<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] CONFIDENTIAL, FOR USE OF THE
[X] Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
VITESSE SEMICONDUCTOR CORPORATION
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 27, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Vitesse
Semiconductor Corporation, a Delaware corporation (the "Company"), will be
held on TUESDAY, JANUARY 27, 1998, AT 10:30 A.M., local time, at The Radisson
Hotel, 30100 Agoura Road, Agoura Hills, California 91301 for the following
purposes:
1. To elect directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To approve a proposal to amend the Company's Restated Certificate of
Incorporation to authorize an increase in the authorized shares of
Common Stock, par value $.01 per share, of the Company from
50,000,000 to 100,000,000 shares.
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the 1998 fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on NOVEMBER 28, 1997
are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign
and return the enclosed proxy as promptly as possible in the postage-paid
envelope enclosed for that purpose. Any shareholder attending the meeting may
vote in person even if he or she has returned a proxy.
THE BOARD OF DIRECTORS
Camarillo, California
December 21, 1997
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
741 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
----------------
PROXY STATEMENT FOR 1998
ANNUAL MEETING OF SHAREHOLDERS
----------------
The enclosed proxy is solicited on behalf of Vitesse Semiconductor
Corporation (the "Company") for use at the Annual Meeting of Shareholders to
be held on TUESDAY, JANUARY 27, 1998, AT 10:30 A.M., local time, and at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at
the Radisson Hotel, 30100 Agoura Road, Agoura Hills, California 91301. The
Company's principal executive office is located at 741 Calle Plano, Camarillo,
California 93012. The Company's telephone number at that address is (805) 388-
3700.
These proxy solicitation materials were mailed on or about December 21,
1997, to all shareholders entitled to vote at the meeting. A copy of the
Company's 1997 Annual Report to Shareholders accompanies this Proxy Statement.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE
Shareholders of record at the close of business on NOVEMBER 28, 1997 (the
"Record Date") are entitled to notice of the meeting and to vote at the
meeting. As of the Record Date, 35,961,042 shares of the Company's Common
Stock were issued and outstanding. There are no shares of Preferred Stock
outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share of Common Stock on
all matters presented at the meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. In general, the affirmative vote of a majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present is required under Delaware law for approval of proposals
presented to shareholders. Delaware law also provides that a quorum consists
of a majority of shares entitled to vote and present or represented by proxy
at the meeting. The Inspector will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum, but will not treat abstentions as votes in favor of approving any
matter submitted to shareholders for a vote. Any proxy that is returned using
the form of proxy enclosed and that is not marked as to a particular item will
be voted for the election of directors, for ratification of the appointment of
the designated independent auditors and, as the proxy holders deem advisable,
on other matters that may come before the meeting, as the case may be with
respect to the item not marked. If a broker indicates on the enclosed proxy or
its substitute that it does not have discretionary authority as to certain
shares to vote on a particular matter ("broker non-votes"), those shares will
not be considered as present with respect to that matter. The Company believes
that the tabulation procedures to be followed by the Inspector are consistent
with the general statutory requirements in Delaware concerning voting of
shares and determination of a quorum.
<PAGE>
The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of Corporate Investor Communications, Inc. ("CIC") to
aid in the solicitation of proxies from bankers, bank nominees and other
institutional owners (and beneficial owners of shares held by brokerage
firms). The Company estimates that it will pay CIC a fee not to exceed $4,000
for its services and will reimburse CIC for certain out-of-pocket expenses.
The Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegram, letter or facsimile.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
The Company anticipates that the next Annual Meeting of Shareholders will be
held in January or February 1999. Therefore, proposals of shareholders of the
Company which are intended to be presented by such shareholders at the
Company's 1999 Annual Meeting of Shareholders must be received by the Company
no later than August 31, 1998, in order to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
PRINCIPAL SHARE OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of September 30, 1997, by each director, by all directors and
officers of the Company as a group, and by all persons known to the Company to
be the beneficial owners of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENT OF TOTAL
---- ---------------- ----------------
<S> <C> <C>
Fidelity Management & Research Company.. 3,758,000 10.5%
Nicholas Applegate Capital Management,
Inc. .................................. 2,301,032 6.4%
Pilgrim Baxter & Associates Ltd. ....... 1,962,465 5.5%
Louis R. Tomasetta/(1)/................. 426,325 1.2%
Neil Rappaport/(2)/..................... 103,871 *
Pierre R. Lamond/(3)/................... 60,950 *
Robert Nunn/(4)/........................ 60,648 *
Eugene Hovanec/(5)/..................... 52,431 *
Michael Millhollan/(6)/................. 51,418 *
James A. Cole/(7)/...................... 38,903 *
John C. Lewis/(8)/...................... 33,399 *
Thurman J. Rodgers/(9)/................. 3,600 *
All executive officers and directors as
a group (15 persons)/(10)/............. 1,463,282 3.9%
</TABLE>
- --------
* Less than 1%
(1) Includes options to purchase 221,641 shares of Common Stock exercisable
within 60 days of September 30, 1997. Also includes an aggregate of 5,250
shares held by Dr. Tomasetta as custodian for James L. Tomasetta, and
16,750 shares held for each of Kathleen A. and Susan A. Tomasetta,
pursuant to the Transfers to Minors Act and as to which Dr. Tomasetta has
voting and investment power.
(2) Includes options to purchase 66,636 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(3) Includes options to purchase 13,950 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(4) Includes options to purchase 59,500 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(5) Includes options to purchase 31,582 shares of Common Stock exercisable
within 60 days of September 30, 1997.
2
<PAGE>
(6) Includes options to purchase 48,980 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(7) Includes options to purchase 33,600 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(8) Includes options to purchase 8,400 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(9) Includes options to purchase 3,600 shares of Common Stock exercisable
within 60 days of September 30, 1997.
(10) Includes options to purchase 988,914 shares of Common Stock exercisable
within 60 days of September 30, 1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and the holders of 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of equity
securities of the Company. Based on the Company's review of copies of such
reports received by it, or written representations from reporting persons, the
Company believes that during the period from October 1, 1996 to September 30,
1997, its officers and directors filed all required reports on a timely basis.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
A board of six (6) directors is to be elected at the Annual Meeting of
Shareholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's five nominees named below, all of
whom are presently directors of the Company. In the event that any nominee of
the Company is unable or declines to serve as a director at the time of the
Annual Meeting of Shareholders, the proxies will be voted for any nominee who
shall be designated by the present 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 will
continue until the next Annual Meeting of Shareholders or until a successor
has been elected and qualified.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE PRINCIPAL OCCUPATION
---- --- -------- --------------------
<C> <C> <C> <S>
Pierre R. Lamond 67 1987 General Partner of Sequoia Capital and
Chairman of the Board of Directors of the
Company
James A. Cole 55 1987 General Partner of Spectra Enterprise
Associates and a Partner of New Enterprise
Associates
Alex Daly 36 -- Vice President, Marketing of C-Cube
Microsystems
John C. Lewis 62 1990 Chairman of the Board of Directors of Amdahl
Corporation
Thurman J. Rodgers 49 1987 President and Chief Executive Officer of
Cypress Semiconductor Corporation
Louis R. Tomasetta 48 1987 President, Chief Executive Officer and
Director of the Company
</TABLE>
PIERRE R. LAMOND has been the Chairman of the Board of Directors since the
Company's inception in February 1987. Since December 1981, he has been a
General Partner of Sequoia Capital, a venture capital firm. Sequoia has
financed companies such as Cypress Semiconductor Corporation, Cisco Systems,
Inc., and C-Cube Microsystems, Inc. Mr. Lamond was founder and Vice President
of National Semiconductor Corporation. He is also a Director of Cypress
Semiconductor Corporation and CKS Group.
3
<PAGE>
JAMES A. COLE has served as a Director of the Company since February 1987.
