<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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
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
741 Calle Plano
Camarillo, CA 93012
(805) 388-3700
Notice of Annual Meeting of Stockholders
On January 25, 2000
Dear Vitesse Stockholder:
On Tuesday, January 25, 2000, Vitesse Semiconductor Corporation, a Delaware
corporation, will hold its 2000 Annual Meeting of Stockholders at the Westlake
Village Inn located at 32001 Agoura Road, Westlake Village, California 91361.
The meeting will begin at 10:30 a.m.
Only stockholders who owned stock at the close of business on December 2,
1999 can vote at this meeting or any adjournments that may take place. At the
meeting we will:
1. Elect a Board of Directors.
2. Approve an amendment to the Directors' Stock Option Plan to reserve an
additional 250,000 shares of Vitesse common stock thereunder for
issuance.
3. Approve a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to provide for an increase in authorized
shares of common stock, par value $.01 per share, of the Company from
250,000,000 to 500,000,000.
4. Approve the appointment of our independent auditors for 2000.
5. Attend to other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of the four
proposals outlined in this Proxy Statement.
At the meeting we will also report on Vitesse's 1999 business results and
other matters of interest to stockholders.
Vitesse recently mailed a copy of its 1999 Annual Report to all
stockholders. The approximate date of mailing for this notice, proxy statement
and proxy card is December 17, 1999.
The Board of Directors
December 17, 1999
Camarillo, California
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
January 25, 2000
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Vitesse Semiconductor Corporation
("Vitesse" or the "Company") of proxies to be voted at the Annual Meeting of
Stockholders to be held on Tuesday, January 25, 2000, at 10:30 a.m., and at any
adjournment that may take place.
The Annual Meeting will be held at the Westlake Village Inn located at 32001
Agoura Road, Westlake Village, California 91361. Vitesse anticipates sending
the proxy materials to stockholders on or about December 17, 1999.
The following is important information in a question-and-answer format
regarding the Annual Meeting and this Proxy Statement.
Q: What may I vote on?
A: (1) The election of five nominees to serve on our Board of Directors.
(2) A proposal to approve an amendment to the Directors' Stock Option Plan
to reserve an additional 250,000 shares of common stock for issuance
thereunder.
(3) A proposal to amend the Amended and Restated Certificate of
Incorporation to provide for an increase in authorized shares of
Vitesse common stock, par value $.01 per share, from 250,000,000 to
500,000,000.
(4) The approval of the appointment of our independent auditors for 2000.
(5) Any other business properly presented at the meeting.
Q: How does the Board recommend I vote on the proposals?
A: The Board recommends a vote FOR each of the director nominees, FOR the
amendment of the Directors' Stock Option Plan, FOR the amendment to
increase authorized shares from 250,000,000 to 500,000,000, and FOR the
appointment of KPMG LLP as independent auditors for 2000.
Q: Who is entitled to vote?
A: Stockholders as of the close of business on December 2, 1999 (the "Record
Date") are entitled to vote at the Annual Meeting. Each stockholder is
entitled to one vote for each share of common stock held on the Record
Date. As of the Record Date, 157,018,307 shares of the Company's common
stock were issued and outstanding.
Q: How do I vote?
A: You may vote in person at the Annual Meeting, by signing and dating each
proxy card you receive and returning it in the prepaid envelope, or through
the Internet or telephone voting system more fully described on your proxy
card.
Q: How can I change my vote or revoke my proxy?
A: You have the right to revoke your proxy and change your vote at any time
before the meeting by notifying the Company's Secretary, or returning a
later-dated proxy card. You may also revoke your proxy and change your vote
by voting in person at the meeting.
<PAGE>
Q: What does it mean if I get more than one proxy card?
A: It means you hold shares registered in more than one account. Sign and
return all proxies to ensure that all your shares are voted.
Q: Who will count the vote?
A: Representatives of Boston EquiServe, the Company's transfer agent, will
count the votes and act as the inspector of election. The Company believes
that the procedures to be used by the Inspector to count the votes are
consistent with Delaware law concerning voting of shares and determination
of a quorum.
Q: What is a "quorum"?
