 647,847
9,056 (2) 0.4% 22.58 4/14/09 128,609 325,921
C. Philip Chapman......... 33,000 (1) 1.4% 22.58 4/14/09 468,677 1,187,719
11,264 (2) 0.5% 22.58 4/14/09 159,968 405,390
Mitchell R. Little........ 33,000 (1) 1.4% 22.58 4/14/09 468,677 1,187,719
11,270 (2) 0.5% 22.58 4/14/09 160,053 405,606
</TABLE>
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(1) Each stock option becomes exercisable over a one-year vesting period, in 12
successive monthly installments commencing on July 1, 2003, and has a
maximum term of 10 years from the date of grant. Vesting may be accelerated
under certain circumstances in connection with an acquisition of the
Company or a change of control. The exercise price may be paid in cash or
through a cashless exercise procedure involving a same-day sale of the
purchased shares.
(2) Each stock option became fully exercisable on April 14, 2000, and has a
maximum term of 10 years from the date of the grant. Vesting may be
accelerated under certain circumstances in connection with an acquisition
of the Company or a change in control. The exercise price may be paid in
cash or through a cashless exercise procedure involving a same-day sale of
the purchased shares.
(3) Each stock option is exercisable over a three-year vesting period, in 36
successive monthly installments commencing on July 1, 1999 and has a
maximum term of 10 years from the date of grant. Vesting may be accelerated
under certain circumstances in connection with an acquisition of the
Company or a change of control. The exercise price may be paid in cash or
through a cashless exercise procedure involving a same-day sale of the
purchased shares.
(4) No assurance can be given that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. The rates of appreciation are specified by rules of
the Securities and Exchange Commission (the "SEC") and are for illustrative
purposes only; they do not represent the Company's estimate of future stock
price. Unless the market price of the Common Stock does, in fact,
appreciate over the option term, no value will be realized from the option
8
<PAGE>
grant. The exercise price of each of the options was equal to the closing
sales price of the Common Stock as quoted on the NASDAQ Stock Market on the
date of grant.
OPTION EXERCISES AND HOLDINGS
The following table provides information on option exercises in the
fiscal year ended, and option holdings at, March 31, 2000, by the Named
Executive Officers and the value of such officers' unexercised options at March
31, 2000:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES VALUE AT MARCH 31, 2000 (#) AT MARCH 31, 2000 ($)(2)
ACQUIRED ON REALIZED ----------------------------- -----------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steve Sanghi............. 60,000 2,048,715 1,194,291 704,883 70,179,494 34,608,269
Timothy B. Billington.... 79,379 1,754,217 32,619 213,346 1,625,794 10,566,890
George P. Rigg........... 50,918 1,418,338 8,940 128,149 454,632 6,402,594
C. Philip Chapman........ 70,576 2,230,597 29,719 185,545 1,550,304 9,150,541
Mitchell R. Little....... 40,122 940,313 11,225 184,145 554,400 9,077,776
</TABLE>
----------
(1) Calculated based on the market price per share of the Common Stock at date
of exercise multiplied by the number of shares issued upon exercise less
the total exercise price of the options exercised.
(2) Calculated based on $65.75 per share, which was the closing sales price per
share of the Common Stock as quoted on the NASDAQ Stock Market on March 31,
2000, multiplied by the number of applicable shares in-the-money less the
total exercise price for such shares.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has not entered into employment contracts with any of the
Named Executive Officers. Each of the Named Executive Officers has entered into
an Executive Officer Severance Agreement with the Company (the "Severance
Agreement"). The Severance Agreement provides for the automatic acceleration in
vesting of all unvested stock options upon the first to occur of any of the
following events: (i) as of the date immediately preceding a change of control
in the event any such stock options are or will be terminated or canceled
(except by mutual consent) or any successor to the Company fails to assume and
agree to perform all such stock option agreements at or prior to such time as
any such person becomes a successor to the Company; (ii) as of the date
immediately preceding such change of control in the event the executive does not
or will not receive upon exercise of such executive's stock purchase rights
under any such stock option agreement the same identical securities and/or other
consideration as is received by all other stockholders in any merger,
consolidation, sale, exchange or similar transaction occurring upon or after
such change of control; (iii) as of the date immediately preceding any
involuntary termination of such executive occurring upon or after any such
change of control; or (iv) as of the date six months following the first such
change of control, provided that the executive shall have remained an employee
of the Company continuously throughout such six-month period. For purposes of
the Severance Agreement, "change of control" means the occurrence of any of the
following events: (a) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
9
<PAGE>
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the total voting power represented by the Company's then
outstanding voting securities; or (b) a change in the composition of the Board
of Directors as a result of which fewer than a majority of the directors are
"Incumbent Directors." "Incumbent Directors" means directors who either (A) are
directors of the Company as of the date the Severance Agreement was entered
into, or (B) are elected, or nominated for election, to the Board of Directors
with the affirmative votes (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
election as a director without objection to such nomination) of at least
three-quarters of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors of the Company); or (c) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 50% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all the
Company's assets.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE; GENERAL
The Board of Directors maintains a Compensation Committee (the
"Committee") comprised of one or more outside directors. The Committee is
presently comprised of Messrs. Hugo-Martinez and Day. The Committee, with input
from directors Chapman, Meyercord and Sanghi, conducted performance reviews for
fiscal 2000, and made compensation decisions for fiscal 2001, with respect to
the Company's executive officers other than Mr. Sanghi. The Committee, with
input from director Chapman, conducted the performance review for fiscal 2000,
and made compensation decisions for fiscal 2001, with respect to Mr. Sanghi. Mr.
Sanghi does not participate in deliberations relating to his own compensation.
THE STOCK OPTION COMMITTEE
The Board of Directors also maintains a Stock Option Committee
comprised of two or more outside directors. The Stock Option Committee
administers the Plans and determines, within the confines of the Plans, the
timing, amount and vesting of stock options to be granted to the Company's
executive officers. Currently, the Committee serves as the Stock Option
Committee.
COMPENSATION POLICY
The Company bases its compensation policy on a pay-for-performance
philosophy for all corporate officers and key employees. This philosophy
emphasizes variable compensation, primarily by setting base salaries after a
review of average base salary levels of comparable companies in the
semiconductor industry, with an opportunity to enhance total compensation
through various incentives. The Company believes that this philosophy
successfully aligns an executive's total compensation with the Company's
10
<PAGE>
business objectives and performance and the interests of the stockholders, and
serves to attract, retain and reward individuals who contribute both to the
Company's short-term and long-term success. Compensation decisions also include
subjective determinations and a consideration of various factors with the weight
given to a particular factor varying from time to time and in various individual
cases. The Company believes that its overall pay-for-performance philosophy
fosters a team environment among the Company's management that focuses their
energy on achieving the Company's financial and performance objectives,
consistent with the Company's guiding values.
The Committee believes that the overall compensation levels for the
Company's executive officers for fiscal 2000 are consistent with the Company's
pay-for-performance philosophy and are commensurate with the Company's fiscal
2000 performance. Overall, the 8-bit microcontroller segment of semiconductor
industry achieved a revenue growth rate of approximately 3% for the period ended
December 31, 1999. By contrast, the Company's net sales increased 22% in fiscal
2000; its net income before special income and charges increased 40% in fiscal
2000; and its return on average equity was 22.71% in fiscal 2000.