Since October 1986, he has served as a General Partner of Windward Ventures
and Spectra Enterprise Associates. He was a founder and Executive Vice
President of Amplica, Inc., a GaAs microwave IC and sub-system company. Mr.
Cole also serves as a Director of Giga-Tronics, Inc., Spectrian Corporation
and eight privately held companies.
ALEX DALY has been Vice President of Marketing at C-Cube Microsystems since
June 1995. From 1990 to 1995, he served at Intel Corporation, a semiconductor
company, most recently as director of marketing for the mobile computing
group. He holds a B.S. degree, cum laude, in electrical engineering from the
University of Miami and an M.B.A. from the University of Dallas.
JOHN C. LEWIS became a Director of the Company in January 1990. He is
currently Chairman of the Board of Directors of Amdahl Corporation, a
manufacturer of large general purpose computer storage systems and software
products where he has been since 1977. Before joining Amdahl in 1977, he was
President of Xerox Business Systems. Mr. Lewis also serves as a Director of
Cypress Semiconductor Corporation, Pinnacle Systems, and Infinity Financial
Technology, Inc.
THURMAN J. RODGERS has served as a Director of the Company since September
1987. He is the co-founder and since 1982 has been President and Chief
Executive Officer of Cypress Semiconductor Corporation. Prior to forming
Cypress Semiconductor, Dr. Rodgers managed the design, technical development,
and engineering for the static RAM business of AMD Corporation. He also serves
as a Director of C-Cube Microsystems, Inc.
LOUIS R. TOMASETTA, a co-founder of the Company, has been President, Chief
Executive Officer and a Director since the Company's inception in February
1987. From 1984 to 1987, Dr. Tomasetta served as President of the integrated
circuits division of Vitesse Electronics Corporation. Prior to that, Dr.
Tomasetta was the director of the Advanced Technology Implementation
department at Rockwell International Corporation. Dr. Tomasetta has over 20
years experience in the management and development of GaAs based businesses,
products, and technology. He received a B.S., M.S., and Ph.D. in electrical
engineering from the Massachusetts Institute of Technology.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five (5) meetings
during the fiscal year ended September 30, 1997.
The Compensation Committee, which currently consists of James A. Cole,
Pierre R. Lamond and Thurman J. Rodgers, reviews and approves officers'
salaries and employee compensation programs. During fiscal year 1997, the
Compensation Committee met at the same times as the Board of Directors met as
a whole.
The Audit Committee, which currently consists of James A. Cole, Pierre R.
Lamond and John C. Lewis, met four (4) times during fiscal year 1997. The
purpose of the Audit Committee is to recommend engagement of the Company's
independent auditors and approve the services performed by such auditors. In
addition, the committee reviews and evaluates the Company's accounting
principles and its system of internal accounting controls.
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Each director attended at least 75% of the aggregate of (i) the total number
of meetings of the Board of Directors held during fiscal year 1997 and (ii)
the total number of meetings held by all committees of the Board of Directors
during fiscal year 1997 on which such person served.
4
<PAGE>
COMPENSATION OF DIRECTORS
On September 14, 1995 the Board approved a cash compensation plan for non-
employee directors' attendance at Board meetings. Non-employee directors
receive $2,000 for meetings attended in person and $1,000 for participation in
Board meetings via telephone. They may also be reimbursed for certain expenses
in connection with attendance at Board and committee meetings.
Each of the directors has been granted options to purchase Common Stock
under the Company's 1987 and/or 1989 Stock Option Plans. Non-employee
directors also participate in the 1991 Director Stock Option Plan (the
"Directors' Plan"). The Directors' Plan provides that each non-employee
director automatically will be granted a nonstatutory option to purchase
10,000 shares (except in the case of the Chairman of the Board who shall
receive an option to purchase 15,000 shares) of Common Stock upon first
becoming a director. In addition, under the Directors' Plan each director
serving on January 1, 1992 was automatically granted a nonstatutory option to
purchase 10,000 shares of Common Stock (except in the case of the Chairman of
the Board who received an option to purchase 15,000 shares) of Common Stock.