A: A "quorum" is a majority of the outstanding shares. They may be present at
the meeting or represented by proxy. There must be a quorum for the meeting
to be held and action to be validly taken. If you submit a properly
executed proxy card, even if you abstain from voting, then you will be
considered part of the quorum. Abstentions are not counted in the tally of
votes FOR or AGAINST a proposal. A withheld vote is the same as an
abstention. If a broker indicates on a proxy 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 counted as present with
respect to that matter for purposes of establishing a quorum.
Q: Who can attend the Annual Meeting?
A: All stockholders as of the Record Date can attend. If your shares are held
in the name of a broker or other nominee, please bring proof of share
ownership with you to the Annual Meeting. A copy of your brokerage account
statement or an omnibus proxy (which you can get from your broker) will
serve as proof of share ownership.
Q: How will voting on any other business be conducted?
A: We do not know of any business to be considered at the 2000 Annual Meeting
other than the proposals described in this proxy statement. However,
because the Company did not receive notice of any other proposals to be
brought before the meeting by November 2 (45 days prior to the month and
day of last year when proxy materials for the 1999 Annual Meeting were
mailed to stockholders), if any other business is properly presented at the
Annual Meeting, your signed proxy card gives authority to Pierre R. Lamond,
Vitesse's Chairman, and Louis R. Tomasetta, Vitesse's President and Chief
Executive Officer, to vote on such matters at their discretion.
Q: Who are the largest principal stockholders?
A: Fidelity Management and Research Corporation owned 12,400,000 shares, or
7.9% as of September 30, 1999, according to information provided by
Fidelity Management and Research Corporation. Janus Capital Corporation
owned 9,678,340 shares, or 6.2% as of September 30, 1999, according to
information provided by Janus Capital Corporation.
Q: How and when may I submit proposals for the 2001 Annual Meeting?
A: To have your proposal included in the Company's Proxy Statement for the
2001 Annual Meeting, you must submit your proposal in writing by August 19,
2000, to the Company's Secretary, c/o Vitesse Semiconductor Corporation,
741 Calle Plano, Camarillo, California 93012.
If you submit a proposal for the 2001 Annual Meeting after November 2,
2000, the proxy for the 2001 Annual Meeting may confer upon management
discretionary authority to vote on your proposal.
You should also be aware of certain other requirements you must meet to
have your proposal included in the Company's Proxy Statement for the 2001
Annual Meeting that are explained in Rule 14a-8 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934.
2
<PAGE>
Q: How much did this proxy solicitation cost?
A: Corporate Investor Communications, Inc. was hired to assist in the
distribution of proxy materials and solicitation of votes for $6,000, plus
certain out-of-pocket expenses. We also reimburse brokerage houses and
persons representing beneficial owners of shares for their reasonable out-
of-pocket expenses in forwarding solicitation materials to such beneficial
owners. Certain of the Company's directors, officers or employees may also
solicit proxies in person or by telephone, but they will not receive any
additional compensation for doing so.
3
<PAGE>
PROPOSALS YOU MAY VOTE ON
1. Election of Directors.
The Company has nominated five (5) candidates for election to the Board this
year. Detailed information on each of the Company's nominees is provided on
page 8. All directors are elected annually and serve a one-year term until the
next Annual Meeting. If any director is unable to stand for re-election, the
Board may reduce the size of the Board, designate a substitute or leave a
vacancy unfilled. If a substitute is designated, proxies voting on the original
director candidate will be cast for the substituted candidate. We expect that
each nominee listed on page 8 will be able and will not decline to serve as a
director.
Vote Required; Recommendation of the Board of Directors
With respect to the election of directors, the five 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.
Your Board unanimously recommends a vote FOR Proposal 1.
2. Amendment to the Directors' Stock Option Plan reserving an additional
250,000 shares of Vitesse common stock for issuance thereunder.
Proposed Amendment
The Board of Directors is asking stockholders to amend the Directors' Stock
Option Plan (the "Directors' Plan") to increase the number of shares of Vitesse
common stock reserved thereunder from 2,400,000 to 2,650,000.