ELEMENTS OF COMPENSATION
There are currently four major elements of the Company's executive
compensation program: annual base salary, incentive cash bonuses and long-term
compensation programs, stock options, and compensation and employee benefits
generally available to all Company employees.
BASE SALARIES. The Committee establishes annual base salaries for the
Company's executive officers at the beginning of each fiscal year, primarily by
considering the salaries of executive officers in similar positions with
comparably sized companies (the "Reference Group"). The Reference Group
currently consists of five companies that have annual sales of $500 million to
$1.5 billion, have current market capitalizations of between $5.0 billion and
$20.0 billion, and operate in recognized market segments, such as logic, memory
and mixed-signal, within the semiconductor industry. Monitoring the Reference
Group provides a stable and continuing frame of reference for reviewing and
setting base salary compensation. The composition of the Reference Group is
subject to change from year to year based on the Committee's assessment of
comparability, including the extent to which the Reference Group reflects
changes occurring within the Company and in the semiconductor industry as a
whole. The Reference Group companies also comprise the Peer Group used in the
performance graph. See "Performance Graph," below. In addition, consistent with
the Company's pay-for-performance philosophy, the Committee reviews the
performance objectives for the Company as a whole for the immediately preceding
fiscal year and the upcoming fiscal year, as well as the performance objectives
for each of the individual officers relative to their respective areas of
responsibility for both periods. Performance objectives are initially developed
by the individual officers, in conjunction with their respective operating
units, and then discussed with and approved by the Chief Executive Officer to
generate the Company's annual operating plan ("AOP"). The Board of Directors
then reviews and approves the AOP. In setting base salaries, the Committee also
considers subjective factors such as an executive's experience and tenure in the
industry and perceived value of the executive's position to the Company as a
whole. After consideration of all of the above-described factors, average base
salaries for the Company's executive officers increased 5.7% in fiscal 2000.
11
<PAGE>
INCENTIVE CASH BONUSES AND LONG-TERM COMPENSATION PROGRAMS. Incentive
cash bonuses may be payable to the Company's officers, managers and other key
employees under the Company's Management Incentive Compensation Plan ("MICP").
The Board of Directors approved the MICP for fiscal 2000 as part of the fiscal
2000 AOP at the beginning of fiscal 2000. The MICP is an aggregate bonus pool
derived from a percentage of the Company's annual operating profit. This bonus
pool may then be allocated among the eligible participants based upon the
achievement of individual performance objectives and various subjective
determinations, with no particular weight being assigned to any one factor. MICP
bonuses, if any, are payable on a quarterly basis. The Board of Directors and
the Committee generally give Mr. Sanghi wide discretion with respect to the
designation of employees eligible to participate in the MICP and the amount of
any MICP bonus to be awarded to each participant, including executive officers
other than himself. The Committee determines the amount of the MICP bonus, if
any, to be awarded to Mr. Sanghi. In fiscal 2000, approximately 400 employees,
including the executive officers and the Chief Executive Officer, participated
in the MICP.
In conjunction with the MICP, the executive officers are eligible to
participate in a program designed to provide longer-term compensation to the
executive officers. In light of the importance of retaining the executive
officers in the Company's long-term employ and in order to provide an
alternative to immediately taxable cash bonuses, the Company maintains a
split-dollar life insurance program for key executives. The split-dollar life
insurance program provides key officers with an incentive to remain in the
long-term employ of the Company, an insurance benefit, and a cash value benefit
payable in the future when the executive is no longer in the Company's employ.
The Committee determines what portion of an executive's overall MICP cash bonus
will be paid in cash or into the split-dollar life insurance program. During
fiscal 2000, four of the executive officers, including Mr. Sanghi, participated
in the split-dollar life insurance program. See the "Summary Compensation Table"
and the footnotes thereto, above.
Numerous objective and subjective factors were considered in
establishing the total MICP bonus compensation for fiscal 2000, including the
Company's sales and net income growth, return on equity and industry conditions
as they exist throughout the fiscal year. MICP bonuses for fiscal 2000 were paid
at the rate of 128% of the total MICP bonus pool established in the fiscal 2000
AOP. As a result, the average MICP bonus for the Company's four executive
officers, excluding Mr. Sanghi, was approximately 35.7% of base salary, an
increase of approximately 18.2% in fiscal 2000 as compared to fiscal 1999 when
the average MICP bonus for such officers, excluding Mr. Sanghi, was
approximately 17.5% of base salary. See the "Summary Compensation Table" and
footnotes thereto, above. The Committee believes that the MICP bonus
compensation for fiscal 2000 is consistent with the Company's
pay-for-performance philosophy and is commensurate with the fiscal 2000 AOP
objectives.
STOCK OPTIONS. The Company believes that executive officers, other
corporate officers and key employees should hold substantial, long-term equity
stakes in the Company so that their collective interests will coincide with the
interests of the stockholders. Thus, stock options constitute a significant
portion of the Company's incentive compensation program. At March 31, 2000,
approximately 47% of the Company's employees worldwide held options to purchase
Common Stock. In granting stock options to executive officers, the Committee
considers numerous factors, such as the individual's position and
responsibilities with the Company, the individual's future potential to
influence the Company's mid- and long-term growth, the vesting schedule of the
options awarded and the number of options previously granted. See the table
under "Option Grants - Option Grants in Last Fiscal Year," above, for
12
<PAGE>
information regarding options to purchase Common Stock granted to the Named
Executive Officers during fiscal 2000.
OTHER COMPENSATION AND EMPLOYEE BENEFITS GENERALLY AVAILABLE TO COMPANY
EMPLOYEES. The Company maintains compensation and employee benefits that are
generally available to all Company employees, including medical, dental and life
insurance benefits, the Purchase Plan, a 401(k) retirement savings plan, a
supplemental retirement savings plan (an unfunded, non-qualified deferred
compensation plan maintained primarily for the purpose of providing deferral of
compensation for a select group of management employees as defined in ERISA
Sections 201, 301 and 401), and a cash bonus plan. The cash bonus plan awards
each eligible employee with up to two and one-half days of pay, based on base
salary, every quarter, if the Company meets certain operating profitability
objectives established by the Board of Directors. For fiscal 2000, each eligible
employee received 103% of the target cash bonus payment permitted under the cash
bonus plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the same factors and criteria described above in
making compensation decisions regarding the Chief Executive Officer. For fiscal
2000, Mr. Sanghi's base salary was increased by 6.3%. The Committee believes
this is an appropriate increase considering the base salaries of chief executive
officers in the Reference Group and the Company's increased sales growth and
performance compared to the semiconductor industry as a whole. Mr. Sanghi's
aggregate MICP bonus for fiscal 2000 was determined after considering numerous
objective and subjective factors, including industry conditions and the
Company's performance, and resulted in a total MICP bonus payment for fiscal
2000 (which was made as a contribution to the split-dollar life insurance
program) of approximately 79.5% of his base salary. As a result, Mr. Sanghi's
fiscal 2000 MICP bonus represented an increase of approximately 39.6% in fiscal
2000 as compared to fiscal 1999 when Mr. Sanghi's MICP bonus was approximately
39.9% of his base salary. See the "Summary Compensation Table" and footnotes
thereto, above. The Committee believes that Mr. Sanghi's fiscal 2000 MICP bonus
was (i) consistent with the Company's pay-for-performance philosophy and is
commensurate with the Company's overall performance, as well as the fiscal 2000
AOP objectives; and (ii) reasonable based on the Company's overall performance
in fiscal 2000, its performance as compared to the Reference Group and Mr.