The options granted to the non-employee directors are for a ten-year term and
vest at the rate of two percent of the shares subject to the option at the end
of each month following the date of grant. The exercise price of the options
may not be less than 100% of the fair market value of the Common Stock as
determined by the closing price as quoted on the Nasdaq National Market on the
last business day prior to the date of grant of the option. Options granted
under the Directors' Plan may be exercised only while the optionee is serving
as a director on the Board, within six months after termination by death or
disability, or within three months after termination as a director. During
fiscal 1997, Mr. Lamond was granted an option to acquire 22,500 shares of
common stock and Messrs., Cole, Lewis and Rodgers each were granted an option
to acquire 15,000 shares of common stock at an exercise price of $28.125 under
the Directors' Plan (as adjusted to account for a 3 for 2 stock split of the
Company's Common Stock that was effected February 28, 1997).
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
With respect to the election of directors, the six candidates receiving the
highest number of "for" votes shall be elected to the Company's Board of
Directors. An abstention will have the same effect as a vote withheld for the
election of directors, and, pursuant to Delaware law, a broker non-vote will
not be treated as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES SET FORTH
HEREIN.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth certain summary information regarding
compensation paid, with respect to the three most recent fiscal years, to the
Chief Executive Officer and the four most highly compensated executive
officers other than the Chief Executive Officer who were serving as executive
officers at the end of fiscal year 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(/3/) OPTIONS (#)
- ------------------ ---- ---------- --------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Louis R. Tomasetta........... 1997 200,000 67,200/(1)/ -- 150,000
President & Chief
Executive Officer 1996 160,000 2,168/(1)/ 36,923/(4)/ 75,000
1995 161,385 -- -- 150,000
Eugene F. Hovanec............ 1997 180,000 63,000/(1)/ -- 30,000
Vice President, Finance 1996 150,000 2,019/(1)/ -- 45,000
& Chief Financial Officer 1995 150,000 -- -- 60,000
Michael S. Millhollan........ 1997 150,000 58,800/(1)/ -- 30,000
Vice President & General 1996 140,000 1,885/(1)/ -- 37,500
Mgr., Data Communications 1995 140,000 -- -- 90,000
Robert Nunn.................. 1997 150,000 58,800/(1)/ -- 30,000
Vice President & General 1996 140,000 1,897/(1)/ -- 37,500
Mgr., Telecommunications 1995 141,212 -- -- 90,000
Neil J. Rappaport............ 1997 150,000 194,693/(2)/ -- 30,000
Vice President, Sales 1996 125,000 115,235/(2)/ 9,985/(4)/ 45,000
1995 130,923 72,112/(2)/ -- 60,000
</TABLE>
- --------
(1) Represents amounts paid under the Company's bonus plan.
(2) Represents bonuses paid to Mr. Rappaport pursuant to the Company's sales
commission plan.
(3) Excludes certain expenses which, for any executive officer, did not exceed
the lesser of $50,000 or 10% of the compensation reported in the above
table, and which, for all executive officers as a group, did not exceed
the lesser of $50,000 times the number of Executive officers or 10% of all
Executive officers' annual salaries and bonuses reported in the above
table.
(4) Represents payment of accrued vacation to Mr. Rappaport and Mr. Tomasetta.