Of the 2,400,000 shares of common stock presently reserved under the
Directors' Plan, 1,298,400 shares have been issued pursuant to option
exercises, 787,200 shares are subject to outstanding options, and 314,400
shares are available for grant. The proposed increase in shares reserved under
the Directors' Plan would be sufficient to fund the anticipated option grants
for directors through 2001, or through the remaining term of the Directors'
Plan.
Vote Required; Recommendation of Board of Directors
Proposal 2 was adopted by the Board of Directors in October 1999, subject to
stockholder approval. In considering the recommendation of the Board of
Directors that the proposed amendment be adopted, it should be noted that non-
employee Directors have an inherent conflict of interest in their
recommendation because they personally benefit from the adoption of the
amendment at the potential expense of the stockholders.
Because approval of this proposal requires the affirmative vote of the
majority of shares of common stock present in person or represented by proxy at
the Annual Meeting and entitled to vote on the proposal, abstentions will have
the same effect as a vote against the proposal, and broker non-votes will have
no effect on the outcome of the proposal.
Your Board unanimously recommends a vote FOR Proposal 2.
Description of the Directors' Plan
General; Eligibility. The Directors' Plan was initially adopted by the Board
of Directors and approved by the stockholders of Vitesse on August 6, 1991.
Options to purchase common stock are granted under the Directors' Plan to
individuals who serve as members of the Board of Directors of Vitesse or its
subsidiaries but are not employees of Vitesse or its subsidiaries. The number
of shares of common stock reserved for issuance under the Directors' Plan is
2,400,000, or 2,650,000 if Proposal 2 is approved. Option grants under the
Directors' Plan are not considered "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code (the "Code"). The Directors' Plan
terminates on January 1, 2002.
4
<PAGE>
Administration. The Directors' Plan is designed to operate automatically
without requiring administration. However, to the extent administration is
necessary, it will be provided by the Board of Directors. The interpretation
and construction of any provision of the Directors' Plan by the Board of
Directors shall be final and conclusive. Members of the Board of Directors
receive no additional compensation for their services in connection with the
administration of the Directors' Plan.
Terms of Grant. The Directors' Plan provides that, as of the close of
business on January 1 each year, each non-employee director generally receives
a grant of an option to purchase 60,000 shares of common stock, or 90,000 in
the case of the Chairman of the Board. Generally, any new non-employee director
joining the Board of Directors will receive an initial option grant, on the
date such person first becomes a non-employee director, for 60,000 shares of
common stock, or 90,000 in the case of the Chairman of the Board. Options under
the Directors' Plan vest over a period of five years, at a rate of 2% per
month. All options granted pursuant to the Directors' Plan are evidenced by
written agreements. The option price is set at 100% of the fair market value of
Vitesse common stock on the date the option is granted. The exercise price may
be paid in cash, by tendering shares of common stock (valued at fair market
value), by withholding shares otherwise issuable upon exercise in aggregate
value equal the exercise price, by promissory note, by subscription agreement
or by a combination of the foregoing. The terms of the options under the
Directors' Plan described above may not be amended more than once every six
months, except for amendments to comply with changes in applicable law. Options
granted under the Directors' Plan are nontransferable by the optionee, other
than by will or the laws of descent and distribution, and are exercisable
during the optionee's lifetime only by the optionee. Any option granted under
the Directors' Plan terminates upon the earlier of (i) ten years after the date
such option is granted, (ii) three months after the optionee's termination of
service as a director of Vitesse, or (iii) six months following termination of
service as a director of Vitesse due to death or disability.
The Directors' Plan requires that options granted thereunder comply with the
applicable provisions of Rule 16b-3 promulgated under the Exchange Act, or any
successor to Rule 16b-3. Such options contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to the Directors' Plan
transactions.
Termination; Amendment. The Board of Directors may, at any time and from
time to time, amend, alter, suspend or discontinue the Directors' Plan as to
any shares of common stock as to which options have not been granted.
Changes in Capitalization; Liquidation; Change of Control. The number of
shares of Vitesse common stock for which options are outstanding pursuant to
the Directors' Plan and the number of shares of Vitesse common stock reserved
for issuance under the Directors' Plan but not subject to outstanding options
will be adjusted proportionately for any increase or decrease in the
outstanding shares of common stock effected without receipt of consideration by
the Company, such as a stock split or a reverse stock split. In the event of
the proposed dissolution or liquidation of Vitesse, all outstanding options
will terminate immediately prior to the consummation of such proposed action.