Sanghi's leadership and influence over the Company's performance. During fiscal
2000, Mr. Sanghi was granted options to acquire 188,321 shares of Common Stock
at a weighted average exercise price of $22.58 per share. For additional
information concerning these option grants, including vesting information, see
the table under "Option Grants in Last Fiscal Year," above. The amounts of the
grants and the vesting terms were determined to provide an appropriate long-term
incentive for Mr. Sanghi.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the deductibility by the Company for federal income tax purposes
of compensation paid to the Company's Chief Executive Officer and to each of the
Company's other four most highly compensated executive officers to $1 million
each, subject to certain exceptions. The Company anticipates that a substantial
portion of each executive officer's compensation will be "qualified
performance-based compensation," that is not limited under Code Section 162(m).
The Committee, therefore, does not currently anticipate that any executive
officer's compensation will exceed that limitation of deductibility in fiscal
2001. The Committee intends to review the deductibility of executive
13
<PAGE>
compensation from time to time to determine whether any additional actions are
advisable to maintain deductibility.
By The Compensation and Stock Option Committees of the Board of
Directors:
Albert J. Hugo-Martinez L.B. Day
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors maintains a Compensation Committee, which is
currently comprised of Messrs. Hugo-Martinez and Day. Neither of Messrs.
Hugo-Martinez or Day had any contractual or other relationship or transaction
with the Company during fiscal 2000 except as a director and neither has ever
served as an officer or employee of the Company.
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return for: (i) the Common Stock; (ii) a self-constructed Peer Group Index
comprised of five companies that operate in recognized market segments, such as
logic, memory and mixed-signal, within the semiconductor industry and that have
annual sales between $500 and $1.5 billion and a current market capitalization
of between $5.0 billion and $20.0 billion (the "Peer Group"); and (iii) the CRSP
Total Return Index for the NASDAQ Stock Market (U.S.). The Peer Group is
comprised of Altera Corporation, Atmel Corporation, Linear Technology
Corporation, Maxim Integrated Products, Inc. and Xilinx, Inc.
The Peer Group is identical to the Reference Group used by the
Committee in reviewing executive compensation. See "Board Compensation Committee
Report on Executive Compensation," above.
In preparing the following graph, it was assumed that $100 was invested
in the Common Stock at the initial offering price on March 22, 1993, the date on
which shares of Common Stock were first publicly traded. No cash dividends have
been declared or paid with respect to the Common Stock.
NOTE THAT HISTORIC STOCK PRICE PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE STOCK PERFORMANCE.
14
<PAGE>
<TABLE>
<CAPTION>
Mar-93 Apr-93 May-93 Jun-93 Jul-93 Aug-93 Sep-93 Oct-93 Nov-93 Dec-93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Microchip Technology 100.00 131.77 144.18 181.38 176.73 288.35 322.46 396.87 396.87 483.69
Peer Group Index 100.00 96.66 112.41 117.40 126.44 140.02 152.89 134.98 138.41 161.46
Broad Market Index 100.00 95.73 103.51 103.99 104.11 109.49 112.75 115.29 111.85 114.97
Jan-94 Feb-94 Mar-94 Apr-94 May-94 Jun-94 Jul-94 Aug-94 Sep-94 Oct-94 Nov-94 Dec-94
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Microchip Technology 492.99 551.90 474.39 520.88 576.69 655.77 595.30 683.68 730.17 863.33 830.18 767.39
Peer Group Index 171.71 185.01 173.38 193.43 177.34 164.27 157.45 184.35 193.08 222.25 215.39 224.05
Broad Market Index 118.45 117.35 110.13 108.70 108.97 104.98 107.13 113.96 113.67 115.91 112.06 112.38
Jan-95 Feb-95 Mar-95 Apr-95 May-95 Jun-95 Jul-95 Aug-95 Sep-95 Oct-95 Nov-95 Dec-95
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Microchip Technology 624.38 704.61 784.84 788.35 830.17 1015.07 1074.35 1060.41 1056.89 1107.50 1130.16 1018.53
Peer Group Index 215.46 246.22 257.81 294.87 311.36 351.76 430.27 465.76 483.61 476.07 439.63 391.01
Broad Market Index 113.01 118.98 122.47 126.32 129.59 140.08 150.37 153.42 156.95 156.05 159.71 158.87
Jan-96 Feb-96 Mar-96 Apr-96 May-96 Jun-96 Jul-96 Aug-96 Sep-96 Oct-96 Nov-96 Dec-96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Microchip Technology 927.86 774.35 767.38 711.56 718.53 690.65 889.50 1023.80 1042.95 1011.56 1332.46 1419.67
Peer Group Index 455.95 458.46 400.80 433.12 409.97 347.38 353.57 371.33 409.06 399.38 525.79 489.71
Broad Market Index 159.66 165.75 166.30 180.08 188.34 179.85 163.84 173.05 186.28 184.21 195.63 195.47
Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97 Jul-97 Aug-97 Sep-97 Oct-97 Nov-97 Dec-97
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Microchip Technology 1595.85 1564.46 1255.74 1308.04 1485.98 1245.25 1559.18 1692.61 1890.13 1669.06 1465.00 1255.74
Peer Group Index 605.94 565.59 527.67 575.53 608.27 599.05 705.84 684.87 702.66 588.94 598.83 532.17
Broad Market Index 209.34 193.83 181.19 186.84 207.99 214.39 236.98 236.63 250.65 237.60 238.85 234.74
Jan-98 Feb-98 Mar-98 Apr-98 May-98 Jun-98 Jul-98 Aug-98 Sep-98 Oct-98 Nov-98 Dec-98
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Microchip Technology 966.67 1012.44 879.02 1187.74 1025.50 1093.56 1283.24 766.50 915.62 1132.80 1457.16 1548.76
Peer Group Index 559.47 650.40 580.93 669.45 558.45 501.21 522.02 419.20 464.84 573.48 654.55 802.69
Broad Market Index 242.17 264.94 274.73 279.36 263.84 282.26 278.97 223.67 254.71 265.91 292.93 330.99
Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Microchip Technology 1208.65 1140.65 1449.31 1465.00 1836.51 1983.00 2098.15 2291.72 2150.45 2788.80 2652.74 2864.65
Peer Group Index 924.23 768.65 917.14 1024.59 983.36 1205.61 1195.04 1312.88 1244.70 1479.68 1591.06 1673.49
Broad Market Index 379.00 345.02 370.97 382.86 372.65 405.92 398.73 415.40 415.76 448.20 500.56 612.53
Jan-00 Feb-00 Mar-00
------ ------ ------
Microchip Technology 2631.83 3920.28 4128.23
Peer Group Index 1925.32 2632.81 2793.28
Broad Market Index 589.94 701.04 689.04
</TABLE>
15
<PAGE>
CERTAIN TRANSACTIONS
In the ordinary course of business, the Company uses numerous
employment recruiters to locate potential employment candidates. During fiscal
2000, the Company began using High Tech Job Placement, a company owned by the
wife and daughter of Mr. Little, as one of its numerous employment recruiters.
