QuickLinks-- Click here to rapidly navigate through this documentUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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SCHEDULE 14A |
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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. ) |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Soliciting Material underPursuant to §240.14a-12
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Vitesse Semiconductor Corporation |
VITESSE SEMICONDUCTOR CORPORATION |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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741 Calle Plano Drive
Camarillo, California 93012
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 11, 2010
TO OUR STOCKHOLDERS:To Be Held Thursday, January 26, 2012
NOTICE IS HEREBY GIVEN that the
To Our Stockholders:
The 2012 Annual Meeting of Stockholders of VITESSE SEMICONDUCTOR CORPORATION, a Delaware corporation,Vitesse Semiconductor Corporation will be held on May 11, 2010January 26, 2012, at 99:00 a.m. local time at the Hyatt Westlake Plaza in Thousand Oaks, 880 S.South Westlake Blvd.,Boulevard, Westlake Village, CaliforniaCA 91361, for the following purposes:
1.
- To elect
fivesix directors to servehold office for the ensuing year and until their successors are duly elected (Proposal One);
- elected;
2.
- To
approve the 2010 Vitesse Semiconductor Corporation Incentive Plan (Proposal Two);
- hold an advisory vote on executive compensation;
3.
- To hold an advisory vote on the frequency of the advisory vote on executive compensation;
4.To ratify the appointmentselection of BDO Seidman,USA, LLP as the Company'sour independent registered public accounting firm for the fiscal year ending September 30, 2010 (Proposal Three);2012; and
5.
4.- To transact such other business as may properly be brought before the meeting and any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy Statementproxy statement accompanying this Notice.
Stockholders of record at the close of business on March 26, 2010December 5, 2011 are entitled to notice of, and to vote at, the meeting.Annual Meeting.
All stockholders are cordially invited to attend the meeting. However,This year we are using the Internet as our primary means of furnishing proxy materials to assureour stockholders. Accordingly, most stockholders will not receive paper copies of our proxy materials. We will instead send our stockholders a notice with instructions for accessing the proxy materials and voting electronically over the Internet or by telephone. The notice also provides information on how stockholders may request paper copies of our proxy materials. You may access the proxy statement and our annual report on the Internet, both of which are available at “www.edocumentview.com/VTSS.”
Your vote is important. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting and we urge you to vote as soon as possible. As an alternative to voting in person at the Annual Meeting, you may vote electronically over the Internet or by telephone, or if you receive a proxy card or voting instruction form in the mail, by mailing the completed proxy card or voting instruction form. Timely voting by any of these methods will ensure your representation at the meeting, you are urged to mark, sign, date and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose. Any stockholder of record attending the meeting may vote in person even if he or she has returned a proxy. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.Annual Meeting.
| | By Order of the Board of Directors, |
| | Sincerely, |
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Camarillo, California |
Christopher R. Gardner
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December 6, 2011 | President and Chief Executive Officer |
Camarillo, California
March 31, 2010
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 11, 2010
The proxy statement and annual report to stockholders are available atwww.vitesse.com/2010-annual-proxy.
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to complete, sign and date the enclosed proxy card as promptly as possible and return it in the enclosed envelope. Any stockholder attending the Annual Meeting may vote in person even if he or she returned a proxy card.
VITESSE SEMICONDUCTOR CORPORATION
741 Calle Plano Drive
Camarillo, California 93012
(805) 388-3700
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxyproxy is solicited on behalf of the Board of Directors (the "Board"“Board”) of Vitesse Semiconductor Corporation ("Vitesse"(“Vitesse” or the "Company"“Company”, “us”, “we”, or “our”) for use at the 2012 Annual Meeting of Stockholders (the "Annual Meeting"“Annual Meeting”) to be held at the Hyatt Westlake Plaza in Thousand Oaks, 880 S.South Westlake Blvd.,Boulevard, Westlake Village, CaliforniaCA 91361, on May 11, 2010Thursday, January 26, 2012, at 9:00 a.m., local time and at any adjournment(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. Our telephone numberThis Proxy Statement is (805) 388-3700. These proxy solicitation materials were first mailed on or about April 1, 2010being made available to all stockholders entitled to vote at the Annual Meeting.Meeting on or about December 16, 2011.
Record Date and Share OwnershipShares Outstanding
Stockholders of record at the close of business on March 26, 2010December 5, 2011 (the "Record Date"“Record Date”) are entitled to notice of and to vote at the meetingAnnual Meeting and at any adjournment(s) thereof. On the Record Date, 404,841,80224,487,978 shares of our common stock, $0.01 par value, were issued and outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use (i) by delivering to us at our principal offices (Attention: Tracy Kern, Corporate Controller)Secretary) a written notice of revocation or a duly executed proxy bearing a later date, or (ii) by attending the meetingAnnual Meeting and voting in person. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote in person at the meeting,Annual Meeting, you must obtain a proxy issued in your name from that record holder, and you will need to provide a copy of such proxy at the meeting.Annual Meeting.
Attendance at the Annual Meeting
All stockholders of record as of the Record Date may attend the Annual Meeting. Please note that cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. No items will be allowed into the Annual Meeting that might pose a concern for the safety of those attending. Additionally, to attend the meeting you will need to bring identification and proof sufficient to us that you were a stockholder of record as of the Record Date or that you are a representative of a stockholder of record as of the Record Date for a stockholder of record that is not a natural person.
For directions to attend the Annual Meeting, please visit the Hyatt Westlake Plaza'sPlaza in Thousand Oaks website athttp://westlake.hyatt.com/hyatt/hotels/services/maps/index.jspmaps or contact the hotel via telephone at (805) 557-1234.
Voting and Costs of Solicitation
On all matters, other than the election
Shares Directly Held—Stockholder of directors, each share has one vote.
Record. If you are a stockholder of record as of“registered holder,” that is your shares are registered in your name through our transfer agent, and you are viewing this proxy over the Record Date,Internet you may vote electronically over the Internet. For those stockholders who receive a paper proxy in person at the Annual Meetingmail, you may also vote electronically over the Internet or by telephone or by completing and mailing the proxy card provided. The website identified in our Notice of Internet Availability of Proxy Materials provides specific instructions on how to vote electronically over the Internet. Those stockholders who receive a paper proxy by proxy using the enclosed proxy card.Whether or not you plan to attend the Annual Meeting, we urge youmail, and who elect to vote by mail, should complete and return the mailed proxy to ensure your vote is counted. As stated above, youcard in the prepaid and addressed envelope that was enclosed with the proxy materials. You may still attendrequest a ballot at the Annual Meeting and vote in person if you have already voted by proxy.
•To vote in person: Come to the Annual Meeting and we will give you a ballot at the time of voting. If you have previously turned in a proxy card, please notify us at the Annual Meeting that you intend to cancel the proxy and vote by ballot.
•To vote using the proxy card: Simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, the designated proxies will vote your shares as you direct. If you are a stockholder of record, you willnot be able to cast your vote over the Internet or by telephone. If you hold your shares in "street name," the broker, nominee, fiduciary or other custodian through which you hold your shares will instruct you as to how your shares may be voted by proxy.person.
