<PAGE>
SCHEDULE 14A
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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the 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
SEMTECH CORPORATION
----------------------------------------------
(Name of Registrant as Specified In Its Charter)
__________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than 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)(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:
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:
1
<PAGE>
SEMTECH
April 25, 1997
Dear Stockholder:
This year's Annual Meeting (the "Meeting") of Stockholders of Semtech
Corporation (the "Company") will be held on June 5, 1997, at 1:00 PM at the
Radisson Hotel, 30100 Agoura Road Agoura Hills, California 91301 (Reyes Adobe
Road exit off the 101 Freeway).
The formal notice of the meeting and Proxy Statement are enclosed. This year
we are seeking to elect six Directors to hold office until the next annual
meeting (or until their successors are duly elected and qualified) and to
approve the appointment of Arthur Andersen LLP as the Company's independent
public accountants for the ensuing year.
In addition to these two proposals, we are presenting several important
issues for stockholder consideration. First, we are seeking approval of an
amendment to the Company's 1994 Long-Term Stock Incentive Plan to increase the
number of shares reserved for issuance under this plan by 800,000 shares. Stock
options have been a key factor in the Company's ability to hire talented design
and applications engineers. The market for top design and applications people in
the analog segment is extremely competitive. The Company's ability to attract
talented individuals is dependent upon our ability to offer them the
opportunity, through their dedication and creativity, to participate in
increases in stockholder values. The continued ability to grant employees stock
options is a critical component of the Company's long-term growth strategy. The
Company is requesting that shareholders approve this amendment given that the
Company currently has only 200,000 shares available for grant to new and
existing employees.
The Company is also seeking to amend its Certificate of Incorporation to (i)
increase its authorized shares of Common Stock from 15,000,000 to 40,000,000,
and (ii) authorize a new class of 10,000,000 shares of Preferred Stock. The
Company is requesting approval of this amendment so that, among other things, it
may implement a shareholder rights plan to protect shareholders' interests in
the event of an unwanted takeover attempt of the Company. Finally, the Company
is seeking to amend its Certificate of Incorporation to eliminate cumulative
voting for directors in order to minimize the risk of any unwanted acquirors or
competitors gaining representation on the Board of Directors of the Company.
If you do not plan to be present at the meeting, we urge you to complete and
return the enclosed proxy card promptly. Prompt return of the enclosed proxy by
stockholders may save the Company the necessity and expense of further
solicitation to ensure a quorum at the meeting.
<PAGE>
A prepaid return envelope is provided to you for that purpose. We look forward
to meeting those of you who are able to attend the meeting and discussing any
questions which you may have.
Sincerely,
John D. Poe
President and Chief
Executive Officer
-2-
<PAGE>
SEMTECH
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Semtech
Corporation will be held at the Radisson Hotel, 30100 Agoura Road, Agoura Hills,
California 91301 (Reyes Adobe Road exit off the 101 Freeway), on Thursday, June
5, 1997 at 1:00PM Los Angeles time, for the following purposes:
1. To elect six Directors to hold office until the next annual
meeting or until their successors are duly elected and qualified.
2. To approve an amendment to the Company's 1994 Long-Term Stock
Incentive Plan to increase the number of shares reserved for issuance under
the Plan by 800,000 shares.
3. To approve an amendment to the Company's Certificate of
Incorporation to (i) increase the number of authorized shares of Common
Stock from the current 15,000,000 to 40,000,000, and (ii) authorize a new
class of 10,000,000 shares of Preferred Stock.
4. To amend the Company's Certificate of Incorporation to eliminate
cumulative voting for the election of Directors.
5. To ratify and approve the appointment of Arthur Andersen LLP as
the independent public accountants for the Company.
6. To transact any other business which may properly come before the
Meeting or any adjournment or postponements thereof.
The record date for the determination of the stockholders entitled to notice
of and to vote at the Annual Meeting was the close of business on April 11,
1997.
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. IF YOU DO
NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN ORDER THAT YOUR SHARES MAY BE VOTED.
A return envelope is enclosed for your convenience.
By Order of the Board of Directors
David G. Franz, Jr.
Vice President of Finance
and Secretary
Newbury Park, California
April 25, 1997
-3-
<PAGE>
SEMTECH CORPORATION
652 MITCHELL RD, NEWBURY PARK, CA 91320
PROXY STATEMENT
GENERAL INFORMATION
This statement is furnished in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders (the "Meeting") of Semtech
Corporation (the "Company") to be held on June 5, 1997 and at any postponement
or adjournment or adjournments thereof. The enclosed proxy is solicited by the
Board of Directors of the Company and the cost of such solicitation will be
borne by the Company. In addition to the primary solicitation by mail, certain
directors, officers or regular employees of the Company may solicit proxies by
telephone, telegraph, facsimile, or in person. The mailing of proxy materials
will commence on or about April 25, 1997. The Company will request known
nominees to forward proxy materials to the beneficial owners of Company shares,
and will pay the nominees' reasonable expenses in so doing upon request.
Any stockholder desiring additional proxy materials should contact: David
G. Franz, Jr., Vice President of Finance and Secretary, Semtech Corporation
(805) 498-2111.
As of the close of business on April 11, 1997, the record date, 6,143,250
shares of common stock, $0.01 par value (the "Common Stock"), were issued and
outstanding. Each stockholder of record on April 11, 1997 is entitled to one
vote per share. However, in electing directors, a stockholder may cumulate his
or her votes by casting a number of votes equal to the number of directors to be
elected, multiplied by the number of votes to which the stockholder's shares are
entitled; or the stockholder may distribute his or her votes using the same
principle among as many nominees as the stockholder sees fit. The nominees
receiving the highest number of votes, up to the number of directors to be
elected, will be elected.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock represented in person or by proxy at the Meeting and entitled to
vote at the Meeting will be required to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants. Approval of the
amendment to the 1994 Long-Term Stock Incentive Plan requires the affirmative
vote of the holders of at least a majority of the shares voting on such
amendment. Approval of the amendments to the Company's Certificate of
Incorporation requires the affirmative vote of the holders of at least a
majority of the outstanding shares entitled to vote thereon.
Proxies will be received and tabulated by the Company's transfer agent.
Votes cast in person at the Meeting will be tabulated by an election inspector
appointed by the Company.
-4-
<PAGE>
Abstentions and "broker non-votes" are each included in the determination of the
number of shares present and voting, with each tabulated separately. Abstentions
are counted in tabulations of the votes cast on proposals presented to the
stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
The enclosed proxy may be revoked at any time before it is exercised by
filing with the Company a written notice of revocation or by presenting at or
before the Meeting a duly executed proxy bearing a later date. A stockholder
may also revoke a proxy by attending the Meeting and voting in person. The
proxies will be voted in accordance with the stockholder's directions on the
enclosed form of proxy. If no directions are given, proxies will be voted in
favor of each of the proposals hereinafter stated.
PRINCIPAL STOCKHOLDERS
The following are all persons known to the Company who own beneficially more
than 5% of the Common Stock as of April 11, 1997:
<TABLE>
<CAPTION>
Amount and Percent
Name and Address of Nature of Beneficial of
Beneficial Owner Ownership (1) Class(2)
---------------- -------------------- --------
<S> <C> <C>
Teledyne, Inc. 950,763 15.5%
Avenue of the Stars
Los Angeles, California
John D. Poe 311,882 (3) 5.1%
c/o Semtech Corporation
652 Mitchell Road
Newbury Park, California
</TABLE>
(1) Each stockholder listed has sole voting and investment power with
respect to the shares listed.