The Board may, in the event of liquidation or dissolution of Vitesse, declare
that any options granted under the Directors' Plan shall terminate as of a date
fixed by the Board and give the holders of each such option the right to
exercise such options as to all or any part of the stock subject to such
option, regardless of whether such shares are vested. In the event of a merger
of Vitesse with or into another corporation or the sale of all or substantially
all of the assets of Vitesse, each option under the Directors' Plan shall be
assumed, or an equivalent option substituted, by the corporation acquiring
Vitesse, unless the Board determines that such options should become fully
vested in lieu of assumption or substitution by the acquiring corporation.
Federal Income Tax Consequences
An optionee will not recognize income at the time an option is granted to
such optionee under the Directors' Plan. However, upon exercise of an option
granted under the Directors' Plan, the optionee will generally recognize
ordinary income in an amount equal to the difference between the option
exercise price and
5
<PAGE>
the fair market value of the stock on the date of exercise. Generally, Vitesse
will be entitled to a deduction in the same amount and at the same time as the
optionee recognizes ordinary income.
Upon a subsequent sale or exchange of shares acquired pursuant to the
exercise of an option, the optionee will have either long-term or short-term
capital gain or loss (depending upon the holding period), measured by the
difference between the amount realized on the disposition and the tax basis of
the shares (generally, the amount paid for the shares plus the amount treated
as ordinary income at the time the option was exercised).
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and Vitesse with respect to the grant and exercise of options
under the Directors' Plan. It does not purport to be complete, and it does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state, or foreign country in which an optionee may reside.
3. Proposal to amend the Amended and Restated Certificate of Incorporation to
provide for an increase in authorized shares of Vitesse common stock, par value
$.01 per share, from 250,000,000 to 500,000,000.
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 250,000,000 shares of common stock and 10,000,000 shares of
preferred stock. In October 1999, the Board authorized an amendment to the
Certificate to increase the authorized number of shares of common stock to
500,000,000 shares (the "Amendment"). The stockholders are being asked to
approve the Amendment at the Annual Meeting.
As of the Record Date, 157,018,307 shares of common stock were issued and
outstanding and an aggregate of 22,295,927 shares were reserved for future
grant or for issuance upon the exercise of outstanding options under the
Company's stock option plans, employee stock purchase plans and certain other
options and rights to acquire common stock assumed by the Company in connection
with past acquisitions.
If the Amendment is approved, the Board will have the authority to issue up
to approximately 320,000,000 (as of the Record Date) shares of common stock
without further stockholder approval. The Board believes that the increase in
the number of authorized shares of common stock is in the best interests of the
Company and its stockholders. The principal purpose of the proposed increase in
the authorized number of shares of common stock is to provide sufficient shares
for such corporate purposes as may be determined by the Board to be necessary
or desirable. Such purposes 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. The Board currently has
not adopted any specific resolution as to the use of the additional shares.
Under Delaware law, the Board generally may issue authorized but unissued
shares of common stock without stockholder approval. The Board does not
currently intend to seek stockholder approval prior to any future issuance of
additional shares of common stock, unless stockholder 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 stockholder approval of a specific issuance could be
to the detriment of the Company and its stockholders.
The additional shares of common stock authorized pursuant to the Amendment
would 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 stockholders, 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 stockholders'
6
<PAGE>
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 preemptive rights.
Certain Anti-Takeover Effects
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 stockholders. 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.
Vote Required; Recommendation of the Board of Directors
This proposal will be approved if a majority of the shares of the Company's
outstanding common stock vote "FOR" the proposal. Abstention and broker "non-
votes" will have the effect of a vote "AGAINST" the proposal.
Your Board unanimously recommends a vote FOR Proposal 3.
4. Approval of the Appointment of KPMG LLP as Independent Auditors
The Audit Committee has recommended, and the Board has approved, the
appointment of KPMG LLP ("KPMG") as our independent auditors for fiscal 2000
subject to your approval. KPMG has served as our independent auditors since
1991. Representatives of KPMG will attend the Annual Meeting to answer
appropriate questions. They also may make a statement.