No compensation was paid to High Tech Job Placement during fiscal 2000, but, to
date during fiscal 2001, the Company has paid approximately $65,000 in placement
fees to High Tech Job Placement. The Company expects that it will continue to
consider employment candidates presented by High Tech Job Placement during the
remainder of fiscal 2001; however, any additional placement fees that may be
payable during fiscal 2001 are not knowable at this time.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of April 28, 2000 by: (i) each
director and nominee for director; (ii) each of the Named Executive Officers;
(iii) all directors and executive officers as a group; and (iv) each person who
is known to the Company to own beneficially more than five percent of the Common
Stock:
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) COMMON STOCK
------------------------------------ ------------------------ ------------
Capital Research & Management (3)........ 9,915,000 12.55%
J. & W. Seligman & Co., Inc. (4)......... 5,532,000 7.01%
AMVESCAP PLC(5).......................... 5,331,848 6.75%
FMR Corp. (6)............................ 4,214,235 5.34%
Steve Sanghi (7)......................... 2,030,761 2.53%
George P. Rigg (8)....................... 138,495 *
Albert J. Hugo-Martinez (9).............. 64,563 *
C. Philip Chapman (10)................... 58,051 *
Timothy B. Billington (11)............... 45,331 *
Matthew W. Chapman (12).................. 27,250 *
L.B. Day (13)............................ 21,250 *
Wade F. Meyercord (14)................... 11,250 *
Mitchell R. Little (15).................. 7,141 *
All directors and executive officers as
a Group (nine persons) (16)............ 2,404,092 2.99%
--------------------
* Less than 1% of the outstanding shares of Common Stock
(1) Except as otherwise indicated in the footnotes to this table and subject to
applicable community property laws, the persons named in this table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Includes shares of Common Stock issuable to the identified person pursuant
to stock options and stock purchase rights that may be exercised within 60
days of April 28, 2000. In calculating the percentage of ownership, such
shares are deemed to be outstanding for the purpose of computing the
percentage of shares of Common Stock owned by such person but are not
deemed to be outstanding for the purpose of computing the percentage of
shares of Common Stock owned by any other stockholder.
(3) 333 South Hope Street, Los Angeles, CA 90071. Information is based on a
Schedule 13G filed with the SEC by Capital Research & Management dated
February 10, 2000. Such Schedule 13G indicates that Capital Research and
Management is the beneficial owner of 9,915,000 shares of the Common Stock
as a result of acting as an investment adviser to investment companies
registered under Section 8 of the Investment Company Act of 1940. Capital
16
<PAGE>
Research and Management has the sole power to dispose of and direct the
disposition of such Common Stock. The Growth Fund of America, Inc., an
investment company registered under Section 8 of the Investment Company Act
of 1940, which is advised by Capital Research and Management, is the
beneficial owner of 4,012,000 shares of the Common Stock. The Growth Fund
of America, Inc. has sole power to vote or direct the vote of such Common
Stock.
(4) 100 Park Avenue, New York, NY 10017. Information is based on a Schedule 13G
filed with the SEC by J. & W. Seligman & Co., Inc. on February 10, 2000.
Such Schedule 13G indicates that J. & W. Seligman & Co., Inc. is the
beneficial owner of 5,532,000 shares of Common Stock as a result of acting
as an investment adviser to investment companies registered under Section 8
of the Investment Company Act of 1940. J. & W. Seligman & Co. has the
shared power to vote or direct the vote of 5,315,550 shares of the Common
Stock and has the shared power to dispose of and direct the disposition of
5,532,000 shares of such Common Stock.
(5) 11 Devonshire Square, London, EC2M 4YR, England. Information is based on
the Schedule 13G filed with the SEC by AMVESCAP PLC on February 4, 2000.
Such Schedule 13G indicates that AMVESCAP PLC has shared power to vote or
direct the vote and to dispose of and direct the disposition of such Common
Stock. AMVESCAP PLC is the parent holding company of a group of investment
management companies that hold investment power and, in some cases, voting
power over the securities reported in the referenced Schedule 13G.
(6) 82 Devonshire Street, Boston, MA 02109. Information is based on a Schedule
13G filed with the SEC by FMR Corp. on January 10, 2000. Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp. and
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, is the beneficial owner of 4,214,235 shares of the
Common Stock. Neither FMR Corporation nor Fidelity Management & Research
Company have the sole power to vote or direct the voting of the Common
Stock.
(7) Includes 1,289,799 shares issuable upon exercise of options. Also includes
387,598 shares held of record by Steve Sanghi and Maria T. Sanghi as joint
tenants, 41,445 shares held individually by Steve Sanghi, and 311,919
shares held of record by Steve Sanghi and Maria T. Sanghi as Trustees of
Declaration of Trust.
(8) Includes 32,152 shares issuable upon exercise of options. Also includes
19,155 shares held by George P. Rigg and Jane H. Rigg as joint tenants, and
87,188 shares held individually by George P. Rigg.
(9) Includes 64,563 shares issuable upon exercise of options.
(10) Includes 51,952 shares issuable upon exercise of options. Also includes
6,099 shares held by C. Philip Chapman and Donna R. Chapman as joint
tenants.
(11) Includes 44,027 shares issuable upon exercise of options. Also includes
1,304 shares held individually by Timothy B. Billington.
(12) Includes 21,250 shares issuable upon exercise of options. Also includes
6,000 shares held individually by Matthew W. Chapman.
(13) Includes 21,250 shares issuable upon exercise of options.
(14) Includes 11,250 shares issuable upon exercise of options.
(15) Includes 6,751 shares issuable upon exercise of options. Also includes 390
shares held individually by Mitchell R. Little.
(16) Includes 1,542,994 shares issuable upon exercise of options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a class of the Company's
equity securities registered under the Exchange Act to file reports of
securities ownership and changes in ownership with the SEC. Officers, directors
and greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
received by it during the fiscal year ended March 31, 2000, and written
representations that no other reports were required, the Company believes that,
except as described below, each person who, at any time during fiscal 2000, was
a director, officer or beneficial owner of more than 10% of the Common Stock,
complied with all Section 16(a) filing requirements. Mr. Little filed one late
report covering an aggregate of 185 shares of Commons Stock. Mr. Rigg filed one
late report covering an aggregate of 10,000 shares of Common Stock.
17
<PAGE>
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Certificate of Incorporation currently provides that the Company is
authorized to issue two classes of stock consisting of 100,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, $0.001 par value per
share. In May 2000, the Board of Directors unanimously approved an amendment to
the Certificate of Incorporation to increase the number of authorized shares of
Common Stock to 300,000,000 shares. The Board of Directors believes that the
current capital structure does not provide sufficient flexibility for the future
needs of the Company. Therefore, at the Meeting, the stockholders are being
asked to approve the proposed amendment. Under the proposed amendment, paragraph
(A) of Article IV of the Certificate of Incorporation would be amended to read
as follows:
"(A) CLASSES OF STOCK. This corporation is authorized to issue two
classes of stock to be designated, respectively, `Common Stock' and
`Preferred Stock.' The total number of shares which the corporation is
authorized to issue is three hundred and five million (305,000,000)
shares. Three hundred million (300,000,000) shares shall be Common
Stock, par value $0.001 per share and five million (5,000,000) shares
shall be Preferred Stock, par value $0.001 per share."