(2) Each of the respective percentages are calculated using a figure of
6,143,250 shares outstanding as of April 11, 1997 adjusted as required by
rules promulgated by the SEC.
(3) Includes outstanding options to purchase 24,582 shares which were
exercisable as of April 11, 1996, or within 60 days from such date.
-5-
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Six directors are to be elected at the Meeting, each to serve until the
following annual meeting or until a successor is elected and qualified. The
nominees named below were elected to their present terms of office by the
stockholders. All of the nominees have consented to be named and have indicated
their intent to serve if elected. Unless a proxy directs otherwise, it is
intended that the proxies solicited by management will be voted for the election
of the nominees listed in the following table, subject (in the event cumulative
voting is in effect) to the right of the proxyholders to cumulate their votes
and distribute them among the nominees in their discretion or to drop nominees
to ensure election of the greatest number of nominees. If any nominee should
refuse or be unable to serve, the proxyholders will vote the shares for such
other person, if any, as shall be designated by the Board of Directors. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES
LISTED BELOW.
Section 16(A) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes of ownership of Common Stock and other equity securities of the Company.
The Company is aware of only one owner of more than 10% of its Common Stock,
Teledyne, Inc. The Company believes that during the fiscal year ended January
26, 1997, its officers and directors and Teledyne, Inc. complied with all
Section 16(a) filing requirements. In making these statements the Company has
relied on its review of forms 3, 4 and 5 provided to the company with respect to
its most recent fiscal year by its officers and directors and Teledyne, Inc.
-6-
<PAGE>
The chart below indicates the number of shares and exercisable stock options
held by each director, each executive officer named in the Summary Compensation
Table below and by the directors and officers as a group as of April 11, 1997:
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP OF
COMMON STOCK (1)
DIRECTOR --------------------------
NAME OFFICE AGE SINCE NUMBER % (2)
---- ------ --- ----- ------ -----
<S> <C> <C> <C> <C> <C>
John D. Poe President, Chief 45 1985 311,882(3) 5.1%
Executive Officer and
Director
Rock N. Hankin Director, Member of 50 1988 23,000(4) *
the Audit Committee
and Compensation and
Stock Option Committee
Allen H. Orbuch Director, Member of 68 1991 21,000(4) *
the Audit Committee
and Compensation and
Stock Option Committee
James P. Burra Director, Member of 54 1991 16,450(4) *
the Audit Committee
and Compensation and
Stock Option Committee
Jack O. Vance Director, Member of 72 1995 7,000(5) *
the Audit Committee
and Compensation and
Stock Option Committee
James T. Schraith Director, Member of 39 1995 5,000(5) *
the Audit Committee
and Compensation and
Stock Option Committee
Raymond E. Bregar Executive Vice 49 - 57,916(6) *
President
David G. Franz, Jr. Vice President and CFO 35 - 35,683(7) *
All Executive 480,181(8) 7.6%
Officers and Directors as a
Group (12 persons)
</TABLE>
- -------------------
* Less than 1%
(1) Unless otherwise indicated below, each person has sole voting and
investment power with respect to the shares listed.
(2) Each of the respective percentages is based upon the 6,143,250 shares
outstanding as of April 11, 1997, plus, if applicable, the shares which
each officer or director has the right to acquire within 60 days thereof
through the exercise of stock options.
(3) Includes 24,582 shares issuable pursuant to options exercisable within 60
days of April 11, 1997.
-7-
<PAGE>
(4) Includes 11,000 shares issuable pursuant to options exercisable within 60
days of April 11, 1997.
(5) Includes 5,000 shares issuable pursuant to options exercisable within 60
days of April 11, 1997.
(6) Includes 57,916 shares issuable pursuant to options exercisable within 60
days of April 11, 1997.
(7) Includes 19,500 shares issuable pursuant to options exercisable within 60
days of April 11, 1997.
(8) Includes 147,248 shares issuable pursuant to options exercisable within
60 days of April 11, 1997.
BACKGROUND OF NOMINEES
Mr. Poe has been President, Chief Executive Officer and a Director of the
Company since October 1985. Since that date Mr. Poe has also served as Managing
Director of the Company's subsidiary, Semtech, Ltd. In addition, Mr. Poe
currently serves as sole Director and President of the Company's wholly owned
subsidiaries, Semtech Corpus Christi Corporation and Semtech Santa Clara, Inc.
Mr. Hankin has been a Director of the Company since May 1988. He currently
serves as Senior Partner of Hankin & Co., a diversified business advisory firm,
where he has held such position since June 1986. Mr. Hankin also serves on the
Board of Directors Alpha Microsystems, House of Fabrics, Sparta, Inc. and
Quidel.
Mr. Orbuch has been a Director of the Company since March 1991. He currently
serves as a Management Consultant. He retired in 1994 from his position as Group
Executive of Teledyne, Inc. He had served in that position for more than five
years.
Mr. Burra has been a Director of the Company since march 1991. Since June
1989 Mr. Burra has served as President and Chief Executive Officer of W. D. Adam
Co., Inc., a manufacturer selling a proprietary line of vacuum formed, high
density polyethylene containers.
Mr. Vance became a Director of the Company in April 1995. Mr. Vance is a
retired Managing Director of the Los Angeles office of Mckinsey & Company, a
management consulting firm. He now runs his own firm, Management Research, Inc.,
which serves a few selective clients. Mr. Vance has authored 30 articles on
subjects such as corporate planning and strategy. Mr. Vance is also a director
of several other corporations, including International Rectifier and the Vencor
Corporation.
Mr. Schraith became a Director of the Company in June 1995. Mr. Schraith is
currently Vice-President and General Manager, North America for Compaq Computer.
Prior to that Mr. Schraith was Chief Executive Officer and a Director of the
Cerplex Group, Inc.. From 1987 to 1995, Mr. Schraith was employed at AST
Research, Inc., most recently serving as President, Chief Operating Officer and
Director.
-8-
<PAGE>
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS.
The Company has a standing Compensation and Stock Option Committee and an
Audit Committee. The Company has no nominating committee. During the Company's
last fiscal year the Board of Directors held four regular meetings and two
special meetings. During such fiscal year each of the incumbent Directors
attended 75% or more of the sum of the number of such meetings plus the number
of meetings of the Committees of which such person is a member. It is expected
that the Board will meet on a regular basis during the ensuing year.
Compensation and Stock Option Committee
The Compensation and Stock Option Committee ("Compensation Committee"), as
comprised of Mr. Hankin, Mr. Burra, Mr. Schraith, Mr. Vance and Mr. Orbuch, met
six times during fiscal year 1997. The Compensation Committee administers the
Company's 1986 Stock Option Plan, the 1987 Stock Option Plan, the 1994 Long-Term
Stock Incentive Plan and the 1994 Non-Employee Directors Stock Option Plan. It
also makes recommendations to the Board on incentive compensation, stock options
and other compensation matters.