Audit services provided by KPMG during fiscal 1999 included an audit of the
Company's consolidated financial statements, a review of the Company's Annual
Report and certain other filings with the Securities and Exchange Commission
("SEC") and certain other governmental agencies. In addition, KPMG provided
various non-audit services to the Company during 1999.
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 stockholders do not approve the
selection of KPMG, the appointment of the independent auditors will be
reconsidered by the Board of Directors.
Your Board unanimously recommends a vote FOR Proposal 4.
7
<PAGE>
NOMINEES FOR THE BOARD OF DIRECTORS
Pierre R. Lamond Director since 1987
Age 69
Mr. Lamond has been the Chairman of the Board of Directors since the Company
was founded 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 Redback Networks and a
number of private companies.
James A. Cole Director since 1987
Age 57
Mr. Cole has been a General Partner of Spectra Enterprise Associates since
1987 and a General Partner of Windward Ventures since 1997. 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. and
Spectrian Corporation.
Alex Daly Director since 1998
Age 38
Mr. Daly has been President and Chief Executive Officer of Cygnus Solutions,
a developer of software tools, since May 1998. From 1995 to 1998 he served as
Vice President of Sales & Marketing and Chief Marketing Officer at C-Cube
Microsystems, Inc., a developer of digital video communications products. From
1990 to 1995, he served at Intel Corporation, a semiconductor company, most
recently as director of marketing for the mobile computing group.
John C. Lewis Director since 1990
Age 64
Mr. Lewis is 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 Cygnus Solutions.
Louis R. Tomasetta Director since 1987
Age 51
Dr. 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, he served as President of the integrated circuits
division of Vitesse Electronics Corporation. Prior to that he was the director
of the Advanced Technology Implementation department at Rockwell International
Corporation. Dr. Tomasetta has over 25 years experience in the management and
development of GaAs based businesses, products, and technology. Dr. Tomasetta
also serves as a director of Maker Communications, Inc.
8
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Company's Board usually meets five times a year in regularly scheduled
meetings, but will meet more often if necessary. The Board held five meetings
during fiscal 1999 and all of the directors attended at least 75% of the Board
meetings of which they were members.
The full Board considers all major decisions of the Company. However, the
Board has established the following two standing committees, each of which is
chaired by an outside director:
Compensation Committee
The Compensation Committee reviews and approves officers' salaries and
employee compensation programs. During fiscal 1999, the Committee, which
currently consists of James A. Cole, Alex Daly and Pierre R. Lamond, met at the
same times as the Board of Directors met as a whole and all members attended at
least 75% of the meetings.
The Audit Committee
The Audit Committee reviews and evaluates the Company's accounting
principles and its system of internal accounting controls. It also recommends
the appointment of the Company's independent auditors and approves the services
performed by the auditors. The Committee, which currently consists of James A.
Cole, Pierre R. Lamond and John C. Lewis, met four times during fiscal 1999 and
all members attended at least 75% of the meetings.
The Board currently has no nominating committee or committee performing a
similar function.
9
<PAGE>
DIRECTOR COMPENSATION
Non-employee directors receive $2,000 for each Board meeting attended in
person and $1,000 for each meeting attended by telephone. Directors are also
reimbursed for customary and usual travel expenses.
All non-employee directors participate in the Directors' Plan. For details
about the Directors' Plan and options under it, see "Description of the
Directors' Plan" elsewhere in this proxy statement.
During fiscal 1999, Mr. Lamond was granted an option to purchase 90,000
shares of common stock and Messrs. Cole, Daly and Lewis each were granted an
option to purchase 60,000 shares of common stock at an exercise price of
$22.8125.
Employee directors receive no other compensation for serving on the Board.
10
<PAGE>
STOCK PERFORMANCE GRAPH
Comparison of Five-Year Cumulative Total Return
The following performance graph compares the cumulative total stockholder
return on the Company's common stock with the NASDAQ Stock Market-U.S. Index
and the NASDAQ Electronic Components Index from market close on the last
trading day in September 1994 through September 30, 1999. The graph is based on
the assumption that $100 was invested in each of the Company's common stock,
the NASDAQ Stock Market-U.S. Index and the NASDAQ Electronic Components Index
on September 30, 1994.