The Company currently has 100,000,000 authorized shares of Common
Stock. As of the Record Date, 78,949,234 shares of Common Stock were issued and
outstanding. In addition, as of the Record Date, and without giving effect to
the proposed amendment to Purchase Plan described in this Proxy Statement,
16,569,634 shares were reserved for future issuance upon the exercise of
outstanding options under the Company's various stock plans and an outstanding
stock purchase warrant.
PURPOSE AND EFFECT OF THE AMENDMENT
The principal purpose of the proposed amendment is to authorize
additional shares of Common Stock which will be necessary or appropriate to,
among other things, effect future stock splits or stock dividends, to raise
additional capital through the sale of securities, or to acquire another company
or its business or assets through the issuance of securities. Depending on the
price, the issuance of additional shares of Common Stock may have a dilutive
effect on earnings per share and, for persons who do not purchase additional
shares to maintain their pro rata interest in the Company, on such stockholders'
percentage voting power.
The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable, without further action by the Company's
stockholders, except as may be required by applicable law or by the rules of any
stock exchange or national securities association trading system on which the
Common Stock may be listed or traded. Upon issuance, such shares will have the
same rights as the outstanding shares of Common Stock. Holders of Common Stock
have no preemptive rights.
The Company has no arrangements, agreements or understandings at the
present time for the issuance or use of the additional shares of Common Stock
proposed to be authorized. The Board of Directors does not intend to issue any
Common Stock except on terms that the Board of Directors deems to be in the best
interests of the Company and its stockholders. Any future issuance of Common
18
<PAGE>
Stock will be subject to the rights of holders of outstanding shares of any
preferred stock that the Company may issue in the future.
REQUIRED VOTE
The approval of the foregoing amendment to the Certificate of
Incorporation requires the affirmative vote of a majority of the shares of
Common Stock issued and outstanding on the Record Date. Accordingly, the effect
of an abstention is the same as that of a vote against the proposal. If approved
by the stockholders, the proposed amendment to Article IV(A) will become
effective upon the filing of a certificate of amendment to the Certificate of
Incorporation, which will occur as soon as reasonably practicable. If the
proposed amendment is not approved by the stockholders, the authorized number of
shares of the Company's stock will not change.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK.
PROPOSAL TO AMEND THE COMPANY'S 1993 STOCK OPTION PLAN
PROPOSED PLAN AMENDMENT
The Board of Directors has approved an amendment to the Company's 1993
Stock Option Plan (the "Plan"), subject to approval by the stockholders, to
extend the term of the Plan so that the Plan terminates upon the earlier of (i)
JANUARY 19, 2013 or (ii) the date on which all shares available for issuance
under the Plan have been issued pursuant to the exercise of options granted
under the Plan (the "Plan Amendment"). Without giving effect to the Plan
Amendment, the Plan provides that the Plan shall terminate upon the earlier of
(i) JANUARY 19, 2003 or (ii) the date on which all shares available for issuance
under the Plan have been issued pursuant to the exercise of options granted
under the Plan.
Since the Plan's initial adoption, a total of 25,346,216 shares of
Common Stock have been reserved for issuance under the Plan. As of the Record
Date, 14,734,788 have been issued upon exercise of options, 5,531,473 are
currently subject to outstanding options and 5,079,955 are shares with respect
to which options may be granted in the future.
REASONS FOR THE PLAN AMENDMENT
The Plan is intended to promote the best interests of the Company by
providing officers, key employees, non-employee members of the Board of
Directors, and consultants and other independent contractors who provide
valuable services to the Company with the opportunity to acquire, or otherwise
increase, their equity interest in the Company as an incentive to remain in
service to the Company and to align their collective interests with those of the
stockholders.
The participation of key employees, including officers, in stock option
plans has always been an essential component of the Company's pay-for-
performance compensation program. See "Board Compensation Committee Report on
Executive Compensation," above. The Board of Directors believes that the stock
option program should continue to function as the Company's key long-term
incentive compensation program. Stock option programs are a standard employee
benefit in the high technology industry in which the Company competes, enabling
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such companies to ultimately attract and then retain talented employees. As a
result, many other companies, including the Company's competitors, maintain
stock option programs. The Board of Directors believes that such plans are
necessary and important in attracting and retaining employees with outstanding
capabilities and that a serious competitive disadvantage would result if the
Company were unable to continue granting stock options. For these reasons, the
Board of Directors believes that it is in the best interest of the Company to
extend the term of the Plan for an additional ten years beyond its current
expiration date.
BOARD RECOMMENDATION
At the Meeting, the stockholders are being requested to approve the
proposed Plan Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED PLAN
AMENDMENT.
DESCRIPTION OF THE PLAN
The Plan is the Company's primary equity incentive program for officers
and non-employee members of the Board of Directors. The Plan, which is a
successor plan to the Company's 1989 Stock Option Plan (the "1989 Plan"), was
adopted by the Board of Directors in January 1993 and approved by the
stockholders in February 1993.
The Plan is divided into the Discretionary Option Grant Program and the
Automatic Option Grant Program. Option grants under the Discretionary Option
Grant Program may be made to officers, key employees, non-employee members of
the Board of Directors, and consultants and other independent contractors who
provide valuable services to the Company. As of March 31, 2000, there were
approximately nine persons eligible to participate under the Plan's
Discretionary Option Grant Program. The Discretionary Option Grant Program is
administered by the Stock Option Committee, which is presently comprised of
Messrs. Hugo-Martinez and Day.
On May 5, 2000, the Board of Directors adopted an amendment to the Plan
providing that options granted under the Discretionary Option Grant Program
after such date will be non-statutory. Prior to May 5, 2000, options granted
under the Plan were either incentive stock options meeting the requirements of
Code Section 422 or non-statutory options. If any outstanding option expires or
terminates prior to exercise, the shares subject to that option may become the
subject of subsequent grants under the Plan. The expiration date, maximum number
of shares purchasable and the other provisions of the options granted under the
Discretionary Option Grant Program, including vesting provisions, are
established at the time of grant. Options may be granted for terms of up to 10
years and become exercisable in whole or in one or more installments at such
time as may be determined by the Stock Option Committee upon the grant of the
options. The exercise prices of options are determined by the Stock Option
Committee, but may not be less than 100% of the fair market value of the Common
Stock at the time of the grant. The per share closing price of the Common Stock
on the NASDAQ Stock Market was $57.625 on June 26, 2000.
If the Company is acquired by merger, consolidation or asset sale, each
outstanding option under the Discretionary Option Grant Program that is not
assumed by the successor corporation or otherwise replaced with a comparable
option will automatically accelerate and become exercisable in full. Any options
so assumed may be accelerated if the optionee's employment is terminated within
a designated period following the acquisition. In connection with a change in
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control of the Company by tender offer or proxy contest for board membership,
the Stock Option Committee can accelerate outstanding options. The Stock Option
Committee also has authority to extend these acceleration provisions to one or
more outstanding options under the 1989 Plan incorporated into the Plan.