6
<PAGE>
The following tables set forth, as to the executive officers, certain
information relating to options for the purchase of Common Stock granted and
exercised during fiscal year 1997 and held at the end of fiscal year 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
ASSUMED ANNUAL RATE OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------- ---------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ----------- ---------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Louis R. Tomasetta...... 150,000 10.23% 22.50 03/19/07 2,122,519 5,378,881
Eugene F. Hovanec....... 30,000 2.05% 22.50 03/19/07 424,504 1,075,776
Michael S. Millhollan... 30,000 2.05% 22.50 03/19/07 424,504 1,075,776
Robert Nunn............. 30,000 2.05% 22.50 03/19/07 424,504 1,075,776
Neil J. Rappaport....... 30,000 2.05% 22.50 03/19/07 424,504 1,075,776
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FY-END OPTIONS AT FY-END
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Louis R. Tomasetta...... 315,751 10,312,348 202,891 152,437 6,398,253 6,918,881
Eugene F. Hovanec....... 95,917 2,792,911 31,582 105,000 1,328,418 4,321,238
Michael S. Millhollan... 61,162 2,052,701 39,605 93,750 1,216,911 4,238,653
Robert Nunn............. 45,575 1,337,335 59,500 56,250 2,052,719 2,616,778
Neil J. Rappaport....... 38,750 1,534,800 55,386 99,432 2,548,098 3,952,971
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was or is an officer or employee of
the Company. Pierre R. Lamond, Chairman of the Board of the Company, is
Chairman of the Board of Directors and a member of the Compensation Committee
of the Board of Directors of Cypress Semiconductor Corporation ("Cypress").
Neither the Company nor Cypress treats Chairman of the Board as an officer of
the corporation for compensation purposes. Mr. Lamond is a general partner of
a venture capital firm that invested in the Company prior to its initial
public offering in 1991.
7
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors reviews and approves
salaries, bonuses and other benefits payable to the Company's executive
officers and administers the Company's employee stock option plans. The
Compensation Committee is composed of three non-employee directors.
COMPENSATION GOALS
The goals of the Compensation Committee in establishing compensation for
executive officers are to align executive compensation with business
objectives and performance and to enable the Company to attract, retain and
reward executive officers who contribute to the long-term success of the
Company. The Company's compensation program for executive officers is based on
the same four principles applicable to compensation decisions for all
employees of the Company:
. The Company pays competitively. The Company is committed to providing a
compensation program, including competitive base salaries and, where
appropriate, relocation benefits, to attract and retain the best people
in the industry. To ensure that pay is competitive, the Company reviews
the compensation practices of other leading companies in the industry.
. The Company pays for relative sustained performance. Executive officers
are rewarded based upon corporate performance, departmental performance,
and individual performance. Corporate performance and departmental
performance are evaluated by reviewing the extent to which strategic and
business plan goals are met, including such factors as revenues,
operating profit, performance relative to goals, and timely new product
introductions. Individual performance is evaluated by measuring
organizational progress against set objectives.
. The Company strives for fairness in the administration of compensation.
The Company strives to achieve a balance with respect to compensation
paid to the executives within the Company and in comparable companies.
The Company believes that the contributions of each member of the
executive staff are vital to the success of the Company.
. The Company believes that employees should understand the performance
evaluation and compensation administration process. At the beginning of
the performance cycle, key quarterly and annual objectives are set for
each officer. The chief executive officer gives ongoing feedback on
performance to each officer. At the end of the performance cycle, the
Compensation Committee evaluates the accomplishments of the key
objectives in making its decisions on merit increases and stock option
grants.
COMPENSATION COMPONENTS
The Company's compensation program, which consists of cash- and equity-based
compensation, allows the Company to attract and retain highly skilled
officers, provide useful products and services to customers, enhance
shareholder value, motivate technological innovation, and reward executive
officers and other employees. The components are:
Cash-Based Compensation:
Salary. The Committee sets base salary for officers by reviewing the
compensation levels for competitive positions in the market.
Bonus. The Company's 1997 bonus plan provided for bonuses to be paid to
eligible executive officers as a percentage of their base salary and on the
basis of the achievement of certain corporate financial goals. The bonuses
actually earned by each individual for fiscal 1997 are to be paid in fiscal
1998.
8
<PAGE>
The Vice President of Sales is eligible for participation in the Company's
sales commission plan which covers substantially all of the Company's sales
personnel. Under this plan, participants receive commissions based on
achieving certain bookings and billings targets.
Equity-Based Compensation:
Stock options provide additional incentives to officers to work to maximize
shareholder value. The options vest over a defined period to encourage
officers to continue their employment with the Company. In line with its
compensation philosophy, the Company grants stock options to all employees,
commensurate with their potential contributions to the Company.