If you return a signed and dated proxy card without marking any voting directions, your shares will be voted:
•"For" the election of all five (5) nominees for director set forth herein as described in Proposal One;
•"For" the approval of the 2010 Vitesse Semiconductor Corporation Incentive Plan (the "2010 Incentive Plan") as described in Proposal Two;
•"For" the ratification of the appointment of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2010 as described in Proposal Three;
If any other matter is properly presented at the Annual Meeting, your proxy holders (one of the individuals named on your proxy card) will vote your shares in their discretion.
Shares Indirectly Held—Beneficial Owner. If your shares are held in "street name," meaning that they are registered in the name of a broker, nominee, fiduciarystock brokerage account or by a bank or other custodian, then generally only thatnominee, you are considered the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by your broker or nominee fiduciary or other custodian may execute a proxy andwho is considered the stockholder of record with respect to those shares. We urge you to direct your broker on how to vote your shares. Beneficial owners may attend the Annual Meeting, but may not vote in person unless you obtain a signed proxy from the stockholder of record giving you the right to vote the shares in person at the Annual Meeting. Your broker nominee, fiduciary or other custodiannominee should provide you with a voting instruction formcard for youryou to use to provide them with instructions as toin directing the broker or nominee regarding how to vote your shares. If you did not receive a voting instruction card, please contact the institution holding your shares. We recommend that you vote your shares atin advance as described above, so that your vote will be counted if you later decide not to attend the Annual Meeting. If your shares are held of record
Only proxy cards and voting instruction forms that have been signed, dated and timely returned, and only proxies that have been timely voted electronically or by telephone will be counted in "street name"the quorum and voted. The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time, Wednesday, January 25, 2012. Stockholders who vote over the Internet or by telephone need not return a broker, nominee, fiduciary or other custodian and you wish to vote in person at the Annual Meeting, you must obtain from the record holder a "legal proxy" issued in your name.
Stockholders that receive more than one proxy card or voting instruction form have shares registered in different forms or in more than one account. Stockholders that receive more than oneby mail.
We will bear the entire cost of the solicitation of proxies for the Annual Meeting, including the preparation, assembly, printing and mailing of the Notice of Internet Availability of Proxy Materials, this proxy statement, the proxy card, are requestedand any additional solicitation materials furnished to please sign, date and return all proxy cards and provide instructions for all voting instruction forms received to ensure that all of your shares are voted.
The cost of this solicitation will be borne by us. Georgeson Inc. will distribute proxy materials to beneficial owners, may solicit proxies by personal interview, mail, telephone, and electronic communications, and will request brokerage houses and other custodians, nominees, and fiduciaries to forward soliciting material to the beneficial owners of the common stock held on the record date by such persons. The Company will pay Georgeson Inc. $7,500 for its proxy solicitation services and will reimburse Georgeson Inc. for payments made to brokers and other nominees for their expenses in forwarding solicitation materials.stockholders. Solicitations also may be made by personal interview, telephone and electronic communications by directors, officers and other employees of the CompanyVitesse without additional compensation. We may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such beneficial owners. No additional compensation will be paid to those individuals for any such services.
If your proxy is properly submitted, the shares represented thereby will be voted at the Annual Meeting in accordance with your instructions. If you are a registered holder and you do not specify how the shares represented thereby are to be voted, your shares will be voted as follows:
Quorum; Abstentions;·“For” election of all six nominees for director as described in Proposal One;
·“For” approval of the advisory vote on executive compensation as described in Proposal Two;
·In favor of a say-on- pay vote occurring every “1 Year” as described in Proposal Three; and
·“For” ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm as described in Proposal Four.
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If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the meeting to another time or place in order to solicit additional proxies in favor of the nominees of the Board of Directors, the persons named as proxies and acting thereunder will have discretion to vote on these matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. At the date this proxy statement went to press, we did not know of any other matter to be raised at the Annual Meeting.
Some stockholders receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form because their shares are held in multiple accounts or registered in different names or addresses. Please vote your shares held in each account to ensure that all of your shares will be voted.
Quorum, Abstentions, Broker Non-Votes;Non-Votes, Required Votes
Our Bylawsbylaws provide that stockholders holding a majority of the shares of common stock issued and outstanding and entitled to vote on the Record Date constitute a quorum at meetings of stockholders. Therefore, at the Annual Meeting, the presence, in person or by proxy, of the holders of at least 202,420,90212,243,990 shares of Common Stock will be required to establish a quorum. Each outstanding share of
our Common Stock is entitled to one vote on each proposal at the Annual Meeting. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. Broker non-votes, however, are not counted as shares present and entitled to be voted with respect to the matter on which the broker has expressly not voted. Thus, broker non-votes will not affect the outcome of any of the matters being voted on at the Annual Meeting. Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner and (2) the broker lacks discretionary voting power to vote such shares because the matter is not considered a routine matter. The only routine matter that is being submitted to stockholders at the Annual Meeting is Proposal Four, ratification of the appointment of our independent registered public accounting firm.
In the election of the six directors (Proposal One), you may vote “For” all of the nominees or your vote may be “Withheld” with respect to one or more of the nominees. With respect to Proposal Three, the advisory vote on the frequency of the advisory vote on executive compensation, you may vote for “1 year,” “2 years,” or “3 years” or you may “Abstain.” For all other proposals, you may vote “For,” “Against” or “Abstain.” If you “Abstain,” it has the same effect as a vote “Against.”
If a quorum is present at the Annual Meeting, a plurality of the shares voting will be sufficient to elect the director nominees (Proposal One). This means that the six nominees for election as directors who receive the most votes “for” election will be elected. Approval of the proposals requires the following votes: The five director nominees receiving the highest number of "For" votes will be elected as directorsadvisory vote on executive compensation (Proposal Two) and ratification of the Company andappointment of our independent registered public accounting firm (Proposal Four), each of Proposals 2 and 3 requires thewill require an affirmative vote of athe majority of the shares of Common Stock present or represented at the Annual Meeting. Votes will be counted by the inspector of election appointed for the Annual Meeting who will separately count "For" and (with respect to proposals other than the election of directors) "Against" votes, abstentions and broker non-votes. Because directors are elected by a plurality vote, abstentions in the election of directors will have no impact once a quorum exists. Abstentions will be counted towards the vote total for each proposal, other than the election of directors, will have the same effect as "Against" votes with respect to such proposal. With respect to the proposalsfrequency of the advisory vote on executive compensation (Proposal Three), the Board will give careful consideration to approve the 2010 Vitesse Semiconductor Corporation Incentive Planvoting results on this proposal and expects to ratifyadopt the appointmentalternative that receives the greatest number of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2010. A "broker non-vote" occurs when a nominee holding shares for a beneficial ownervotes, even if that alternative does not vote onreceive a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner. Broker non-votes represented by submitted proxies will not be taken into account in determining the outcomemajority of the election of directors or the proposals to approve the 2010 Vitesse Semiconductor Corporation Incentive Plan and to ratify the appointment of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2010.votes cast.