The Plan's Automatic Option Grant Program provides for the automatic
grant of stock options to non-employee directors, of which there are currently
four. The non-discretionary feature is intended to satisfy the requirements of
rules adopted under the Exchange Act. Under the Automatic Option Grant Program,
an option to acquire 5,000 shares of Common Stock is automatically granted to
each non-employee director at the meeting of the Board of Directors held
immediately after each annual meeting of stockholders, effective as of the first
business day of the month in which the annual stockholders' meeting is held,
with such options to vest in a series of 12 equal and successive monthly
installments commencing one month after the annual automatic grant date. In
addition, each new non-employee member of the Board of Directors receives an
automatic grant of an option to acquire 10,000 shares of Common Stock on the
date of their first appointment or election to the Board of Directors. Those
options become exercisable and vest in a series of 36 equal and successive
monthly installments commencing one month after the automatic grant date. A
non-employee member of the Board of Directors is not eligible to receive the
5,000 share automatic option grant if that option grant date is within 30 days
of such non-employee member receiving the 10,000 share automatic option grant.
If the Company is acquired by merger, consolidation or asset sale, or in
connection with a change in control of the Company by tender offer or proxy
contest for board membership, each outstanding option under the Automatic Option
Grant Program will automatically accelerate and immediately vest in full.
Options granted under the Plan are nontransferable other than by will
or by the laws of descent and distribution upon the death of the option holder
and, during the lifetime of the option holder, are exercisable only by such
option holder. Termination of employment at any time for cause immediately
terminates all options held by the terminated employee.
If the stockholders approve the proposed amendment to the Plan, the
Plan will remain in force until January 19, 2013. The Board of Directors at any
time may suspend, amend or terminate the Plan except that, without the approval
of the stockholders, the Board of Directors may not: (i) increase, except in the
case of certain organic changes to the Company, the maximum number of shares of
Common Stock subject to the Plan; (ii) reduce the exercise price at which
options may be granted or the exercise price for which any outstanding option
may be exercised; (iii) extend the term of the Plan; (iv) materially change the
class of persons eligible to receive options; or (v) materially increase the
benefits accruing to participants under the Plan. The Board of Directors,
however, may amend the Plan from time to time as it deems necessary in order to
meet the requirements of any amendments to Rule 16b-3 under the Exchange Act
without the consent of the stockholders of the Company.
PLAN PARTICIPATION
The grant of options under the Discretionary Option Grant Program,
including grants to the Named Executive Officers, is subject to the discretion
of the Stock Option Committee. As of the date of this Proxy Statement, there has
been no determination by the Stock Option Committee with respect to future
awards under the Plan. Accordingly, future discretionary awards are not
determinable.
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The future award of options under the Automatic Option Grant Program to
non-employee directors is subject to the (re)election of such individuals as
directors and the fair market value of the Common Stock on the first business
day of the month in which the annual stockholders' meeting is held.
The following table sets forth information with respect to the grant of
options during the fiscal year ended March 31, 2000 to: (i) each of the Named
Executive Officers; (ii) all current executive officers as a group; (iii) all
non-employee directors; and (iv) all other employees as a group:
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<PAGE>
AMENDED PLAN BENEFITS
1993 STOCK OPTION PLAN
NAME OF INDIVIDUAL OR NUMBER OF
IDENTITY OF GROUP AND SHARES SUBJECT TO EXERCISE
POSITION OPTIONS GRANTED (#)(1) PRICE ($)
--------------------------------- ---------------------- ---------
Steve Sanghi, Director,
Chairman, President and
Chief Executive Officer 188,321 $22.58
George P. Rigg, Vice President
Advanced Microcontroller and
Technology Division 27,056 22.58
Timothy B. Billington,
Vice President,
Manufacturing Operations 51,252 22.58
C. Philip Chapman, Vice President
Chief Financial Officer 44,264 22.58
Mitchell R. Little,
Vice President,
Americas Sales 44,270 22.58
All current executive officers
as a group (5 people) 355,163 22.58
All current directors who are not
executive officers as a group 45,000 33.25(2)
(4 people)
All other employees as a group 0 0
----------
(1) See also the table under "Options Grants," above, for additional
information regarding options granted to the Named Executive Officers.
(2) Represents weighted average price share exercise price.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
Certain options granted under the Plan prior to May 5, 2000 were
intended to qualify as incentive stock options under Code Section 422. There is
no taxable income to an employee when an incentive stock option is granted to
him or her or when that option is exercised. The amount by which the fair market
value of the shares at the time of exercise exceeds the option price generally
will be treated as an item of preference in computing the alternative minimum
taxable income of the optionholder. If an optionholder exercises an incentive
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<PAGE>
stock option and does not dispose of the shares within either two years after
the date of the grant of the option or one year of the date the shares were
transferred to the optionholder, any gain or loss realized upon disposition will
be taxable to the optionholder as a capital gain or loss. If the optionholder
does not satisfy the applicable holding periods, however, the difference between
the option price and the fair market value of the shares on the date of exercise
of the option will be taxed as ordinary income, and the balance of the gain, if
any, will be taxed as capital gain. If the shares are disposed of before the
expiration of the one-year or two-year periods and the amount realized is less
than the fair market value of the shares at the date of exercise, the employee's
ordinary income is limited to the amount realized less the option exercise price
paid. The Company will be entitled to a tax deduction only to the extent the
option holder has ordinary income upon the sale or other disposition of the
shares.
Options issued under the Plan also may be nonqualified options. The
income tax consequences of nonqualified options are governed by Code Section 83.
Under Code Section 83, the excess of the fair market value of the shares of the
Common Stock acquired pursuant to the exercise of any option over the amount
paid for such stock (hereinafter referred to as "Excess Value") must be included
in the gross income of the optionholder. In calculating Excess Value, fair
market value is generally determined on the date of the acquisition. Generally,
the Company will be entitled to a federal income tax deduction in the same
taxable year that the optionholder recognizes income. The Company will be
required to withhold taxes with respect to income reportable pursuant to Code
Section 83 by an optionholder who is also an employee of the Company. The basis
of the shares acquired by an optionholder will be equal to the option price of
those shares plus any income recognized pursuant to Code Section 83. Subsequent
sales of the acquired shares will produce capital gain or loss. Such capital
gain or loss will be a long-term gain or loss if the stock has been held for one
year from the date the substantial risk of forfeiture, if any, lapsed, or, if a
Section 83(b) election is made, one year from the date the shares were acquired.
PROPOSALS TO AMEND THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL 1: PROPOSED PURCHASE PLAN AMENDMENT TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE THEREUNDER
The Board of Directors has approved an amendment to the Company's
Employee Stock Purchase Plan (the "Purchase Plan"), subject to approval by the
Company's stockholders, to increase by 200,000 the number of shares of Common
Stock reserved for issuance thereunder (the "Share Increase"). Since the initial
adoption of the Purchase Plan, a total of 5,559,000 shares of Common Stock have
been reserved over time for issuance under the Purchase Plan. Of this amount and
as of the Record Date, 5,075,109 shares of Common Stock have previously been
issued, and a total of 483,891 shares are presently available for future
issuance, without giving effect to the proposed Share Increase.
REASON FOR THE AMENDMENT
The Purchase Plan is intended to promote the best interests of the
Company by providing all eligible employees, including officers, who participate
in the Purchase Plan with the opportunity to become stockholders of the Company
by purchasing the Company's Common Stock at discounted prices through payroll
deductions. The Board of Directors believes that the Purchase Plan is an
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<PAGE>
incentive to employees to remain in the Company's employ, and aligns the
collective interests of employees with those of the stockholders. Equity
incentives are necessary for the Company to remain competitive in the market for
employee talent. The Board of Directors believes that the shares remaining
available for issuance pursuant to the Purchase Plan are insufficient for such
purpose. As of March 31, 2000, approximately 1,275 employees were eligible to
participate in the Purchase Plan, of whom 1,042 were participants.