Audit Committee
The Audit Committee, which consists of Mr. Hankin, Mr. Burra, Mr. Orbuch,
Mr. Schraith and Mr. Vance, met two times during fiscal year 1997. The Audit
Committee makes recommendations concerning the engagement of the Company's
independent auditors, consults with the independent auditors concerning the
audit plan, reviews the comments and recommendations resulting from the
auditor's report and management letter and reviews the Company's accounting and
control policies and procedures.
Compensation
In fiscal 1997, Directors who were not employees of the Company were paid
$2,500 for each Board meeting attended, $1,500 for each special meeting
attended, a $500 monthly retainer, and were reimbursed for their actual expenses
incurred in attending the meeting. Directors do not receive separate
compensation for committee meetings attended. Non-employee directors also
participate in the 1994 Non-Employee Directors Stock Option Plan. New non-
employee directors receive an initial grant of 7,500 shares. In addition, each
non-employee director receives annual grants of options to purchase a total of
7,500 shares. The specific provisions of this plan are set forth in the 1994
Non-Employee Directors Stock Option Plan, a copy of which is on file with the
Securities and Exchange Commission. Directors who are Company employees are not
paid fees or additional compensation for attending Board or committee meetings.
Mr. Poe is currently the only employee on the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was, during fiscal year 1997, an
officer or employee of the Company or any of its subsidiaries; or was formerly
an officer of the Company or any of its subsidiaries. During fiscal year 1997,
no executive officer of the Company served as a director or member of the
compensation committee (or other board committee performing equivalent
functions, or in the absence of such committee, the entire board of directors)
of another entity, one of whose executive officers served as a member of the
Compensation Committee, or as a director, of the Company.
-9-
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, as to the Chief Executive Officer and each of the
executive officers of the Company who received total compensation from the
Company and its subsidiaries in excess of $100,000 for the fiscal year ended
January 26, 1997 (collectively, the "Named Executive Officers"), information
concerning compensation paid for services to the Company in all capacities
during the fiscal years ended January 26, 1997, January 28, 1996 and January 29,
1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
----------------------- ---------
OTHER STOCK ALL
FISCAL SALARY ANNUAL OPTIONS OTHER
NAME AND TITLE YEAR ($)(1) BONUS($) COMP.($)(2) AWARDED(#) COMP.($)(3)
- ---------------------- ------ ------- ------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John D. Poe 1997 221,921 75,600 9,925 30,000 501,589
President and CEO 1996 180,119 65,175 10,327 10,000 113,580
1995 165,006 0 11,465 15,000 24,108
Raymond E. Bregar 1997 156,383 50,000 10,777 25,000 28,117
Executive Vice 1996 132,342 38,728 10,239 10,000 22,535
President 1995 123,989 0 10,674 35,000 17,907
David G. Franz, Jr. 1997 116,805 40,000 9,857 25,000 22,501
Vice President and 1996 91,096 24,600 9,778 8,000 17,179
CFO 1995 78,479 0 9,994 10,000 3,489
</TABLE>
- ----------------------
(1) Salaries for fiscal years 1997, 1996 and 1995 each reflect 26 pay periods.
(2) "Other Annual Compensation" includes (a) premiums on life insurance and (b)
auto allowance.
(3) "All Other Compensation" for 1997, 1996 and 1995 includes, respectively, (a)
Company contributions to 401K savings plan of $4,589, $4,325 and $4,260 on
behalf of Mr. Poe; $3,858, $4,121 and $2,991 on behalf of Mr. Bregar; and
$3,855, $2,805 and $1,555 on behalf of Mr. Franz; and (b) deferred
compensation of $92,698, $24,505 and $19,848 for Mr. Poe; $24,259, $18,414
and $14,916 for Mr. Bregar; and $18,646, $14,374 and $1,934 for Mr. Franz;
and (c) income of $497,000 and $84,750 related to debt relief for Mr. Poe
in 1997 and 1996, respectively.
-10-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows, as to the Named Executive Officers, information
concerning stock options granted during the fiscal year ended January 26, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM
OPTIONS TO EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---------------------- ----------------- --------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John D. Poe 30,000 3.70% $10.875 5/7/06 $199,179 $519,958
Raymond E. Bregar 25,000 3.08% $10.875 5/7/06 $165,982 $433,299
David G. Franz, Jr. 25,000 3.08% $10.875 5/7/06 $165,982 $433,299
</TABLE>
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table shows, as to the Named Executive Officers, information
concerning stock options exercised during the fiscal year ended January 26,
1997, the number of unexercised options and the value of "in-the-money"
unexercised options.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FY END(#) AT FY END ($)(1)
ON VALUE ---------------------------- -----------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John D. Poe 0 0 14,583 40,417 $ 295,072 $564,615
Raymond E. Bregar 10,000 $60,000 64,583 35,417 $1,357,573 $185,865
David G. Franz, Jr. 5,000 $27,500 16,833 35,344 $ 350,122 $504,636
</TABLE>
(1) Based upon the $23.50 per share closing price of the Company's common stock
on the NASDAQ National Market System on January 26, 1997.
TEN YEAR OPTION REPRICING
In May 1996, the Compensation Committee authorized the cancellation and
reissuance of options to the three Named Executives, as summarized in the
following table.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL OPTION
SECURITIES MARKET PRICE OF EXERCISE PRICE TERM REMAINING
UNDERLYING STOCK AT TIME AT TIME OF AT DATE OF
OPTIONS REPRICED OF REPRICING OR REPRICING OR NEW EXERCISE REPRICING OR
NAME DATE OR AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- -------------------- ------ ---------------- --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John D. Poe 5/7/96 20,000 $10.875 $18.50 $10.875 9.7 years
Raymond E. Bregar 5/7/96 15,000 $10.875 $18.50 $10.875 9.7 years
David G. Franz, Jr. 5/7/96 15,000 $10.875 $18.50 $10.875 9.7 years
</TABLE>
-11-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
The Compensation and Stock Option Committee (the "Committee"), a committee
composed entirely of Directors who have never served as officers of the Company,
determines and administers the compensation of the Company's executive officers.
This report, prepared by the Committee, sets forth the Company's compensation
policies for the year ended January 26, 1997, as such policies affected the
Company's executive officers.
COMPENSATION PHILOSOPHY. At the direction of the Board of Directors and
pursuant to the charter of the Committee, the Committee endeavors to ensure that
the compensation programs for executive officers of the Company and its
subsidiaries are effective in attracting and retaining key executives
responsible for the success of the Company and are administered in an
appropriate fashion in the long-term interests of the Company and its
stockholders. The Committee seeks to align total compensation for senior
management with corporate performance.
The Committee believes that the Company's overall financial performance
should be an important factor in the total compensation of the Company's
executive officers. At the executive officer level, the Committee has a policy
that a proportion of total compensation should consist of variable, performance-
based components, such as bonuses, which can increase or decrease to reflect
changes in corporate and individual performance. These incentive compensation
programs are intended to reinforce management's commitment to enhancement of
profitability and stockholder value. The performance goals upon which payment to
the Company's executive officers are based include net income, cash flow, new
order generation and returns on assets.
COMPENSATION PROGRAM. The Company has a comprehensive compensation program
which consists of cash compensation, both fixed and variable, and equity-based
compensation. The program has three principal components which are intended to
attract, retain, motivate and reward executives who are expected to manage both
the short-term and long-term success of the Company. These components are:
Cash-Based Compensation
Base Salary--Base salary is predicated on industry and peer group
comparisons and on performance judgments as to the past and expected future
contribution of the individual executive officer. In general, salaries are set
based on median salaries for similar executives of similar sized companies in
the high technology industry.