If you hold shares in your name, and you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our Board on all matters and as the proxy holders may determine in their discretion with respect to any other matters that properly come before the meeting.
Effect of Not Casting Your Vote
If you hold your shares in street name it is critical that you cast your vote if you want it to count in the election of directors (Proposal One of this proxy statement)One). In the past, if you held your shares in street name, and you did not indicate how you wanted your shares voted in the election of directors, your bank or broker was allowed to vote those shares on your behalf in the election of directors as theyit felt appropriate.
Recent changes in regulations were made to take away the ability of your
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Your bank or broker no longer has the discretion to vote your uninstructed shares in the election of directorsdirectors. Similarly, your bank or broker does not have ability to vote your uninstructed shares on any other matters being submitted to the stockholders for a discretionary basis.vote at the Annual Meeting other than ratification of the appointment of our independent registered public accounting firm (Proposal Four). Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote inat the election of directors, no voteAnnual Meeting, your shares will not be castvoted on your behalf. Your bankProposals One, Two or broker does not have discretion to vote any uninstructed shares in favor of the approval of the 2010 Incentive Plan (Proposal Two of this proxy statement), however your bank or broker will continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company's independent registered public accounting firm (Proposal Three of this proxy statement).Three.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders that are intended
In order for a stockholder proposal to be presented by such stockholders atconsidered for inclusion in our proxy statement for our 2013 Annual Meeting of Stockholders, the annual meeting of stockholders for the 2010 fiscal yearwritten proposal must be received by us no later than August 18, 2012, and should contain the close of business on the 45th day, nor earlier than the close of business on the 75th day, prior to the one year anniversary of the date these proxy materials were first mailed by us unless the annual meeting of stockholders is held prior to April 11, 2011 or after July 10, 2011, in which case, the proposal must be received by us not earlier than the 120th day prior to the annual meeting and not later than the later of the 90th day prior to the annual meeting and the tenth day following public announcement of the date the annual meeting will be held and must otherwise be in compliance with applicable laws and regulations in order to be considered for inclusion in the proxy statement and form of proxy relating to that meeting. Under the federal securities laws, for such a matter to be included in the proxy materials
for the annual meeting of stockholders for the 2010 fiscal year, timely notice must be delivered to us atinformation required under our principal executive offices to the attention of Tracy Kern, our Corporate Controller, not less than 120 days beforebylaws. If the date of next year’s annual meeting is moved more than 30 days before or after January 26, 2013, the first anniversary date of this year’s Annual Meeting, the deadline for inclusion of proposals in our proxy statement releasedis instead a reasonable time before we begin to stockholders in connection with the previous year's annual meeting, or December 2, 2010. Stockholderprint and mail our proxy materials for next year’s meeting. Any proposals must otherwisewill also need to comply with the requirements of Rule 14a-8 of the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). , regarding the inclusion of stockholder proposals in company sponsored proxy materials. Proposals should be addressed to our Corporate Secretary, at our principal executive offices.
If a stockholder who has notified us of his or her intentionyou intend to present a proposal at an annualour 2013 Annual Meeting of Stockholders and the proposal is not intended to be included in our proxy statement relating to that meeting, you must give us advance notice of the proposal in accordance with our bylaws. Pursuant to our bylaws, in order for a stockholder proposal to be deemed properly presented in these circumstances, a stockholder must deliver notice of the proposal to our Corporate Secretary, at our principal executive offices after the close of business on October 28, 2012 and before the close of business on November 27, 2012. However, if the date of our 2013 Annual Meeting of Stockholders is more than 30 days before or after January 26, 2013, the first anniversary of this year’s Annual Meeting, stockholders must give us notice of any stockholder proposals within a reasonable time before the mailing date of the proxy statement for next year’s Annual Meeting. If a stockholder does not appearprovide us with notice of a stockholder proposal in accordance with the deadlines described above, the stockholder will not be permitted to present his or her proposal at such meeting, we need not present the proposal to the stockholders for a vote at suchthe meeting.
However,
The proxies to be solicited by us through our Board of Directors for our 2013 Annual Meeting of Stockholders will confer discretionary authority on the proxy holders to vote on any stockholder proposal properly presented at the 2013 Annual Meeting of Stockholders if we fail to receive notice of the stockholder’s proposal for the meeting by August 18, 2012.
If a stockholder wishesdesires only to recommend a candidate for consideration by the GovernanceNominating and NominatingCorporate Governance Committee as a potential nominee for the Company's Board, see the procedures discussed in "Proposal“Proposal One—Election of Directors—Process for Recommending Candidates for Election to the Board of Directors."”
The attached proxy card grants to the proxyholders discretionary authority to vote on any matter raised at the Annual Meeting.
Delivery of Voting Materials to Stockholders Sharing an Address
To reduce the expense of delivering duplicate voting materials to our stockholders who may hold shares of Vitesse common stock in more than one stock account, we are delivering only one set of the proxy solicitation materials to certain stockholders who share an address, unless otherwise requested. A separate proxy card is included in the voting materials for each of these stockholders. We will promptly deliver, upon written or oral request, a separate copy of the annual report or this proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered. To obtain an additional copy, you may write us at 741 Calle Plano Drive, Camarillo, California 93012, Attn: Investor Relations, or contact us by telephone at (805) 388-3700 and request to be connected to our Investor Relations department. Similarly, if you share an address with another stockholder and have received multiple copies of our proxy materials, you may contact us at the address or telephone number specified above to request that only a single copy of these materials be delivered to your address in the future. Stockholders sharing a single address may revoke their consent to receive a single copy of our proxy materials in the future at any time by contacting our distribution agent, Broadridge, either by calling toll-free at 1-800-542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Broadridge will remove such stockholder from the householding program within 30 days of receipt of such written notice, after which each such stockholder will receive an individual copy of our proxy materials.
Further Information
We will provide without charge to each stockholder solicited by these proxy solicitation materials a copy of Vitesse'sVitesse’s annual report on Form 10-K for the fiscal year ended September 30, 20092011, without exhibits, and any amendments, thereto on Form 10-K/A upon request of such stockholder made in writing to Vitesse Semiconductor Corporation, 741 Calle Plano Drive, Camarillo, California 93012, Attn: Investor Relations. We will also furnish any exhibit to the annual report on Form 10-K, if specifically requested in writing. You can also access our Securities and Exchange Commission ("SEC"(“SEC”) filings, including our annual reports on Form 10-K, and all amendments thereto filed on Form 10 K/A, on the SEC website at www.sec.gov.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 11, 2010
The proxy statement and annual report to stockholders are available at www.vitesse.com/2010-annual-proxy.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
Five (5)
Our bylaws provide that the authorized number of directors is a minimum of five and a maximum of nine, with the exact number set by our Board. Currently, the authorized number of directors of the Company is six, and six members of our Board are to be elected at the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the nominees named below. Each nominee has consented to be named a nominee in thethis proxy statement and to continue to serve as a director if elected. If any nominee becomes unable or declines to serve as a director, if additional persons are nominated at the meeting, or if stockholders are entitled to cumulate votes, the proxy holders intend to vote all proxies received by them in such a manner (in accordance with cumulative voting) as will ensure the election of as many of the nominees listed below as possible, and the specific nominees to be voted for will be determined by the proxy holders.