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.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG VITESSE SEMICONDUCTOR CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period VITESSE NASDAQ STOCK NASDAQ ELECTRONIC
(Fiscal Year Covered) SEMICONDUCTOR MARKET (U.S.) COMPONENTS
- ------------------- ------------- ------------- -----------------
<S> <C> <C> <C>
Measurement Pt- 9/94 $100 $100 $100
FYE 9/95 $271 $138 $199
FYE 9/96 $736 $164 $237
FYE 9/97 $1,416 $225 $417
FYE 9/98 $1,350 $229 $332
FYE 9/99 $4,879 $372 $683
</TABLE>
*$100 INVESTED ON 9/30/94 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING SEPTEMBER 30.
11
<PAGE>
PRINCIPAL OWNERSHIP
OF VITESSE SEMICONDUCTOR CORPORATION
COMMON STOCK
The following table shows the number of shares of Company common stock owned
as of September 30, 1999 by the directors, the Named Executive Officers listed
on page 13, all directors and officers as a group, and holders known to the
Company of at least 5% of the Company's common stock.
Principal Stock Ownership(/1/)
<TABLE>
<CAPTION>
Total Shares
Shares Beneficially Owned
Exercisable Plus Exercisable
Name of Individuals or Shares Owned Within 60 Days of Within 60 Days of Percent
Identity of Group Beneficially Sept. 30, 1999 Sept. 30, 1999 of Total
- ---------------------- ------------ ----------------- ------------------ --------
<S> <C> <C> <C> <C>
Fidelity Management and
Research Corporation
82 Devonshire Street
Boston, MA 02109-3614.. 12,400,000 -- 12,400,000 7.9%
Janus Capital
Corporation
100 Fillmore Street
Denver, CO 80206-4928.. 9,678,340 -- 9,678,340 6.2%
Louis R.
Tomasetta(/2/)......... 694,036 402,312 1,096,348 *
Neil J. Rappaport....... 70,812 280,000 350,812 *
Pierre R. Lamond........ 160,000 75,600 235,600 *
James A. Cole........... 33,700 176,400 210,100 *
Christopher Gardner..... 46,904 110,000 156,904 *
John C. Lewis........... 70,000 45,600 115,600 *
Michael Millhollan...... 16,570 70,620 87,190 *
Eugene F. Hovanec....... 10,596 52,338 62,934 *
Alex Daly............... 0 38,400 38,400 *
All executive officers
and directors as a
group (12 persons)..... 1,531,058 1,441,804 2,972,862 1.9%
</TABLE>
- --------
* Less than 1%
(/1/) All share information has been adjusted to reflect a 3 for 2 stock split
on February 12, 1997, a 2 for 1 stock split on May 26, 1998, and a 2 for
1 stock split on October 20, 1999.
(/2/) Includes an aggregate of 63,000 shares held for each of Kathleen A. and
Susan A. Tomasetta, pursuant to the Transfer to Minors Act and as to
which Dr. Tomasetta has voting and investment power.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following is a summary of information regarding compensation paid 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
as of September 30, 1999. These five individuals are the "Named Executive
Officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
---------------------------------------- --------------------
Other Annual Number of Securities
Name and Principal Position Year Salary Bonus Compensation(/1/) Underlying Options
- --------------------------- ---- -------- -------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
LOUIS R. TOMASETTA.............. 1999 $269,231 $210,830(/2/) -- 760,000
President & Chief.............. 1998 200,000 139,600(/2/) -- 900,000
Executive Officer............. 1997 200,000 67,200(/2/) -- 600,000
EUGENE F. HOVANEC............... 1999 180,000 189,747(/2/) -- 160,000
Vice President, Finance &...... 1998 180,000 111,694(/2/) -- 210,000
Chief Financial Officer....... 1997 180,000 63,000(/2/) -- 120,000
NEIL J. RAPPAPORT............... 1999 150,000 190,658(/3/) $4,800(/4/) 150,000
Vice President, Sales.......... 1998 150,000 166,288(/3/) 28,615(/4/) 180,000
1997 150,000 194,693(/3/) -- 120,000
MICHAEL S. MILLHOLLAN........... 1999 150,000 130,373(/2/) -- 120,000
Vice President & General....... 1998 150,000 89,745(/2/) -- 180,000
Manager, Data Communications.. 1997 150,000 58,800(/2/) -- 120,000
CHRISTOPHER GARDNER............. 1999 148,846 114,647(/2/) 100,000
Vice President & General....... 1998 135,000 48,394(/2/) -- 180,000
Manager, Telecommunications... 1997 130,623 4,397(/2/) 20,769(/4/) 160,000
</TABLE>
- --------
(/1/) Excludes certain expenses which, for any Named Executive Officer, did not
exceed the lesser of $50,000 or 10% of the compensation reported in the
above table, and which, for all Named Executive Officers as a group, did
not exceed the lesser of $50,000 times the number of Named Executive
Officers or 10% of all Named Executive Officers' annual salaries and
bonuses reported in the above table.