Bonuses--The Company has a discretionary key employee incentive pool
pursuant to which executive officers and a limited number of key employees may
receive annual cash bonuses. Individual payments are made based on the
achievement of sales growth and operating income targets and upon the
individual's personal and departmental performance.
Equity-Based Compensation
Stock Options--Stock options are granted periodically to provide additional
incentive to executives and other key employees to work to maximize long-term
total return to stockholders. The options vest over three- and four-year periods
to encourage option holders to continue in the employ of the Company. In
granting options, the Committee takes into account the number of shares and
outstanding options held by the individual. In May 1996, the Committee approved
the cancellation and reissuance of 20,000, 15,000 and 15,000 options,
respectively, to Mr. Poe,
-12-
<PAGE>
Mr. Bregar and Mr. Franz. These new options were issued at the then current
market price of $10.875 per share, as compared to the exercise price of $18.50
of the options they replaced, which replaced options had been granted three
months earlier. The Committee believes this reissuance was justified because the
interim reduction in the prevailing market price of the Company's common stock
was substantially outside the control of management and was predominantly due to
the market's perception of the semiconductor industry, generally, and had little
to do with the Company's overall performance. At the time of the reissuance, the
Committee believed that the incentive effect of the earlier grant would have
been nullified had it not so acted.
CHIEF EXECUTIVE OFFICER COMPENSATION. In accordance with the compensation
philosophy, stated above, and the Company's results, Mr. Poe's base salary
during fiscal year 1997 was $225,000 which represents a 25% increase over fiscal
1996. His base salary is designed to be competitive with base salaries paid to
other chief executive officers of corporations with similar revenues and scope
of operations. Additionally, Mr. Poe was paid a bonus of $75,600 during fiscal
1997 because performance thresholds were met during fiscal 1996.
On November 30, 1994, a special incentive compensation plan was authorized
for Mr. Poe. This incentive plan provides that interest and principal owed by
Mr. Poe to the Company will be forgiven by the Company in the amount of 5% of
the Company's pre-tax earnings. The Plan further provides that up to 50% of the
amount earned by Mr. Poe can by applied to taxes arising from this incentive.
This incentive is paid annually, after the close of the fiscal year. The term of
this plan was for fiscal 1995 through fiscal 1997. As of January 26, 1997, Mr.
Poe owed the Company $32,000. For fiscal 1997, Mr. Poe qualified for principal,
interest relief, and gross up for the applicable taxes of $64,000. The incentive
payment, which was based on fiscal 1997 performance, was approved and paid by
the Board of Directors on February 27, 1997. After application of this amount
Mr. Poe's debt to the Company is extinguished. Such incentive payment, based on
fiscal 1996 and paid in fiscal 1997, was $497,000; and such incentive payment,
based on fiscal 1995 and paid in fiscal 1996, was $84,750. This program
terminated when the balance was reduced to zero during the first quarter of
fiscal 1997.
SUMMARY
The Committee believes that a fair and motivating compensation program
plays a critical role in the performance of the Company. The Committee reviews
this program on an ongoing basis to evaluate its continued effectiveness.
Compensation Committee
James P. Burra Rock N. Hankin
Allen H. Orbuch James T. Schraith
Jack O. Vance
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PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN The following performance
chart shows the value of an investment of $100 on January 30, 1992 in cash of
(i) the Company's Common Stock, (ii) the Nasdaq Stock Market, and (iii) the
Nasdaq Electronic Components Sub-Index. All values assume reinvestment of the
full amount of all dividends and are calculated as of January 30 of each year.
Note that historic stock price performance is not necessarily indicative of
future stock price performance.
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH GOES HERE]
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1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Semtech Corp. $100 $126 $103 $271 $959 $1,153
Nasdaq Stock Market $100 $113 $130 $124 $175 $ 230
Nasdaq Electronic Stocks $100 $149 $187 $204 $326 $ 670
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</TABLE>
The disclosure under the captions "Report of The Compensation Committee"
and "Performance Graph" is not "soliciting material," and is not deemed filed
with the SEC and is not incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing.
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APPROVAL OF AMENDMENT TO 1994 LONG-TERM STOCK INCENTIVE PLAN
(Proposal No. 2)
The 1994 Long-Term Stock Incentive Plan (the "Employee Plan") was adopted
by the Board of Directors and approved by the stockholders in 1994. The Employee
Plan initially reserved 300,000 common shares for grant. Since such time,
amendments have been approved at subsequent Annual Meetings of the stockholders
as a result of which the number of common shares reserved for grant has been
increased to 1,500,000. Currently the Company has only 200,000 shares available
for grant to new and existing employees.
The Company believes that equity participation for employees is critical to
the Company's ability to recruit, reward and retain employees and consultants.
The Company uses stock options to create an organization to which employees will
remain dedicated for long periods of time. The Company competes directly with
other analog semiconductor companies for experienced personnel and must be able
to offer comparable packages, which include equity participation, to attract the
caliber of individuals that the Company believes is necessary to remain
competitive.
PROPOSED AMENDMENT TO THE EMPLOYEE PLAN
The stockholders are being asked to approve an amendment to the Employee
Plan at the Meeting to increase the shares reserved for issuance under the
Employee Plan by 800,000 shares, bringing the total shares reserved for issuance
under the Employee Plan to 2,300,000 shares.
Approval of the amendment to the 1994 Long-Term Stock Incentive Plan
requires the affirmative vote of a majority of the voting shares. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE Amendment to THE 1994
LONG-TERM STOCK INCENTIVE PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THIS PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR ABSTENTION IS
SPECIFICALLY INDICATED.
The following description of the Employee Plan is qualified in its entirety
by reference to the full text of the Plan.
PURPOSE AND ELIGIBILITY
The purpose of the Employee Plan is to enable the Company and its
subsidiaries to attract, retain and motivate its officers and key employees by
providing for or increasing their proprietary interests in the Company and to
align their interests with those of the Company's stockholders. All key
employees and officers who are employees will be eligible for selection as a
participant in the Employee Plan. The determination of which employees are key
employees will be made from time to time by the plan administrators. Non-
employee consultants to the Company who are deemed to be of key significance to
the Company may also be eligible for awards. In determining which employees and
consultants (collectively, "Participants") will be granted awards under the
Employee Plan, the plan administrators will take into account the duties of the
Participants, their present and potential contributions to the Company and other
factors deemed relevant by such administrators.
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<PAGE>
ADMINISTRATION
The Employee Plan is administered by a committee appointed by the Board
consisting of at least two disinterested directors ("Employee Plan Committee").
The Employee Plan Committee is currently the Compensation Committee of the
Board, which is composed solely of "outside" directors within the meaning of
Section 162(m)(4)(C)(ii) of the Internal Revenue Code (the "Code"). Subject to
the provisions of the Employee Plan, the Employee Plan Committee has full and
final authority to select the types of awards (the "Awards") and the persons to
whom Awards will be granted thereunder, to grant such Awards and to determine
the terms and provisions of such Awards and the number of shares to be sold or
issued pursuant thereto. The Employee Plan Committee is also empowered to adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the Employee Plan. Members of the Employee
Plan Committee are not eligible to participate in the Employee Plan.