We are not aware of any reason that any nominee will be unable or will decline to serve as a director. The term of office of each person elected as a director will continue until the next Annual Meeting of Stockholders, or until a successor has been elected and qualified, or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers. There are no arrangements or understandings between any director or executive officer and any other person pursuant to which he or she is or was to be selected as a director or officer.
The names of the nominees, all of whom are currently directors standing for re-election, and certain information about them as of March 26, 2010December 5, 2011, are set forth below. All of the nominees have been recommended for nominationnominated by a majority of the Board acting on the recommendation of the GovernanceNominating and NominatingCorporate Governance Committee of the Board, which was approved by a majority vote of the members of such committee. The committee consists solely of independent members of the Board. There are no family relationships among directors or executive officers
The Board recommends that stockholders vote “For” the election of Vitesse.each of the following nominees.
Nominee | | Age | | Director
Since | | Principal Occupation |
Christopher R. Gardner | | 51 | | 2006 | | President and Chief Executive Officer of Vitesse |
| | | | | | |
Steven P. Hanson(1)(2) | | 63 | | 2007 | | Retired President and CEO of ON Semiconductor |
| | | | | | |
James H. Hugar(1)(2) | | 65 | | 2009 | | Retired Partner of Deloitte & Touche, LLP |
| | | | | | |
G. William LaRosa(2)(3) | | 65 | | 2010 | | Chief Executive Officer of G.W. LaRosa & Associates, LLC |
| | | | | | |
G. Grant Lyon(3) | | 48 | | 2009 | | President of Odyssey Capital Group, LLC |
| | | | | | |
Edward Rogas, Jr.(1)(3) | | 71 | | 2006 | | Chairman of the Board of Vitesse, Retired Senior Vice President of Teradyne, Inc. |
| | | | | | | | |
Name | | Age | | Director
Since | | Principal Occupation |
|---|
Christopher R. Gardner | | | 49 | | | 2006 | | President and Chief Executive Officer |
Steven P. Hanson(1)(2) | | | 61 | | | 2007 | | Senior Partner at Southwest Value Acquisitions LLC |
James H. Hugar(1)(2) | | | 63 | | | 2009 | | Retired Partner at Deloitte & Touche, LLP |
G. Grant Lyon(3) | | | 46 | | | 2009 | | President of Odyssey Capital Group, LLC |
Edward Rogas, Jr.(1)(3) | | | 69 | | | 2006 | | Chairman of the Board of Vitesse, Retired Senior Vice President at Teradyne, Inc. |
- (1)
- Member of the Audit
Committee.
- Committee
(2)
- Member of the Nominating and Corporate Governance
Committee.
- Committee
(3)
- Member of the Compensation
Committee.
Except as set forth below, each of our directors has been engaged in his principal occupation set forth above during the past five years.Committee
Vote Required
If a quorum is present, the six nominees receiving the highest number of votes will be elected to the Board. See “Information Concerning Solicitation and Voting—Quorum, Abstentions, Broker Non-Votes, Required Votes.”
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Directors’ Principal Occupation, Business Experience and Qualifications
Christopher R. Gardner, age 49, has beenserved as a director since October 26, 2006. Mr. Gardner has beenand our Chief Executive Officer since 2006. He served as Vice President and Chief Operating Officer from 2000 to 2002. From 2002 until he was appointed Chief Executive Officer in 2006, he served as our Vice President and General Manager of the Network Products Division.Division, and from 2000 to 2002, he served as our Vice President and Chief Operating Officer. Prior to joining Vitesse in 1986, Mr. Gardner served as a member of the Technical Staff at Bell Laboratories from 1982 to 1986.Laboratories. Mr. Gardner’s extensive career in the semiconductor industry, combined with his extensive knowledge and understanding of our Company, the industry and the markets in which we operate, and the issues facing the Company, make Mr. Gardner a valuable member of our Board. Mr. Gardner received his BSEE degree from Cornell University and his MSEE degree from the University of California at Berkeley.
Steven P. Hanson, age 61, has beenserved as a director since August 16, 2007. For more than 32 years, Mr. Hanson has been a senior partner at Southwest Value Acquisitions LLC, a private equity firm, since 2004. In addition Mr. Hanson serves on the Board of Deca Technologies Inc., a chip scale packaging company and subsidiary of
Cypress Semiconductor Corp. From 2007 to 2009, he served as the Chairman of InPlay Technologies Inc., a high-technology firm delivering human input device technologies and products. From 1999 to 2003, Mr. Hanson was President and Chief Executive Officer of ON Semiconductor. He has served for more than 32 years in senior executive roles at technology companies, including 28 years at Motorola in various engineering management and leadership positions. Mr. Hanson served as the President and Chief Executive Officer of ON Semiconductor from 1999 to 2003. Mr. Hanson has been a senior partner at Southwest Value Acquisitions LLC, a private equity firm, since 2004. He served as the Chairman of InPlay Technologies, Inc., a high-technology firm delivering leadership human input device technologies and products from 2005 to 2007. Mr. Hanson has served Arizona State University as a member of the Dean'sDean’s Advisory Council, W.P. Carey School of Business and the Dean'sDean’s Advisory Council for the Ira A. Fulton School of Engineering. As a former senior executive at technology companies including ON Semiconductor and the General Manager of Europe, Middle East and Africa Semiconductor Group of Motorola, Mr. Hanson brings operational, strategic and industry expertise to our Board. Mr. Hanson holds a BSEE degree from the College of Engineering at Arizona State University.
James H. Hugar, age 63, was appointed to the Board of Directors on has served as a director since October 30, 2009. Mr. Hugar recently retired from Deloitte & Touche, LLP, a public accounting firm, where he was an audit partner from 1982 to 2008, specializing in the financial services industry. Prior to his retirement, he also served as the partner-in-charge of the Southern California Investment Companies Industry and Broker/Dealer Practice Unit. Mr. Hugar currently expectsserves on the Board of Advisors of American Relocation & Logistics, Inc., a privately-held company. With over 35 years of experience in public accounting, including participation at hundreds of audit committee meetings and serving as a director/advisor for both privately and publicly held companies, Mr. Hugar brings public company financial expertise to join the board of directors of Imperial Capital Group, Inc. in connection with the closing of Imperial Capital Group, Inc.'s initial public offering.Board. Mr. Hugar holds a bachelor'sBS degree in Accounting (cum laude) from Pennsylvania State University and an MSBA degree from the University of California, Los Angeles, and is a Certified Public Accountant.