CEO COMPENSATION
Louis R. Tomasetta has been President and Chief Executive Officer of the
Company since its incorporation in 1987. In determining Mr. Tomasetta's
compensation, the Committee evaluates corporate performance, individual
performance, compensation paid to other executive officers of the Company, and
compensation paid to chief executive officers of comparable companies. Through
his equity ownership in the Company, consisting of 204,684 shares of Common
Stock and options to purchase 221,641 shares of Common Stock, Mr. Tomasetta
shares with the other shareholders of the Company a significant stake in the
success of the Company's business. For fiscal year 1997, Mr. Tomasetta's
salary was $200,000. His total compensation consists of base salary, bonus and
employee stock options.
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
Pierre R. Lamond
James A. Cole
Thurman J. Rodgers
9
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph depicted below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934. The stock price performance on the graph
is not necessarily an indicator of future price performance.
The graph shows a comparison of cumulative total return for the Company's
stock, the NASDAQ Stock Market-U.S. Index, and the NASDAQ Electronic Components
Index. The two NASDAQ indices were prepared for NASDAQ by the Center for
Research Studies in Securities Prices at the University of Chicago.
COMPARISON OF 57 MONTH CUMULATIVE TOTAL RETURN*
AMONG VITESSE SEMICONDUCTOR CORPORATION, THE NASDAQ STOCK MARKET-US
INDEX AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period VITESSE NASDAQ NASDAQ
(Fiscal Year Covered) SEMICO CORP STOCK MKT ELECTRONIC
- ------------------- ----------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 9/92 $ 100 $100 $100
FYE 9/93 $ 89 $131 $193
FYE 9/94 $ 111 $132 $188
FYE 9/95 $ 300 $182 $374
FYE 9/96 $ 813 $216 $445
FYE 9/97 $1565 $297 $783
</TABLE>
* $100 invested on December 11, 1991 in stock or index, including reinvestment
of dividends. Fiscal year ended September 30.
10
<PAGE>
PROPOSAL TWO:
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation, as currently in effect (the
"Certificate"), provides that the Company is authorized to issue two classes
of stock consisting of 50,000,000 shares of Common Stock and 5,000,000 shares
of Preferred Stock. In October 1997, the Board of Directors authorized an
amendment to the Certificate to increase the authorized number of shares of
Common Stock to 100,000,000 shares (the "Amendment"). The shareholders are
being asked to approve the Amendment at the Annual Meeting.
As of the Record Date, 35,961,042 shares of Common Stock were issued and
outstanding and 2,110,951 shares were reserved for future grant or for
issuance upon the exercise of outstanding options under the Company's stock
option plans and employee stock purchase plan.
If the Amendment is approved, the Board of Directors will have the authority
to issue 64,038,958 (as of the Record Date) shares of Common Stock without
further shareholder approval. The Board of Directors of the Company believes
that the increase in the number of authorized shares of Common Stock is in the
best interests of the Company and its shareholders. The principal purpose of
the Amendment to increase the authorized number of shares of Common Stock is
to provide sufficient shares for such corporate purposes as may be determined
by the Board of Directors to be necessary or desirable, which may include,
without limitation, facilitating broader ownership of the Company's Common
Stock by effecting a stock split or issuing a stock dividend, raising capital
or acquiring property, technologies or companies through merger or the sale of
stock, or attracting or retaining valuable employees by the issuance of stock
options.
Under Delaware law, the Board of Directors generally may issue authorized
but unissued shares of Common Stock without shareholder approval. The Board of
Directors does not currently intend to seek shareholder approval prior to any
future issuance of additional shares of Common Stock, unless shareholder
action is required in a specific case by applicable law, the rules of any
exchange or market on which the Company's securities may then be listed, or
the certificate of incorporation or by-laws of the Company then in effect.
Frequently, opportunities arise that require prompt action, and the Company
believes that the delay necessitated for shareholder approval of a specific
issuance could be to the detriment of the Company and its shareholders.