LIMITATION ON AWARDS
The maximum number of shares of Common Stock which may be granted under the
Employee Plan may not exceed 1,500,000 shares (or 2,300,000 if the amendment
proposed hereby is approved) of Common Stock subject to proportionate adjustment
in certain circumstances. Any shares of Common Stock subject to issuance upon
exercise of a Stock Option or Stock Appreciation Right ("SAR"), but which are
not issued because of a surrender, lapse, expiration or termination of any such
Stock Option or SAR prior to issuance of the shares, or any shares subject to an
SAR exercised for cash, shall once again be available as shares for which Awards
may be granted under the Employee Plan. On April 11, 1997 the closing price of
the Company's Common Stock on the NASDAQ National Market System was $xx.xx per
share.
The maximum number of shares which may be granted during the life of the
plan to any Participant is twenty percent (20%) of the number of shares
available under the plan. The maximum dollar value in cash which may be awarded
during any Performance Period (as defined in the Employee Plan) to any
Participant is twenty-five thousand dollars ($25,000).
PLAN AWARDS
The Employee Plan authorizes the Employee Plan Committee to grant various
types of benefits to Participants. In general, Awards under the Employee Plan
are not restricted to any specified form or structure. The following
arrangements or benefits are authorized under the Employee Plan so long as their
terms and conditions are consistent with the provisions of the Employee Plan:
Stock Options, Stock Bonus Awards, Performance Shares and SARs.
Shares of Common Stock awarded pursuant to Performance Shares or Stock
Bonus Awards, to the extent they are not fully accrued or vested, and Stock
Options and SARs may not be sold, disposed of, transferred, pledged or
hypothecated, other than by the laws of descent and distribution. If a
Participant ceases to be an employee or consultant, such Participant may have
the right to exercise his or her Stock Options and SARs as of the date of such
cessation, to the extent they have accrued or vested.
In the event of certain sales, mergers or consolidations of the Company in
which the Company is not the surviving entity, the Employee Plan and each
outstanding Award will terminate, but each Participant will have certain rights
with respect to their Awards to the extent they have accrued to date.
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<PAGE>
In addition, under the current terms of the Employee Plan, in the event of
a "Change of Control" as defined by the Employee Plan, the Employee Plan
Committee may, among other things, accelerate the vesting and remove the
restrictions on all outstanding Awards. The Board of Directors, however, at its
regularly held meeting on February 27, 1997 (the "February Meeting") adopted
resolutions to amend this provision to provide for immediate automatic vesting
of all outstanding unvested Awards in the event of a "Change in Control."
PLAN APPROVAL AND DURATION
The Employee Plan was approved by the affirmative vote of the holders of a
majority of the Company's outstanding shares of common stock, present in person
or by proxy, at the 1994 Annual Meeting of Stockholders of the Company. Unless
previously terminated by the Employee Plan Committee, the Employee Plan will
terminate 10 years after its adoption, but such termination will not affect any
Award previously made or granted under the Employee Plan.
AMENDMENTS
The Employee Plan Committee may amend, suspend or terminate the Employee
Plan, provided that no amendment of the Employee Plan may, unless approved by
the stockholders of the Company, materially increase the number of shares of
Common Stock that may be issued under the Employee Plan, materially modify the
requirements as to the eligible class of persons permitted to participate in the
Employee Plan or materially modify certain performance objectives. Furthermore,
no amendment, suspension or termination of the Employee Plan may, without the
consent of the affected Participant, alter the terms of any outstanding Award
under the Employee Plan.
TAX TREATMENT
The following is a brief description of the federal income tax treatment,
which generally will apply to options granted under the Employee Plan, as in
effect on the date hereof. The Code provides favorable tax treatment for
incentive stock options. Generally, a Participant is not subject to regular
federal income tax and the Company is not entitled to a deduction upon the grant
or the exercise of an incentive stock option during employment or within three
months after termination of employment. However, the amount by which the fair
market value of the shares of Common Stock acquired pursuant to the exercise of
an incentive stock option exceeds the exercise price generally will be included
in the Participant's alternative minimum taxable income and may be subject to
the 24% federal alternative minimum tax for the taxable year in which the
incentive stock option is exercised. In addition, if the Participant sells the
shares acquired upon exercise of an incentive stock option at any time within
(a) one year after the date of transfer of shares to the Participant pursuant to
the exercise of such incentive stock option or (b) two years after the date of
grant of such incentive stock options, the Participant generally will recognize
ordinary income for regular federal income tax purposes in an amount equal to
the excess, if any, of the lesser of the sales price or the fair market value on
the date of exercise over the exercise price of such incentive stock options,
and the Company will generally be entitled to a tax deduction in an amount of
the ordinary income amount recognized by the Participant. Any gain in excess of
the ordinary income amount recognized by the Participant in such circumstances
will be short-term or long-term capital gain, depending upon the Participant's
holding period for the stock sold. If the employee holds the Common Stock
acquired upon exercise of an incentive stock option in excess of the holding
periods noted above, then the subsequent sale of the Common Stock will give rise
to long-term capital gain or loss.
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<PAGE>
The grant of a non-qualified stock option is generally not a taxable event
for the recipient. Upon exercise of the non-qualified stock option, the holder
generally will recognize ordinary income in an amount equal to the excess of the
fair market value of the stock acquired upon exercise (determined as of the date
of exercise) over the exercise price of such non-qualified stock option, and the
Company will be entitled to a deduction equal to such amount. A Participant's
new basis in the Common Stock acquired upon exercise of a non-qualified stock
option will generally be the fair market value of the shares on the date of
exercise. Upon a subsequent disposition of such shares of Common Stock, the
Participant will ordinarily realize a capital gain or loss to the extent of any
intervening appreciation or depreciation. If a Participant disposes of the
Common Stock more than one year after the date of such exercise, such capital
gain or loss will be treated as long-term capital gain or loss.
Participants who are officers, directors or 10% stockholders of the
Company, and thus subject to Section 16 of the Exchange Act, should be aware of
significant tax consequences under Section 83 of the Code.
The foregoing is a summary of the effect of federal income taxation upon
the Participant and the Company with respect to the grant and exercise of
options under the Employee Plan, does not purport to be complete, and does not
discuss the income tax laws of any state, foreign country or municipality in
which a Participant may reside.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK AND AUTHORIZE
PREFERRED STOCK
(Proposal No. 3)
The Board of Directors recommends that Article FOURTH of the Company's
Certificate of Incorporation be amended in order (a) to increase the number of
authorized shares of Common Stock which the Company is authorized to issue, from
15,000,000 to 40,000,000 and (b) to establish a new class of 10,000,000 shares
of Preferred Stock. The Preferred Stock would be authorized without any rights
and designations; such rights and designations would be fixed by the Company's
Board of Directors at the time of issuance of such Preferred Stock without
subsequent approval by the Company's stockholders.