G. William LaRosa has served as a director since August 2010. Mr. LaRosa is currently the Chief Executive Officer of G.W. LaRosa & Associates, LLC, a global technology sales and business development firm, a position he has held since June 2009. Mr. LaRosa founded Lead Group International (LGI) and helped lead smaller technology companies including Silicon Graphics and American Motion Systems. Mr. LaRosa currently serves on the board of advisors for Silvatron Partners in Los Gatos, California. Mr. La Rosa also currently serves as a group chairman of Visage International, a global CEO organization. He is a past director for the advisory board for the Lubin School of Business at PACE University, and a CEO and former chairman of the board at LGI. The experience he gained over the 30 years of holding various senior level, VP and senior executive positions at industry leading companies including General Electric, IBM and Advanced Micro Devices allows Mr. LaRosa to provide the Board with industry experience and public company sales, marketing and operational expertise. Mr. LaRosa earned his MBA degree from the Lubin School of Business at PACE University and has a BS degree in electrical and electronic engineering from Manhattan College in New York City.
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G. Grant Lyon, age 46, was appointed to the Board of Directors on has served as a director since October 30, 2009. Mr. Lyon is currently the presidentPresident of Odyssey Capital Group, LLC, a financial advisory and management consulting firm, whichwhere he founded inhas been employed since 1998. In 2005, he served as interim Chief Financial Officer of Hypercom Corporation. BeforePrior to 2005, Mr. Lyon held positions as managing director at Ernst & Young Corporate Finance, LLC, and a managing member of Golf Equity, LLC vice president,and Vice President, Capital Markets at Evans Withycombe Residential, Inc. HeMr. Lyon began his career at Arthur Andersen, LLP, where he worked from 1987 to 1997.1989. Mr. Lyon has been involved in corporate initiatives that have included capital acquisition, business and securities valuation, acquisitions and mergers, and bankruptcy reorganizations. Mr. Lyon is a director of Fairfield Residential LLC andserved as Chairman of the Board of Three Five Systems, Inc.Systems. He has also served as a director of Tickets.com, Inc. Mr. Lyon’s breadth of experience in corporate finance and strategic initiatives, including capital raising, business and securities valuation, mergers and acquisitions and bankruptcy reorganizations allows Mr. Lyon to provide guidance to our Board and our Company regarding our operations, growth strategies and opportunities. Mr. Lyon holds a bachelor'sBS degree (magna cum laude) and an MBA degree (with high distinction) from Brigham Young University. HeMr. Lyon is a Certified Public Accountant and a published author and speaker.
Edward Rogas, Jr., age 69, has beenserved as a director since January 24, 2006 and the Chairman of the Board of Directors since December 2006. Mr. Rogas is currently retired.a director and consultant to companies in the technology industry. He served as a Senior Vice President at Teradyne, Inc., an automated test equipment manufacturer, from 2000 throughto 2005. From 1976 to 2000, he held various management positions in the semiconductor ATE portion of Teradyne's business,Teradyne, Inc., including Vice President from 1984 to 2000. Prior to that, fromFrom 1973 to 1976, he served as a Vice President at American Research and Development. Mr. Rogas is currentlyserves on the Board of FormFactor, Inc., a manufacturing test-technology company, and Vignani Technologies, PvtPvt. Ltd. (a private Indian company). Mr. Rogas previously served on the board of directors of Photon Dynamics, Inc., a provider of digital imaging technology. Mr. Rogas brings to our Board extensive experience in engineering development and operations in the technology industry, financial sophistication and public company board experience. Mr. Rogas holds a bachelor'sBS degree from the United States Naval Academy and an MBA (with distinction)degree from Harvard Business School.
The authorized number of directors under our bylaws is a minimum of five and a maximum of nine, with the exact number set by the Board. Currently the authorized number of directors of the Company is five.
As a condition to the closing of our recently announced debt restructuring transaction, the Company was obligated to appoint two qualified new directors prior to November 2, 2009 from a list of at least four persons identified by the holders of our convertible debentures. The Company received a list of eight director candidates from the holders of the convertible debentures, including James H. Hugar and G. Grant Lyon. Members of our Board reviewed the qualifications of each of the eight candidates and conducted interviews with four of the candidates. As per our independent directors selection process announced on July 17, 2007, these four candidates were also vetted by an independent executive search firm, McDermott & Bull. McDermott & Bull provided an assessment of each
candidate's experience as compared to the qualifications criteria and Independence Standards as documented in the Company's Corporate Governance Guidelines. This document is available on the Company's website,http://www.vitesse.com, under "Investors—Corporate Governance." McDermott & Bull also conducted a comprehensive and confidential background investigation of the final candidates.
The resignation of three of our former directors and the appointment of James H. Hugar and G. Grant Lyon to the Board to fill two of the resulting vacancies became effective on October 30, 2009, upon the closing of our debt restructuring transaction on October 30, 2009.
Director Independence
The Board has determined that with the exception of Mr. Gardner, all of its current members, other than Mr. Gardner, meet the criteria for independence set forth in the NASDAQ Listing Rules and the Company'sCompany’s Corporate Governance Guidelines. Mr. Gardner does not qualify as independent because his is a Vitesse employee. Our Corporate Governance Guidelines are posted on our websitehttp:// at www.vitesse.com, under "Investors—“Investors — Corporate Governance."”
In making its determination, our Board considered the objective tests and the subjective tests for determining who is an “independent director” under the NASDAQ Listing Rules. The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing independence under the subjective test, our Board took into account the standards in the objective tests, and reviewed and discussed additional information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to us and our management for the three year period preceding the date of determination. Based on all of the foregoing, as required by NASDAQ rules, our Board made a subjective determination as to each independent director that no relationships exists which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
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The Board Meetings and Board Committees
Board of Directors
The Board held a total of forty-four (44)nine meetings during fiscal year 2009. During fiscal year 2009, the Board had three standing committees: the Audit Committee; the Compensation Committee; and the Nominating and Corporate Governance Committee. In addition, in fiscal year 2009, the Board had one additional committee: the Strategic Development Committee. The Strategic Development Committee was dissolved effective as of October 30, 2009. Three of the members of that Committee, Guy Adams, Willow Shire and Robert Lundy, resigned from the Board effective as of October 30, 2009.2011. Each of our incumbent directors attended at least 75%75 percent of the aggregate of all meetings of the Board and the committees of the Board upon which such director served in fiscal year 2009.2011. Under our Corporate Governance Guidelines, the Board is required to hold an executive session at each meeting of the Board at which employee directors are not present.
The Board has been chaired by Mr. Rogas since December 2006. As chairman of the Board, Mr. Rogas also serves as our Lead Director. The Board has elected to maintain a leadership structure with an independent director chairman, elected by vote of the independent directors, because we believe that, at this time, our Company and its stockholders are best served by having an independent chairman convene, establish, after consultation with management, agenda items for, and preside over meetings of the Board and executive sessions of the independent directors. We further believe that our corporate governance principles and policies ensure that strong and independent directors will continue to effectively oversee our management and key issues related to long-range business plans, strategic issues, risks and integrity.