(/2/) Represents amounts paid under the Company's bonus plan.
(/3/) Represents bonuses paid to Mr. Rappaport under the Company's sales
commission plan.
(/4/) Primarily represents payment of accrued vacation to Mr. Rappaport and Mr.
Gardner and in the case of Mr. Rappaport, also includes car allowance.
13
<PAGE>
OPTION GRANT TABLE
The following table presents additional information concerning the option
awards shown in the Summary Compensation Table for fiscal year 1999. These
options to purchase common stock were granted to the Named Executive Officers
under the Company's 1989 and 1991 Employee Stock Option Plans.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value Assumed Annual
Rate of Stock Price
Appreciation for
Individual Grants Option Term(/1/)
---------------------------------------------- ----------------------
Exercise
% of Total or Base
Number Options Granted Price
of Options to Employees in Per Expiration
Name Granted Fiscal Year Share Date 5% 10%
---- ---------- --------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Louis R. Tomasetta...... 760,000 12.85% $9.0313 10/5/08 $4,316,599 $10,939,110
Eugene F. Hovanec....... 160,000 2.70% 9.0313 10/5/08 908,758 2,302,971
Neil J. Rappaport....... 150,000 2.54% 9.0313 10/5/08 851,960 2,159,035
Michael S. Millhollan... 120,000 2.03% 9.0313 10/5/08 681,568 1,727,228
Christopher Gardner..... 100,000 1.69% 9.0313 10/5/08 567,974 1,439,357
</TABLE>
- --------
(/1/These)dollar amounts are not intended to forecast future appreciation of
the common stock price. Named Executive Officers will not benefit unless
the common stock price increases above the stock option exercise price. Any
gain to the Named Executive Officers resulting from common stock price
appreciation would benefit all stockholders.
14
<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR-END VALUES
The following table shows information for the Named Executive Officers
concerning stock options exercised during fiscal 1999 and stock options
unexercised at the end of fiscal year 1999.
Aggregated Option Exercises in Last Fiscal Year
And Fiscal Year-end Option Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Number of Unexercised In-the-Money
Shares Options at FY-End Options at FY-End
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(/1/) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Louis R. Tomasetta...... 510,000 $12,919,676 250,312 1,960,000 $ 8,795,310 $67,840,425
Eugene F. Hovanec....... 178,000 3,950,439 18,328 470,000 619,449 16,521,865
Neil J. Rappaport....... 190,000 3,546,252 250,000 435,000 10,451,965 15,354,053
Michael S. Millhollan... 216,800 4,970,182 46,620 412,500 1,656,929 14,667,178
Christopher Gardner..... 98,000 1,928,097 90,000 502,500 3,373,125 18,370,756
</TABLE>
- --------
(/1/Value)realized is the difference between the option exercise price and the
fair market value of the Company's common stock at the date of exercise
multiplied by the number of options exercised.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors consists of three non-
employee directors. The Committee reviews and approves salaries, bonuses and
other benefits payable to the Company's executive officers. It also administers
the Company's employee stock option and employee stock purchase plans.