The Board of Directors intends to implement, as soon as practicable, a
shareholder rights plan, more commonly known as a "poison pill" (as more fully
described below, the "Rights Plan"). Because the implementation of the Rights
Plan requires that the Company have available additional authorized, but
unissued capital stock, the Board of Directors has adopted resolutions
recommending to the stockholders amendments to the Company's Certificate of
Incorporation (a) increasing the number of authorized shares of Common Stock
from 15,000,000 to 40,000,000, and (b) authorizing a new class of 10,000,000
shares of Preferred Stock. The
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<PAGE>
implementation of the Rights Plan would require the approval by the stockholders
of this Proposal No. 3.
As of April 11, 1997 the Company's authorized capital stock consisted of
15,000,000 shares of Common Stock of which 6,143,250 shares were issued and
outstanding as of such date.
The Preferred Stock would be of the type of shares known as "blank check
preferred." Such Preferred Stock would be available for issuance at any time,
but the terms of such securities would not be established until the time of
issuance. The Board of Directors would, if the proposal is adopted by the
stockholders, have the authority, within its sole discretion, to issue the
Preferred Stock in one or more series, and to fix for each such series the
designations and relative rights and preferences, including conversion rights
and prices, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption and redemption prices, as
are permitted by the Delaware General Corporation Law.
As described below, the Board of Directors believes that implementation of
the Rights Plan would be in the best interest of the stockholders and therefore
recommends that the stockholders approve the increase in the authorized capital
stock of the Company (including by providing for Preferred Stock) so that the
Rights Plan may be implemented. The additional authorized capital would also
generally be available for future use in connection with acquisitions,
financing, employee benefit plans, stock dividends or other corporate purposes.
Subject to the requirements of applicable law and regulations, the Board of
Directors generally will have the sole discretion to issue either authorized
Common Stock or authorized Preferred Stock without further stockholder approval.
DESCRIPTION OF RIGHTS PLAN
If the Rights Plan is implemented, the Board of Directors would promptly
declare a dividend distribution of one right (a "Right") to purchase a certain
number of "units" (determined by a formula described herein) for each
outstanding share of Common Stock of the Company at a purchase price of $75.00
subject to adjustment (the "Exercise Price"). Each unit would be equal to one
one-hundredth of a share of a newly designated Series X Junior Participating
Preferred Stock (the "Series X Preferred Stock") of the Company. Although the
Series X Preferred Stock cannot be created unless this Proposal No. 3 is
adopted, it is contemplated that the Board would adopt such a series. One one-
hundredth of a share of Series X Preferred Stock would have, as nearly as
practicable, the economic equivalence of one share of Common Stock. The
distribution would be payable to stockholders of record as of the close of
business on a specified date (the "Record Date") as well as to acquirors of
Common Stock issued after the Record Date but prior to the Separation Time (as
defined below) or the earlier expiration, exchange, redemption or termination of
the Rights.
The description and terms of the Rights would be set forth in a Stockholder
Protection Agreement (the "Rights Agreement") between the Company and its
transfer agent (the "Rights Agent") to be entered into upon implementation of
the Rights Plan. The description of the Rights and of the Rights Agreement
contained herein is a summary, and is qualified in its entirety by reference to
the Rights Agreement to be executed by the parties thereto.
Initially, the Rights would be attached to the Common Stock then
outstanding, and no separate certificates evidencing the rights ("Rights
Certificates") would be issued. The Rights would separate from the Common Stock,
Rights Certificates would be issued and the Rights
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<PAGE>
would become exercisable, if ever, 10 business days (or such later date as may
be determined by action of the Board of Directors prior to the Separation Time)
following the earlier to occur of (i) a public announcement or resolution of the
Board of Directors recognizing that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 25% or more of the outstanding shares of
Common Stock, or (ii) the commencement or announcement of an intention to make a
tender or exchange offer for Common Stock, the consummation of which would
result in the beneficial ownership by a person or group of affiliated or
associated persons of 25% or more of such outstanding Common Stock (the earlier
of such dates being referred to as the "Separation Time"). However, a person or
group of affiliated or associated persons who acquires the beneficial ownership
of 25% or more of the Common Stock then outstanding either (i) by reason of
share purchases by the Company reducing the number of Common Stock outstanding,
or (ii) inadvertently, if such person or group were to notify the Board of
Directors of such inadvertent purchase within five business days, and within two
business days after such notice were to divest itself of enough Common Stock so
as to no longer have beneficial ownership of 25% or more of the outstanding
Common Stock, would not be an Acquiring Person. Pursuant to the terms of the
Rights Agreement, certain types of institutional investors, as well as
designated minority and strategic investors, might not be an Acquiring Person
unless such investor were to (i) acquire, (ii) attain the right to acquire, or
(iii) announce or commence a tender or exchange offer to acquire, beneficial
ownership of in excess of ___% of the outstanding Common Stock.
Until the Separation Time, the Rights would be evidenced only by the
certificates evidencing, and would be transferred only with, the Common Stock.
Until the Separation Time, new Common Stock issued after the Record Date would
contain a notation incorporating the Rights Agreement by reference. Until the
Separation Time, the surrender for transfer, conversion or exchange of any
certificates for Common Stock on or after the Record Date, even without such
notation, would also constitute the transfer of the Rights associated with the
Common Stock represented by such certificates. As soon as practicable following
the Separation Time, separate Rights Certificates would be mailed to holders of
record of the Common Stock as of the close of business on the Separation Time,
and such separate Rights Certificates alone would evidence the Rights.
The Rights would not be exercisable until the Separation Time. The Rights
would expire at the close of business on the tenth (10th) anniversary of the
date of distribution of the Rights, unless earlier redeemed, exchanged or
terminated as provided below (the "Expiration Date").
Following the Separation Time, holders of the Rights (the "Rights Holders")
(other than Rights beneficially owned by the Acquiring Person or its affiliates
or associates, which would thereafter be void) would be entitled to receive upon
exercise and payment of the Exercise Price that number of units of the Series X
Preferred Stock which equals the result obtained by dividing the Exercise Price
by 50% of the market price per share of Common Stock. The rights, preferences
and restrictions with respect to the Series X Preferred Stock would be set forth
in a Certificate of Designation to be filed with the office of the Secretary of
State of the State of Delaware, and thereafter would become part of the
Company's Certificate of Incorporation. The Exercise Price payable, and the
number of shares of Series X Preferred Stock or other securities or property
issuable, upon exercise of the Rights would be subject to adjustment from time
to time to prevent dilution.
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<PAGE>
In the event that, after the Separation Time, the Company were to
consolidate or merge with another entity or the Company were to sell or
otherwise transfer 50% or more of its consolidated assets or earning power,
proper provision would be made so that each Rights Holder (other than Rights
beneficially owned by an Acquiring Person or affiliates or associates thereof)
would thereafter have the right to receive, upon exercise, either that number of
shares of Common Stock of the Company, if the Company were the surviving
corporation of the merger or consolidation, or of common stock in the surviving
acquiring company (or, in the event there is more than one acquiring company,
the acquiring company receiving the greatest portion of the assets or earning
power transferred), which at the time of such transaction would have a market
value of two times the Exercise Price of the Right.
The Company may elect not to issue fractional shares of Series X Preferred
Stock upon exercise of a Right and in lieu thereof may evidence such fractional
shares by depository receipts or may make an adjustment in cash based on the
market price of the Common Stock on the last trading date prior to the date of
exercise of the Right.