During fiscal year 2011, the Board had three standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee.
Audit Committee
The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, consists of directorsMessrs. Hugar, Hanson and Rogas.Rogas, has been chaired by Mr. Hugar was appointed to the Committee as its Chairman onsince December 9, 2009. The Audit Committee held sixteen (16) meetings during fiscal year 2009. All of the members of the Audit Committee are "independent"“independent” as defined under rules promulgated by the SEC and meet the NASDAQ Listing Rules criteria for independence. The Board has determined that Mr. Hugar is an "audit“audit committee financial expert"expert” as that term is defined in Item 407(d)(5) of Regulation S-K. Among other things, the Audit Committee assists our Board of Directors in its oversight of the integrity of our financial statements, the qualifications and independence of our independent audits,auditors, the performance of our internal audit function, compliance with legal and regulatory requirements, our disclosure controls, and systemour systems of internal controls. The Audit Committee held nine meetings during fiscal year 2011. A copy of the Audit Committee charter including any updates thereto, is available on our website at www.vitesse.com.www.vitesse.com under “Investors — Corporate Governance.”
The Compensation Committee, of the Boardwhich consists of directorsMessrs. Lyon, LaRosa and Rogas, has been chaired by Mr. Lyon since December 9, 2009. Mr. Lyon and Mr. Rogas both of whom were appointed tohave served on this Committee oncommittee since December 9, 2009, following the resignation of directors Adams, Lundy and Shire from the Board effective as of October 30, 2009. The Compensation Committee held twelve (12) meetings during fiscal year 2009.Mr. LaRosa has served on this committee since August 11, 2010. The Compensation Committee, among other things, reviews and approves our executive compensation policies and programs, and grants stock options and other equity awards to our employees, including officers, pursuant to our stock optionincentive plans. See "Executive“Executive Officers and Executive Compensation—Compensation Discussion and Analysis"Analysis” and "Director Compensation"
“Director Compensation” below for a description of our processes and procedures for the consideration and determination of executive and director compensation. The Compensation Committee held eight meetings during fiscal year 2011. A copy of the Compensation Committee charter including any updates thereto, is available on our website at www.vitesse.com.www.vitesse.com under “Investors — Corporate Governance.”
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee, which consists of directorsMessrs. Hanson, Hugar and Hugar. During fiscal year 2009, the Governance and Nominating Committee consisted of directors Shire,LaRosa, has been chaired by Mr. Hanson and Lundy.since June 29, 2009. Mr. Hugar was appointed to the Committeehas served on this committee since December 9, 2009. The Nominating2009 and Corporate Governance Committee held six (6) meetings during fiscal year 2009.Mr. LaRosa has served on this committee since August 11, 2010. The Nominating and Corporate Governance Committee, among other things, assists the Board by making recommendations to the Board on matters concerning director nominations and elections, board committees and corporate governance. The Nominating and Corporate Governance Committee held four meetings during fiscal year 2011. A copy of the Nominating and Corporate Governance Committee charter including any updates thereto, is available on our website at www.vitesse.com.www.vitesse.com under “Investors — Corporate Governance.”
The Company maintains a set of Corporate Governance Guidelines, which can also be found on our website at www.vitesse.com under "Investors—“Investors — Corporate Governance."” The Corporate Governance Guidelines cover a range of governance-relatedgovernance related matters, including requirements that the Board of Directors maintain an independent Chairman of the Board, and that three-fourthsat least three fourths of the Board and the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee consist of independent members.
We have adopted a Code of Business Conduct and Ethics for members of the Board, of Directors, a Code of Business Conductour Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Ethics forController and persons performing similar functions, and all other officers and employees of the Company and its consolidated subsidiaries, and asubsidiaries. A copy of this Code of Ethics for the Chief Executive Officer and Senior Financial Officers that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer/Controller and persons performing similar functions. Copies of these Codes areis posted on our websitehttp:// at www.vitesse.com, under "Investors—“Investors — Corporate Governance."” We intend to disclose any amendment to, or waiver from, the provisions of these Codesthis Code on our website at www.vitesse.com under "Investors—“Investors — Corporate Governance."”
Board’s Role in Risk Oversight
Our management team is responsible for identifying, assessing and managing the material risks facing our Company. The Board’s role in risk oversight includes receiving regular updates from management on areas of material risks and key strategies and initiatives. The Board also participates in a review of the Company’s annual operating plan, which includes the identification of the most significant risks facing our business and evaluation of how the Company’s corporate strategies align to manage those risks. While the Board is ultimately responsible for risk oversight, each committee assists the Board in fulfilling its oversight responsibilities. The Audit Committee oversees management of financial risks. The Compensation Committee provides oversight of the Company’s compensation policies and practices including risks associated with executive compensation. The Nominating and Corporate Governance Committee manages risks associated with corporate governance, including the independence of Board members, Board composition, and policies and procedures such as our Code of Business Conduct and Ethics and Corporate Governance Guidelines, used to promote ethical conduct and compliance with law.
The full Board has evaluated Vitesse’s overall compensation policies and practices for its employees to determine whether such policies and practices create incentives that can affect Vitesse’s risk and management of that risk, and has further assessed whether any risks arising from these policies and practices are reasonably likely to have a material adverse effect on us. The Board has concluded that the risks arising from our policies and practices are not reasonably likely to have a material adverse effect on us.
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The Compensation Committee and the Board, in connection with their assessment of performance criteria for fiscal year 2011, concluded that while the criteria or targets reward prudent risk-taking in support of our objectives, they do not encourage or promote inappropriate risk-taking by the participants.
Attendance at Annual Meeting of Stockholders by Directors
It is the policy of the Company that, absent extraordinary circumstances, each member of the Board of Directors shall attend our annual meetingAnnual Meeting of stockholders.Stockholders. All of our Board members attended the last year’s Annual Meeting.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2011, G. Grant Lyon, G. William LaRosa and Edward Rogas, Jr. served on the Compensation Committee. None of the committee members has ever served as an officer of Vitesse. None of the committee members served as an employee of Vitesse during fiscal year 2011 or had any relationship requiring disclosure by us under Item 404 of Regulation S-K. During fiscal year 2011, none of our executive officers served on the compensation committee (or equivalent), or the board of directors, of another entity whose executive officer(s) served on our Compensation Committee or Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors, and persons who own beneficially more than 10 percent of a registered class of our equity securities to file reports of ownership and changes in ownership within specified periods with the SEC. To our knowledge, based solely on our review of the copies of Section 16(a) forms required to be furnished to us with respect to fiscal year 2011 and written representations that no other reports were required, we believe that our executive officers, directors, and greater than 10 percent stockholders complied with the Section 16(a) reporting requirements during fiscal year 2011, except as follows: Columbia Pacific Opportunity Fund, L.P., Columbia Pacific Advisors, LLC, Alexander B. Washburn, Daniel R. Baty, Stanley L. Baty and Brandon D. Baty jointly filed a Schedule 13G/A with the SEC on June 10, 2011, in which they reported beneficial ownership of 11.2 percent of our Common Stock. None of these beneficial owners of greater than 10% of our common stock has filed a Form 3 with the SEC.