The additional shares of Common Stock authorized pursuant to the Amendment
will have all the rights and privileges which the presently outstanding shares
of Common Stock possess. The increase in authorized shares would not
immediately affect the terms or rights of holders of existing shares of Common
Stock. All outstanding shares would continue to have one vote per share on all
matters to be voted on by the shareholders, including the election of
directors.
However, to the extent that the additional authorized shares are issued in
the future, except in the case of a stock-split or stock dividend, such
issuances will decrease existing shareholders' percentage equity ownership and
could have the effect of diluting the earnings per share and book value per
share of outstanding stock ownership. The holders of Common Stock have no pre-
emptive rights.
The authorized but unissued shares of Common Stock could be used to make a
change in control of the Company more difficult. For example, such shares
could be sold to purchasers who might side with the Board of Directors in
opposing a takeover bid that the Board determines not to be in the best
interests of the Company and its shareholders. Such a sale could have the
effect of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of shares of the Company's Common Stock,
to acquire control of the Company, since the issuance of new shares could be
used to dilute the stock ownership of such person or entity. The Company is
not aware, however, of any pending or threatened efforts to obtain control of
the Company.
11
<PAGE>
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of the Amendment to increase the number of authorized shares of
Common Stock will require the affirmative vote of at least a majority of all
outstanding shares of the Company's Common Stock as of the Record Date.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS AMENDMENT.
PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected KPMG Peat Marwick LLP, independent auditors, to audit the financial
statements of the Company for the 1998 fiscal year. KPMG Peat Marwick LLP (or
its predecessor firm) has audited the Company's financial statements since the
Company's inception. A representative of KPMG Peat Marwick LLP is expected to
be present at the meeting, will have the opportunity to make a statement, and
is expected to be available to respond to appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has conditioned its appointment of the Company's
independent auditors upon the receipt of the affirmative vote of a majority of
the shares represented, in person or by proxy, and voting at the Annual
Meeting, which shares voting affirmatively also constitute at least a majority
of the required quorum. In the event that the shareholders do not approve the
selection of KPMG Peat Marwick LLP, the appointment of the independent
auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Company may recommend.
THE BOARD OF DIRECTORS
Camarillo, California
December 12, 1997
12
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 27, 1998
P
R
O The undersigned shareholder of Vitesse Semiconductor Corporation, a
X Delaware corporation, hereby acknowledges receipt of the Notice of
Y Annual Meeting of Shareholders and Proxy Statement, each dated
December 19, 1997, and hereby appoints Louis R. Tomasetta and Eugene F.
Hovanec, and each of them, with full power of substitution, as Proxy or
Proxies, to vote all shares of the Common Stock of the undersigned at
the Annual Meeting of Shareholders of Vitesse Semiconductor Corporation
to be held on January 27, 1998, and at any adjournments thereof, upon
the proposals set forth on this form of proxy and described in the Proxy
Statement, and in their discretion with respect to such other matters as
may be properly brought before the meeting or any adjournments thereof.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2 AND PROPOSAL 3, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
[X] Please mark votes as in this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR NAMED BELOW.
1. To elect six directors of the Company to serve for the ensuing one year
until the Company's 1999 Annual Meeting of Shareholders and until their
successors are elected.
NOMINEES: Pierre R. Lamond, James A. Cole, Alex Daly, John C. Lewis, Thurman J.
Rodgers, Louis R. Tomasetta
FOR WITHHELD
[_] [_]
<PAGE>
[_]
--------------------------
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [_]
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's [_] [_] [_]
Restated Certificate of Incorporation to
authorize an increase in the authorized
shares of Common Stock of the Company from
50,000,000 to 100,000,000 shares.
FOR AGAINST ABSTAIN
3. To ratify the selection of KPMG Peat Marwick [_] [_] [_]
LLP as the Company's independent auditor for
the 1998 fiscal year.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If the
signer is a corporation, please give full corporate name and have a duly
authorized officer sign, stating title. If the signer is a partnership, please
sign in partnership name by authorized person.
Signature: Date:
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Signature: Date:
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