At any time prior to the earlier to occur of (i) the Separation Time or
(ii) the Expiration Date, the Company could redeem the Rights in whole, but not
in part, at a price of $.01 per Right (the "Redemption Price"). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
right to exercise the Rights would terminate and the only right of Rights
Holders would receive the Redemption Price.
Subject to applicable law, the Board of Directors, at its option, could, at
any time after a person or group become an Acquiring Person, exchange all or
part of the then outstanding Rights (other than Rights beneficially owned by an
Acquiring Person or affiliates or associates thereof) for Common Stock at an
exchange ratio equal to the Exercise Price divided by the market price of one
share of Common Stock per Right, subject to adjustment.
The Series X Preferred Stock purchasable upon exercise of the Rights would
not be redeemable and would be, in ranking as to dividend and liquidation
preferences, on a parity with the Common Stock but junior to any other series of
preferred stock the Company may issue or has issued (unless otherwise provided
in the terms of such preferred stock). Each share of Series X Preferred Stock
would have a preferential quarterly dividend in an amount equal to 100 times the
dividend declared on each share of Common Stock. In the event of liquidation,
the holders of Series X Preferred Stock would be entitled to a preferred
liquidation payment equal to the greater of $100.00 or 100 times the payment
made per each share of Common Stock. Each share of Series X Preferred Stock
would have 100 votes, voting together with the Common Stock. In the event of any
merger, consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Series X Preferred Stock would be entitled to receive
100 times the amount and type of consideration received per share of Common
Stock. The rights of the Series X Preferred Stock as to dividends, liquidation
and voting would be protected by customary antidilution provisions. Until a
Right is exercised, the holder thereof, as such, would have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.
The terms of the Rights could be amended at any time by the Board of
Directors without the consent of Rights Holders in order to cure any ambiguity
or to correct or supplement any defective or inconsistent provision and could,
prior to the Separation Time, be amended to change or supplement any other
provision in any manner that the Board may deem necessary or
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<PAGE>
desirable. After the Separation Time, the terms of the Rights could be amended
(other than to cure ambiguities or to correct or supplement defective or
inconsistent provisions) only so long as the amendment did not adversely affect
the interests of Rights Holders (other than the Acquiring Person). Any amendment
of the Rights or Rights Agreement which would adversely affect the rights of any
designated minority or strategic investors thereunder would require the consent
of such designated minority or strategic investors.
PURPOSE AND EFFECTS OF RIGHTS PLAN
The principal purpose in adopting a Rights Plan is to protect the interests
of all stockholders and to increase the likelihood that all stockholders of the
Company will realize the long-term value of their investment. This objective is
achieved by a Rights Plan because the potentially dilutive effect of the issued
Rights effectively delays the consummation of an unsolicited takeover or the
accumulation of a controlling block of the Company's stock until the Board of
Directors has had sufficient time to evaluate unsolicited action, consider
alternatives and take appropriate measures. The Rights Plan would not be adopted
in response to any known effort to acquire the Company, but rather as a
mechanism to assure the maximization of the Company's value for all stockholders
in the event of a takeover attempt.
The need to adopt a Rights Plan is heightened for the Company since its
Certificate of Incorporation and Bylaws, as amended, do not currently contain
any provisions designed to deal with unwanted attempts to take over the Company.
Without a Rights Plan, the Company currently has no effective tools which could
be utilized to protect and enhance stockholder value in the event of such a
takeover attempt. In this regard, it should be noted that at the February
Meeting, the Board of Directors adopted resolutions to implement two other
shareholder protection measures in addition to the Rights Plan. First, the Board
of Directors adopted resolutions to amend the Certificate of Incorporation of
the Company to eliminate cumulative voting for the election of directors (See
Proposal No. 4 below). Second, the Board of Directors adopted resolutions to
amend the Employee Plan to provide for automatic immediate vesting of all
outstanding unvested options under such plan in the event of a "Change in
Control" as defined in the Employee Plan.
Stockholders should be aware that Rights Plans are viewed by some to be
detrimental to stockholder value because they render more difficult or even
discourage attempts to acquire control of a company thereby depriving
stockholders of the opportunity to participate in possible premiums which might
have been obtained in the absence of such plans. Rights Plans have also been
criticized as making the removal of management more difficult even if such
removal would be beneficial to stockholders, generally.
The Board of Directors has considered such arguments against its adoption
and concluded that such arguments do not outweigh the protections afforded to
stockholders by such a plan. The rights granted under the Rights Plan would
serve as a protective device against coercive takeover bids, but they would not
foreclose a fair takeover bid. As such, the rights encourage and provide an
incentive to potential acquirors to negotiate directly with the Board of
Directors whose ability to negotiate effectively, fairly and in the interest of
all stockholders is much greater than that of stockholders individually. The
Rights Plan provides the Board of Directors the flexibility to maximize each
stockholder's investment in the event an attempt is made to acquire the Company.
Thus, the Rights Plan would operate to encourage third parties seeking to
acquire
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control of the Company to make an offer to all stockholders upon terms which
reflect full value for each share.
The adoption of the Rights Plan by the Board of Directors would be a lawful
and valid exercise of its business judgment in the management of the Company's
affairs. Because the decision to adopt the Rights Plan is properly within the
Board's business judgment, it does not require stockholder approval under
Delaware law. The Board's decision to adopt the Rights Plan was made in good
faith and in the best interest of the Company's stockholders as mandated by
Delaware law.
APPROVAL OF THE AMENDMENT
If the amendments to Article FOURTH of the Company's Certificate of
Incorporation are authorized, Article FOURTH will read as follows:
"FOURTH: Number of Shares."
(a) The corporation is authorized to issue two classes of stock
designated "Preferred Stock" and "Common Stock," respectively. The total
number of shares of Preferred Stock authorized to be issued is Ten Million
(10,000,000) and each such share shall have a par value of one cent ($.01).
The total number of shares of Common Stock authorized to be issued is Forty
Million (40,000,000) and each such share shall have a par value of one cent
($.01)."
(b) The Shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors of the corporation is hereby
authorized, by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof, including but not
limited to the fixing or alteration of the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the
liquidation preferences of any wholly unissued series of shares of
Preferred Stock, or any of them; and to increase or decrease the number of
shares of any series subsequent to the issue of the shares of that series,
but not below the number of shares of any series then outstanding. In case
the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to
the adoption of the resolution originally fixing the number of shares of
such series."
Approval of the amendment to the Certificate of Incorporation requires the
affirmative vote of the holders of a majority of the Company's outstanding
Common Stock. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
Amendment to THE CERTIFICATE OF INCORPORATION. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
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APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO ELIMINATE CUMULATIVE VOTING
(Proposal No. 4)
Currently, under Article Ninth, Paragraph (5) of the Certificate of
Incorporation, stockholders have the right to cumulate votes in any election of
directors. The Board of Directors of the Company has unanimously recommended
that the stockholders approve an amendment to the Certificate of Incorporation
eliminating the provision for cumulative voting.