Process for Recommending Candidates for Election to the Board of Directors
The Nominating and Corporate Governance Committee will consider nominees recommended by stockholders. A stockholder that desires to recommend a candidate for election to the Board must direct the recommendation in writing to us at our principal offices (Attention: Tracy Kern, Corporate Controller)Secretary) and must include the candidate'scandidate’s name, age, home and business contact information, principal occupation or employment, the number of shares beneficially owned by the nominee, whether any hedging transactions have been entered into by the nominee or on his or her behalf, information regarding any arrangements or understandings between the nominee and the stockholder nominating the nominee or any other persons relating to the nomination, a written statement by the nominee acknowledging that the nominee will owe a fiduciary duty to the Company, if elected, and any other information required to be disclosed about the nominee if proxies were to be solicited to elect the nominee as a director. For a stockholder recommendation to be considered by the Nominating and Corporate Governance Committee as a potential candidate at an annual meeting,Annual Meeting, nominations must be received on or before the deadline for receipt of stockholder proposals for such meeting. In the event a
stockholder decides to nominate a candidate for director and solicits proxies for such candidate, the stockholder will need to follow the rules set forth by the SEC and in our bylaws. See "Information“Information Concerning Solicitation and Voting—Voting - Deadline for Receipt of Stockholder Proposals."”
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The Nominating and Corporate Governance Committee'sCommittee’s criteria and process for evaluating and identifying the candidates that it approves as director nominees are as follows:
•·The Nominating and Corporate Governance Committeecommittee regularly reviews the current composition and size of the Board.
·
•- The
Nominating and Corporate Governance Committeecommittee reviews the qualifications of any candidates who have been properly recommended by a stockholder, as well as those candidates who have been identified by management, individual members of the Board or, if the Nominating and Corporate Governance Committeecommittee determines, a search firm. Such review may, in the Nominating and Corporate Governance Committee'scommittee’s discretion, include a review solely of information provided to the Nominating and Corporate Governance Committeecommittee or may also include discussions with persons familiar with the candidate, an interview with the candidate or other actions that the Nominating and Corporate Governance Committeecommittee deems proper.
·
•- The
Nominating and Corporate Governance Committeecommittee evaluates the performance of the Board as a whole and evaluates the performance and qualifications of individual members of the Board eligible for re-election at the annual meetingan Annual Meeting of stockholders.Stockholders.
·
•- The
Nominating and Corporate Governance Committeecommittee considers the suitability of each candidate, including the current members of the Board, in light of the current size and composition of the Board. Except as may be required by rules promulgated by the NASDAQ Stock Market or the SEC, it is the currentcommittee’s belief of the Nominating and Corporate Governance Committee that there are no specific minimum qualifications that must be met by any candidate for the Board, nor are there specific qualities or skills that are necessary for one or more of the members of the Board to possess. In selecting new directors of the Company, consideration will be given to each individual director'sdirector’s (i) personal qualities, experiences, and abilities; (ii) the collective skills of all of the directors, taking into account the responsibilities of the Board; and (iii) qualifications imposed by law and regulation. As stated in the Company'sCompany’s Corporate Governance Guidelines, the Company has the following expectations of its directors and director candidates:
·
•- Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the
shareowners.stockholders;
·
•- Directors must
also have an inquisitive and objective perspective, practical wisdom and mature judgment.judgment;
·
•The Company's directorsDirectors should represent diverse experiences at a strategy/policy setting level, and should be people who have high-level managerial experience, and who are accustomed to dealing with complex problems.problems;
·
•- Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of
time.time;
·
•- Directors should
also possess a willingness to challenge and stimulate management and demonstrate the ability to work as part of a team in an environment of trust.trust; and
·
•- Directors should offer their resignation in the event of any significant change in their personal circumstances, including a change in their principal job responsibilities.
·The Nominating and Corporate Governance Committeecommittee may, from time to time,time-to-time, establish additional qualifications for directors as it shall deemdeems appropriate.
•·In evaluating the qualifications of the candidates, the Nominating and Corporate Governance Committeecommittee considers many factors, including, issues of character, judgment, independence, age, expertise, diversity of experience, length of service, other commitments and the like. However, the Board has not adopted a formal diversity policy. The Nominating and Corporate Governance Committeecommittee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors. The Nominating and Corporate Governance Committeecommittee considers each individual candidate in the context of the current perceived needs of the Board as a whole. While the Nominating and Corporate Governance Committee has not established specific minimum qualifications for director candidates, the Nominating and Corporate Governance Committee believes that candidates and nominees must reflect a Board that is comprised of directors who (i) are predominantly independent, (ii) are of high integrity, (iii) have qualifications that will increase the overall effectiveness of the Board, and (iv) meet other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to audit committee members;
·
•In evaluating and identifying candidates, the Nominating and Corporate Governance Committee has the authority to retain and terminate any third party search firm that is used to identify director candidates and has the authority to approve the fees and retention terms of any search firm.
•- After such review and consideration, the
Nominating and Corporate Governance Committeecommittee recommends the slate of directorDirector nominees to the full Board for its approval.
The Nominating and Corporate Governance Committee will endeavor to notify, or cause to be notified, all directorDirector candidates, including those recommended by a stockholder, of its decision as to whether to nominate such individual for election to the Board.
Stockholder Communication with the Board of Directors
We believe that management speaks for Vitesse.
Any stockholder may contact any of our directorsDirectors by writing to them by mail, c/o our Corporate Secretary, at our principal executive offices, the address of which appears on the cover of this proxy statement.
Any stockholder may report to us any complaints regarding accounting, internal accounting controls or auditing matters. Any stockholder who wishes to so contact us should send such complaintscomments to the Audit Committee, c/o James H. Hugar, at our principal executive offices, the address of which appears on the cover of this proxy statement.
Any stockholder communications thatsent to the Board is to receive will first go to our Corporate Secretary, who will log the date of receipt of the communication as well as the identity and contact information of the correspondent in our stockholder communications log. After logging the communication, our Corporate Secretary will forward the communication to the Chairman of the Board (in the case of communications directed to the whole Board) or to the applicable individual director(s)Director(s) addressed in the correspondence.
In the case of any complaints, the appropriate committee of the Board will review and, if appropriate, investigate the complaint in a timely manner. In the case of accounting or auditing related matters, a member of the Audit Committee, or the Audit Committee as a whole, will review the summary of the communication, the results of the investigation, if any, and, if appropriate, the draft response. The summary and response will be in the form of a memo, which will become part of the stockholder communications log that the Corporate Secretary maintains with respect to all stockholder communications.