BOARD OF DIRECTORS RECOMMENDATION
At the Meeting, the stockholders are being requested to approve the
proposed Share Increase.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED SHARE
INCREASE.
PROPOSAL 2: PROPOSED PURCHASE PLAN AMENDMENT TO EXTEND THE TERM OF THE
PURCHASE PLAN FOR AN ADDITIONAL TEN YEARS BEYOND ITS CURRENT
TERMINATION DATE
The Board of Directors has approved an amendment to the Purchase Plan
to extend the term of the Purchase Plan so that the Purchase Plan terminates
upon the earlier of (i) the last business day in FEBRUARY 2013 or (ii) the date
on which all shares available for issuance under the Purchase Plan have been
sold pursuant to purchase rights exercised under the Purchase Plan (the "Term
Extension"). Without giving effect to the Term Extension, the Purchase Plan
provides that it terminates upon the earlier of (i) the last business day in
FEBRUARY 2003 or (ii) the date on which all shares available for issuance under
the Purchase Plan have been sold pursuant to purchase rights exercised under the
Purchase Plan.
The Term Extension will be subject to receiving (i) stockholder
approval of the Term Extensions AND (ii) stockholder approval of the Share
Increase. Accordingly, if the stockholders do not approve the Share Increase,
the Term Extension will not be effective irrespective of the votes received in
favor of this proposal.
REASON FOR THE AMENDMENT
The continued success of the Company depends upon its ability to
attract and retain talented employees. Equity incentives are increasingly
necessary for the Company to remain competitive in the marketplace for qualified
personnel. The Purchase Plan is an integral part of the equity incentive package
that is offered to the Company's employees. As such, the Board of Directors
believes that it is necessary to extend the term of the Purchase Plan in order
to continue to attract and retain the necessary individuals.
BOARD OF DIRECTORS RECOMMENDATION
At the Meeting, the stockholders are being requested to approve the
proposed Amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT
TO THE PURCHASE PLAN.
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<PAGE>
DESCRIPTION OF THE PURCHASE PLAN
The Purchase Plan was initially adopted by the Board of Directors in
January 1993 and approved by the stockholders in March 1993. Since the Purchase
Plan's initial inception, and without giving effect to the proposed Share
Increase, 5,559,000 shares of Common Stock have been reserved over time for
issuance under the Purchase Plan.
The Purchase Plan, and the rights of participants to make purchases
thereunder, is intended to qualify under the provisions of Code Sections 421 and
423. See the discussion below under "Federal Income Tax Consequences For
Purchase of Common Stock Under the Purchase Plan," for a summary of the general
rules regarding the federal income tax treatment of the purchase and sale of
Common Stock under the Purchase Plan. The Purchase Plan is currently
administered by the Board of Directors. The Board of Directors has full
authority to administer the Purchase Plan, including the authority to interpret
and construe any provision of the Purchase Plan and to adopt such rules and
regulations it deems necessary for administration of the Purchase Plan.
Any person who has been employed by the Company for more than 30 days
and who is customarily employed for more than 20 hours per week and at least
five months per calendar year by the Company is eligible to participate in
offerings under the Purchase Plan. Eligible employees become participants in the
Purchase Plan by delivering to the Company's stock administration department a
subscription agreement authorizing payroll deductions at least 24 hours prior to
the beginning of the applicable offering period, as described below. An employee
who becomes eligible to participate in the Purchase Plan after commencement of
an offering period may not participate in the Purchase Plan until the next
semi-annual entry date. There are a maximum of four semi-annual entry dates
("entry date") within each offering period, which are the first business day of
each March and September within an offering period.
The Purchase Plan is currently implemented in a series of successive
offering periods, each with a maximum duration of 24 months. Each two-year
offering period is divided into four semi-annual participation periods,
commencing on the first business day of each March and September during the
offering period. Shares are purchased on the last business day of each
semi-annual participation period (a "purchase date") during an offering period.
The purchase price per share for an eligible employee who participates in the
Purchase Plan is the lower of (i) 85% of the fair market value of a share of
Common Stock on the employee's entry date into the then-current offering period
under the Purchase Plan or (ii) 85% of the fair market value of a share of
Common Stock on the semi-annual purchase date; PROVIDED, HOWEVER, that in no
event will the purchase price per share of Common Stock be less than the fair
market value of a share of Common Stock on the start date of the relevant
two-year offering period.
The purchase price of shares is accumulated by payroll deductions over
the semi-annual participation period. The deductions may not exceed 10% of a
participant's earnings for the semi-annual participation period. A participant
may discontinue his or her participation in the Purchase Plan at any time prior
to five business days before a purchase date during an offering period and may
decrease the rate of payroll deductions at any time during a semi-annual
participation period; provided, however, that the participant may not effect
more than one such reduction during the same semi-annual period of
participation. A participant may not increase his or her rate of payroll
deductions following his or her entry date into the Purchase Plan unless such
increase is made prior to the commencement of the next two-year offering period.
No participant may purchase more than $25,000 in Common Stock annually (based on
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<PAGE>
the fair market value of a share of the Common Stock on the participant's entry
date into the Purchase Plan) or 20,250 shares of Common Stock per semi-annual
participation period.
A participant's purchase right terminates automatically in the event
that the participant ceases to be an employee of the Company, and any payroll
deductions collected from such individual during the semi-annual period in which
such termination occurs will be refunded. However, in the event of the
participant's disability or death, such payroll deduction may be applied to the
purchase of the Common Stock on the next semi-annual purchase date.
If the Company is acquired by merger, consolidation or asset sale, all
outstanding purchase rights will automatically be exercised immediately prior to
the effective date of such acquisition at a price per share equal to 85% of the
lower of (i) the fair market value of the Common Stock on the participant's
entry date into the offering period or (ii) the fair market value of the Common
Stock immediately prior to such acquisition.
The Board of Directors may at any time amend, suspend or terminate the
Purchase Plan following the close of any semi-annual purchase period. Following
termination or suspension of the Purchase Plan all outstanding options will
automatically terminate. Amendments to the Purchase Plan or to options
thereunder that would adversely affect the rights of any participant under an
option theretofore granted shall only be effective as to such options if the
participant's consent is obtained. No amendment may be made to the Purchase Plan
without approval of the stockholders of the Company if stockholder approval of
such amendment is necessary and desirable to comply with Code Section 423 or
with Rule 16b-3 of the Exchange Act, or any successor rule.