If cumulative voting is eliminated, the holders of a majority of the shares
present at any annual meeting will be able to elect all of the directors to be
elected at that meeting. No nominee could be elected without the support of a
majority of the stockholders present and voting. Thus, if cumulative voting is
eliminated, a person or group of persons holding shares or proxies representing
less than a majority of the shares voting for the election of directors will not
be able to elect any directors, even though they might have been able to do so
if cumulative voting were available. For example, if six directors were to be
elected, a stockholder or group of stockholders holding more than one-sixth of
the shares voting at the meeting could, by voting cumulatively, elect one
director; without cumulative voting such stockholder or group of stockholders
would not be able to elect any directors unless holders of more than one-half of
the shares voting at the meeting supported the nominees of such stockholder or
group of stockholders. Additionally, the holders of a majority of the
outstanding shares would be able to remove any or all of the directors, even
over the objections of stockholders holding a number of shares that would be
sufficient to prevent the removal of one or more directors under cumulative
voting. Accordingly, the elimination of cumulative voting would (i) permit a
majority of the shares voting to elect or remove every director; and (ii)
preclude a minority of the shares voting at a meeting from electing or
preventing the removal of any director. The elimination of cumulative voting
could therefore prevent minority stockholders (even those with substantial
holdings but less than a majority) from obtaining representation on the Board of
Directors. The elimination of cumulative voting may tend to make achieving a
change in control of the Company more difficult by preventing substantial
minority stockholders from electing directors.
The Board of Directors believes that the elimination of cumulative voting
is in the best interest of the Company and its stockholders. Public companies
are potentially subject to attempts to acquire significant minority positions
with the intent either of obtaining actual
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control by electing their own slate of directors by certain parties, or
achieving some other goal, such as the repurchase of their shares by the company
at a premium. Because it facilitates minority representation on the board,
cumulative voting makes it easier for an uninvited acquiror or competitor to
gain representation on the Company's Board of Directors. Even if such a person
lacked sufficient shares to actually gain control of the Company, board
representation would allow them access to confidential company information and
could be disruptive. The adoption of Proposal No. 4 will make it more difficult
for such a person to gain representation on the Company's Board of Directors.
Another advantage of eliminating cumulative voting is that the Company's
Board of Directors will be composed of persons representing a majority of the
stockholders, rather than directors potentially elected by one or more separate
factions of minority stockholders to serve as guardians of narrow or limited
interests. The Board of Directors, through its nominating process, has selected
directors based on their qualifications, their business acumen and their
divergent backgrounds. The Board of Directors thus selected reflects the broad
interests of the Company and its stockholders without the factionalization that
can occur when minority stockholders elect board members to represent their
special interests. By eliminating cumulative voting, a unified Board of
Directors, of divergent views and backgrounds, can, in the exercise of its
fiduciary duties, examine all options available to the Company and represent all
stockholders in evaluating and pursuing those options.
Approval of the amendment to the Certificate of Incorporation requires the
affirmative vote of the holders of a majority of the Company's outstanding
Common Stock. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
Amendment to THE CERTIFICATE OF INCORPORATION. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS A VOTE AGAINST THE PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
APPROVAL OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal No. 5)
The firm of Arthur Andersen LLP, certified accountants, has been the
Company's independent accountants since the Company's inception and has been
selected by the Board of Directors to serve as its independent accountants for
the fiscal year ending February 2, 1998. Professional services rendered by
Arthur Andersen LLP for the fiscal year ended January 26, 1997 consisted of an
audit of the Company's financial statements, consultation on interim financial
statements, services related to filings with the Securities and Exchange
Commission, meetings with the Company's Audit Committee and consultation on
various matters relating to accounting and financial reporting. The Audit
Committee of the Board of Directors met periodically with representatives of
Arthur Andersen LLP during the past fiscal year. The members of the Audit
Committee are Messrs. Hankin, Burra, Orbuch, Schraith and Vance.
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<PAGE>
Representatives of Arthur Andersen LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement, if they so desire,
and respond to appropriate questions from stockholders. The Board of Directors
recommends a vote "for" approval of the appointment of the auditors.
ANNUAL REPORTS
The Company hereby undertakes to provide upon written request a copy of the
Company's Annual Report on Form 10-K, including the financial statements and the
schedules thereto, for the fiscal year ended January 26, 1997 without charge to
any person whose proxy is solicited by this statement. Such written request is
to be directed to Gisela Auchter, Semtech Corporation, 652 Mitchell Road,
Newbury Park, California 91320-2289.
OTHER MATTERS
The management of the Company knows of no other matters that may properly
be, or which are likely to be, brought before the meeting. However, if any other
matters are properly brought before the meeting, the persons named in the
enclosed proxy or their substitutes will vote in accordance with their best
judgment on such matters.
STOCKHOLDER PROPOSALS
Stockholder proposals for the 1998 Annual Meeting must be received by the
Company no later than 120 days prior to April 11, 1998 in order to be considered
for inclusion in the Company's proxy materials.
By Order of the Board of Directions
David G. Franz, Jr.
Vice President of Finance
and Secretary
Dated: April 25, 1997
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<PAGE>
SEMTECH CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Semtech Corporation hereby appoints John D.
Poe and David G. Franz, Jr., and each of them, as attorneys and proxies for the
undersigned, each with full power to act without the other and with the power of
substitution to represent the undersigned at the Annual Meeting of Stockholders
of Semtech Corporation to be held on June 5, 1997 at 1:00 p.m., Los Angeles
time, and at any adjournment or postponement thereof, and to vote all of the
shares of Common Stock of Semtech Corporation which the undersigned is entitled
to vote in accordance with the instructions below and on the reverse hereof;
provided however, that such proxies, or either of them, shall have the power to
cumulate votes and distribute them among the nominees listed below as they see
fit, and to drop any of such nominees, in order to ensure the election of the
greatest number of such nominees.
The Board of Directors unanimously recommends a vote "FOR" Proposals 1, 2, 3,
4 and 5:
(1) ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed below
contrary below)
James P. Burra, Rock N. Hankin, Allen H. Orbuch, John D. Poe, James T. Schraith,
Jack O. Vance
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
(2) APPROVAL OF AMENDMENT TO THE 1994 LONG-TERM STOCK INCENTIVE PLAN
[_] FOR [_] AGAINST [_] ABSTAIN
(3) APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE
AUTHORIZED CAPITAL
[_] FOR [_] AGAINST [_] ABSTAIN
(4) APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO ELIMINATE
CUMULATIVE VOTING
[_] FOR [_] AGAINST [_] ABSTAIN
(5) PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP as the independent
public accountants of the Company for the current fiscal year
[_] FOR [_] AGAINST [_] ABSTAIN
(6) With discretionary authority to vote such shares with respect to the
transaction of such other business as may properly come
before the meeting.
This Proxy, when properly executed, will be voted as directed, or if no
direction is indicated, it will be voted FOR proposals 1, 2, 3, 4 and 5.
Discretionary authority is hereby conferred as to all other matters that may
come before the meeting.
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting of Stockholders and hereby ratifies and confirms all that said proxies,
and each of them, may lawfully do by virtue hereof. The undersigned also
acknowledges receipt of the Notice of Annual Meeting of Stockholders to be held
June 5, 1997 and the Proxy Statement furnished herewith.
Dated: _____________________________
____________________________________
____________________________________
Stockholder's Signature
Note: Please sign name exactly as imprinted
above. When signing as attorney, administrator,
executor, trustee or guardian, please give full
title as such; if a corporation, sign in full
corporate name by an authorized officer; and, if
a partnership, sign in partnership name by
authorized person. If more than one name appears
hereon, all persons named should sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