Compensation Goals
The Compensation Committee establishes compensation for executive officers
to align with business objectives and performance and to attract, retain and
reward executive officers who contribute to the long-term success of the
Company. The Company's compensation programs, including those for executive
officers, share these characteristics:
. The Company pays competitively. The Company offers 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, departmental, and individual
performance. Corporate and departmental performance are evaluated by
reviewing whether strategic and business plan goals are met. Individual
performance is evaluated by measuring organizational progress against
set objectives.
. The Company strives for fairness to achieve a balance in compensation
paid to the executives within the Company and in comparable companies.
It 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 programs. 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 stockholder 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 similar positions in comparable companies in the
industry.
. Bonus Under the Company's 1999 bonus plan, bonuses for eligible
executive officers are to be paid as a percentage of their base salary
and on the basis of the achievement of certain individual and corporate
financial goals. The bonuses actually earned by each individual during
fiscal 1999 are to be paid in fiscal 2000, 2001 and 2002.
. Commission The Vice President of Sales participates in the Company's
sales commission plan along with most of the Company's sales personnel.
Under this plan, participants receive commissions based on achieving
certain billings targets.
Equity-Based Compensation:
Stock options provide additional incentives to officers to work to maximize
stockholder value. The options become available for purchase over a defined
period to encourage officers to continue their employment with
16
<PAGE>
the Company. In line with its compensation philosophy, the Company grants stock
options to employees at all levels of the organization based on each
individual's contribution to the Company.
Chief Executive Officer Compensation
Louis R. Tomasetta has been President and Chief Executive Officer of the
Company since its incorporation in 1987. His total compensation consists of
base salary, bonus and employee stock options. In determining Mr. Tomasetta's
compensation, the Committee evaluates:
. Corporate performance
. His individual performance
. Compensation paid to other executive officers of the Company
. Compensation paid to chief executive officers of comparable companies
For fiscal year 1999, Mr. Tomasetta's salary was $269,231. He received non-
statutory options to purchase 760,000 shares of common stock under the
Company's 1991 Stock Option Plan at an exercise price of $9.0313. These options
are for a ten-year term and become available to purchase in annual installments
of 20% of the total number of shares granted beginning on October 1, 1999. Mr.
Tomasetta's equity ownership in the Company includes 694,036 shares of common
stock and stock options to purchase an additional 2,070,312 shares. He shares
significantly in the success of the Company's business with the other
stockholders.
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
Pierre R. Lamond
James A. Cole
Alex Daly
17
<PAGE>
OTHER MATTERS
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of non-employee directors only. Pierre
R. Lamond, Chairman of the Board of the Company, is a general partner of a
venture capital firm that invested in the Company prior to its initial public
offering in 1991.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of forms filed or written notice that no annual forms were
required, the Company believes that from October 1, 1998 to September 30, 1999,
all SEC filings of its officers, directors and ten percent stockholders
complied with the requirements of Section 16 of the Securities Exchange Act.
Other
The Company knows of no other matters to be presented for consideration at
the meeting. If any other matters properly come before the meeting, the persons
named in the enclosed proxy card intend to vote the shares they represent as
the Company may recommend.
The Board of Directors
Camarillo, California
December 17, 1999
18
<PAGE>
PROXY
VITESSE SEMICONDUCTOR CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 25, 2000
The undersigned stockholder of Vitesse Semiconductor Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated December 17, 1999, 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 Stockholders of Vitesse
Semiconductor Corporation to be held on January 25, 2000, 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 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 PROPOSALS 2, 3 AND 4, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR NAMED BELOW.
1. To elect five directors of the Company to serve for the ensuing one year
until the Company's 2001 Annual Meeting of Stockholders and until their
successors are elected.
Nominees: Pierre R. Lamond, James A. Cole, Alex Daly, John C. Lewis, Louis
R. Tomasetta
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2, 3 AND 4.
2. To approve an amendment to the Directors' Stock Option Plan to reserve an
additional 250,000 shares of Vitesse common stock thereunder for issuance.
3. To approve a proposal to amend the Company's Amended and Restated Certificate
of Incorporation to provide for an increase in authorized shares of Common
Stock, par value $0.01 per share, of the Company from 250,000,000 to
500,000,000.
4. To ratify the selection of KPMG LLP as the Company's independent auditors for
the fiscal year ending September 30, 2000.
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: Signature: Date:
---------------- --------- -------------- --------