PURCHASE PLAN PARTICIPATION
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
purchases under the Purchase Plan are not determinable. The following table sets
forth, as to each of the Named Executive Officers, all current executive
officers as a group and all other employees who participated in the Purchase
Plan: (i) the number of shares of Common Stock purchased under the Purchase Plan
during the fiscal year ended March 31, 2000; and (ii) the dollar value of the
benefit, which is calculated as the fair market value per share of the Common
Stock on the date of purchase, minus the purchase price per share of Common
Stock under the Purchase Plan:
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<PAGE>
AMENDED PLAN BENEFITS
EMPLOYEE STOCK PURCHASE PLAN
NAME OF INDIVIDUAL OR
IDENTITY OF GROUP AND NUMBER OF SHARES DOLLAR
POSITION PURCHASED (#) VALUE ($)(1)
-------- ------------- ------------
Steve Sanghi, Director,
Chairman, President and
Chief Executive Officer 1,306 60,205
Timothy B. Billington,
Vice President,
Manufacturing and Technology Group 1,306 60,205
George P. Rigg, Vice President,
Advanced Microcontroller and
Systems Group 0 0
C. Philip Chapman,
Vice President, Chief Financial
Officer and Secretary 1,157 39,073
Mitchell R. Little,
Vice President,
Americas Sales 668 23,605
All current executive officers
as a group (5 people) 4,437 183,088
All other employees
as a group 264,224 8,958,670
----------
(1) Calculated as the fair market value per share of the Common Stock on the
date of purchase, minus the purchase price per share of Common Stock under the
Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES FOR PURCHASE OF COMMON STOCK UNDER THE PURCHASE
PLAN
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Code Sections 421 and
423. Under these provisions, no income will be taxable to a participant at the
time of grant of the option or purchase of shares. Upon 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 have been held by the participant for more than two years
after the date of option grant and for more than one year after the date of
purchase, the lesser of (a) the excess of the fair market value of the shares at
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the time of such disposition over the purchase price or (b) 15% of the fair
market value of the shares at the date of commencement of the offering period,
will be treated as ordinary income. If the shares are sold and the sale price is
less than the purchase price, there is no ordinary income and the participant
has a capital loss for the difference. If the shares are disposed of before the
expiration of these holding periods, the excess of the fair market value of the
shares on the purchase date over the purchase price will be treated as ordinary
income, and any further gain or loss on such disposition will be long-term or
short-term capital gain or loss, depending on the holding period.
Different rules may apply with respect to participants subject to
Section 16 of the Exchange Act.
The Company 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 dispositions of shares prior to
the expiration of the holding periods described above.
The foregoing is only a brief summary of the effect of federal income
taxation upon the participant and the Company with respect to the shares
purchased under the Purchase Plan, does not purport to be complete, and does not
discuss the tax consequences of a participant's death or the income tax laws of
any municipality, state or foreign country in which a participant may reside.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP ("KPMG"), independent
certified public accountants, to audit the consolidated financial statements of
the Company for the fiscal year ending March 31, 2001. KPMG has audited the
Company's financial statements since fiscal 1993. The Board of Directors
recommends that stockholders vote in favor of the ratification of such
appointment. In the event of a negative vote on such ratification, the Board of
Directors will reconsider its selection. The Board of Directors anticipates that
representatives of KPMG will be present at the Meeting, will have the
opportunity to make a statement if they desire, and will be available to respond
to appropriate questions.
DEADLINE FOR RECEIPT OF STOCKHOLDERS PROPOSALS;
DISCRETIONARY AUTHORITY TO VOTE ON STOCKHOLDER PROPOSALS
Stockholders of the Company may submit proposals that they believe
should be voted upon at the annual meeting or nominate persons for election to
the Board of Directors. Pursuant to Rule 14a-8 under the Exchange Act, some
stockholder proposals may be eligible for inclusion in the Company's 2001 proxy
statement. Any such stockholder proposals must be submitted in writing to the
Secretary of the Company no later than March 9, 2001. Stockholders interested in
submitting such a proposal are advised to contact knowledgeable counsel with
regard to the detailed requirements of applicable securities laws. The
submission of a stockholder proposal does not guarantee that it will be included
in the Company's proxy statement.
Alternatively, under the Company's By-Laws, a proposal or a nomination
that the stockholder does not seek to include in the Company's proxy statement
pursuant to Rule 14a-8 may be submitted in writing to the Secretary of the
Company for the 2001 annual meeting of stockholders not less than 90 days prior
to the date on which the Company first mails its proxy materials for the 2000
annual meeting, unless the date of the 2001 annual meeting is advanced by more
than 30 days or delayed by more than 30 days from the anniversary of the 2000
annual meeting. For the Company's 2001 annual meeting, this means that any such
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<PAGE>
proposal or nomination must be submitted no earlier than April 8, 2001. If the
date of the 2001 annual meeting is advanced by more than 30 days or delayed by
more than 30 days from the anniversary of the 2000 annual meeting, the
stockholder must submit any such proposal or nomination no later than the close
of business on the later of the 90th day prior to the 2001 annual meeting or the
10th day following the day on which public announcement of the date of such
meeting is first made. The stockholder's submission must include certain
specified information concerning the proposal or nominee, as the case may be,
and information as to the stockholder's ownership of common stock of the
Company. Proposals or nominations not meeting these requirements will not be
entertained at the annual meeting.
If the stockholder does not also comply with the requirements of Rule
14a-4(c)(1) under the Exchange Act, the Company may exercise discretionary
voting authority under proxies it solicits to vote in accordance with its best
judgment on any such proposal or nomination submitted by a stockholder.
Stockholders should contact the Secretary of the Company in writing at
2355 W. Chandler Blvd., Chandler, AZ 85224 to make any submission or to obtain
additional information as to the proper form and content of submissions.
Dated: July 7, 2000
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PROXY PROXY
[LOGO]
MICROCHIP TECHNOLOGY INCORPORATED THIS PROXY IS SOLICITED ON BEHALF
2355 WEST CHANDLER BLVD OF THE BOARD OF DIRECTORS
CHANDLER, AZ 85224 2000 ANNUAL MEETING OF STOCKHOLDERS
--------------------------------------------------------------------------------
The undersigned stockholder of MICROCHIP TECHNOLOGY INCORPORATED, a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement of the Company, each dated July 7,
2000 and hereby appoints Steve Sanghi and Gordon W. Parnell, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
2000 Annual Meeting of Stockholders of the Company, to be held on August 18,
2000, at 9:00 a.m., local time, at the Company's facilities at 2355 West
Chandler Boulevard, Chandler, Arizona, 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, in the matters set forth
below:
A majority of such attorneys or substitutes as shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall be
present and act, then that one) shall have and may exercise all of the powers of
said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS; FOR THE AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION; FOR THE AMENDMENT TO THE COMPANY'S 1993
STOCK OPTION PLAN; FOR THE AMENDMENTS TO THE COMPANY'S EMPLOYEE STOCK PURCHASE
PLAN; FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY; AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE>
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5.
1. Election of directors:
<S> <C> <C> <C>
01 Steve Sanghi 04 Matthew W. Chapman [ ] Vote FOR [ ] Vote WITHHELD
02 Albert J. Hugo-Martinez 05 Wade F. Meyercord all nominees from all nominees
03 L. B. Day
2. Proposal to amend the Company's Restated Certificate of [ ] For [ ] Against [ ] Abstain
Incorporation to increase the number of authorized shares of
Common Stock from 100,000,000 to 300,000,000;
3. Proposal to amend the Company's 1993 Stock Option Plan to [ ] For [ ] Against [ ] Abstain
extend the term of such Plan;
4. Proposals to amend the Company's Employee Stock Purchase Plan to:
I Proposal to increase by 200,000 the number of shares of [ ] For [ ] Against [ ] Abstain
Common Stock reserved for issuance thereunder;
II Proposal to extend the term of such Purchase Plan; [ ] For [ ] Against [ ] Abstain
5. Proposal to ratify the appointment of KPMG LLP as the [ ] For [ ] Against [ ] Abstain
independent auditors of the Company.
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