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Director Compensation of Directors
Effective
The general policy of the Board is that compensation for non-employee directors should be a mix of cash and equity-based compensation. We do not pay management Directors for Board service in addition to their regular employee compensation. The Compensation Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any revisions to director compensation. Our Board reviews the Compensation Committee’s recommendations and determines the amount and type of director compensation.
The Compensation Committee can engage the services of outside advisers, experts and others to assist the committee. During fiscal year 2011, the Compensation Committee did not use an outside adviser to assist in setting director compensation. The fiscal year 2011 compensation package for Directors is the same as the fiscal year 2010 compensation package for Directors, which was adopted on April 1, 2010, after consultation with its independent compensation consultant, Connell & Partners, a division of Gallagher Benefit Services (formerly DolmatConnell & Partners, the BoardPartners).
Non-employee director compensation consists of Directors adopted the following compensation package for directors:elements:
(i) directors receive an annual
·Annual retainer of $30,000, paid monthly;$30,000;
(ii) the ·Chairperson of the Board (or Independent Lead Director if the Chairperson— additional retainer fee of the Board is an executive$20,000;
·Committee chairpersons — additional retainer fees of the Company) receives an additional annual retainer of $20,000;
(iii) the Chairperson of$20,000 for the Audit Committee, receives an$12,000 for the Compensation Committee, and $8,000 for the Nominating and Corporate Governance Committee;
·Committee membership (excluding chairpersons) — additional annual retainer fees of $20,000 and each other member of$8,000 for the Audit Committee, receives an additional annual retainer of $8,000;
(iv) the Chairperson of$6,000 for the Compensation Committee, receives an additional annual retainerand $4,000 for the Nominating and Corporate Governance Committee;
·Board meeting fees — $1,500 for attendance at each in-person Board meeting and $750 for attendance at each scheduled conference call Board meeting;
·Committee meeting fees —$1,000 for attendance at each in-person committee meeting and $500 for attendance at each scheduled conference call committee meeting; and
·Annual equity compensation $55,000 in the form of $12,000 and each other memberrestricted stock units (RSUs), which RSUs are automatically granted on the second Monday in January of the Compensation Committeeapplicable year and vest fully on the first anniversary of the grant date.
If a non-employee Director is appointed to the Board in between Annual Meetings of Stockholders, the annual cash compensation payable to that Director is pro-rated for the remaining portion of the term in which the director is appointed to the Board, and the first award of $55,000 in annual equity compensation to be automatically granted to the director on the second Monday in January of the year following the Director’s appointment is pro-rated based on the length of the Director’s service on the Board since the date of the previous year’s annual award of equity compensation.
Upon a non-employee Director’s initial election or appointment to the Board, the director also receives an additionala one-time award of equity compensation of $100,000 in the form of RSUs, which RSUs are granted on the date of the Director’s appointment or election to the Board and vest in three annual retainerinstallments of $6,000;33% on the first three anniversaries of the grant date.
(v)
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The following table details the Chairpersontotal compensation earned by our non-employee Directors in fiscal year 2011.
Director Summary Compensation
Director | | Fees Earned
or Paid in
Cash | | Stock
Awards(1)(2) | | Total | |
| | | | | | | |
Steven P. Hanson (3)(8) | | $ | 67,746 | | $ | 55,000 | | $ | 122,746 | |
James H. Hugar (4)(8) | | $ | 75,750 | | $ | 55,000 | | $ | 130,750 | |
G. William LaRosa (5)(8) | | $ | 58,246 | | $ | 22,916 | | $ | 81,162 | |
G. Grant Lyon (6)(8) | | $ | 53,750 | | $ | 55,000 | | $ | 108,750 | |
Edward Rogas, Jr. (7)(8) | | $ | 86,746 | | $ | 55,000 | | $ | 141,746 | |
(1)Represents awards of restricted stock units, each of which entitles the Director to receive one share of our Common Stock at the time of vesting, without the payment of an exercise price or other cash consideration.
(2)These amounts represent the grant date fair value of the stock awards granted in fiscal year 2011 determined in accordance with ASC Topic 718. These amounts may not correspond to the actual value eventually realized by the Director, which depends in part on the market value of our Common Stock in future periods. Assumptions used in calculating these amounts are set forth in the Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended September 30, 2011.
(3)Mr. Hanson served as Chairman of the Nominating and Corporate Governance Committee receives an additional annual retainerand a member of $8,000the Audit Committee during fiscal year 2011.
(4)Mr. Hugar served as Chairman of the Audit Committee and each othera member of the Nominating and Corporate Governance Committee receives an additional annual retainer of $4,000;
(vi) directors receive an additional $1,500 for each in-person Board meeting and $750 for each scheduled conference call Board meeting that they attend and each member of a Board Committee receives $1,000 for each in-person Committee meeting and $500 for each scheduled conference call Committee meeting that they attend; and
(vii) new directors appointed or elected to the Board of Directors after April 1, 2010 will receive restricted stock units on the date of their appointment or election to the Board of Directors with a value of $100,000 while continuing directors will receive an annual grant of restricted stock units with a value of $55,000 on the second Monday in January.
In October 2008, the Board of Directors formed the Strategic Development Committee. This Committee initially consisted of Edward Rogas, Jr., Steven Hanson and former director Guy Adams. The function of this Committee was to seek and evaluate various alternatives to refinancing the 2024 Debentures. The Strategic Development Committee received a monthly retainer of $10,000. In July 2009, the Board of Directors made the decision to expand the Strategic Development Committee to include directors Robert Lundy and Willow Shire. The Strategic Development Committee was dissolved upon the successful completion of the debt restructuring on October 30, 2009.
Director Compensation Table for Fiscal Year 2009
The following table presents information regarding the compensation earned during fiscal year 2009 by members of our Board of Directors who were not also our employees (referred to as "Non-Employee Directors"). The compensation paid to 2011.
(5)Mr. Gardner, who is employed by us, is presented below in the Summary Compensation Table and the related explanatory tables. Directors who
are also officers or employees of the Company or its subsidiaries receive no additional compensation for their services as directors.
| | | | | | | | | | |
Name | | Fees Earned or
Paid in Cash | | Option
Awards(1) | | Total | |
|---|
Guy W. Adams(2) | | $ | 175,337 | | $ | 18,410 | | $ | 193,747 | |
Vincent Chan, Ph.D(3) | | |
28,771 | | |
18,749 | | |
47,520 | |
Steven P. Hanson(4) | | |
165,254 | | |
19,180 | | |
184,434 | |
Robert A. Lundy(5) | | |
93,754 | | |
14,230 | | |
107,984 | |
Edward Rogas, Jr.(6) | | |
185,750 | | |
25,473 | | |
211,223 | |
Willow B. Shire(7) | | |
112,504 | | |
19,149 | | |
131,653 | |
(1)Amounts shown do not reflect compensation actually received by the directors. Instead, the amounts shown are the stock option related compensation costs recognized in fiscal year 2009 for financial statement reporting purposes as determined pursuant to ASC 718. The assumptions used in the calculation of values of option awards are set forth under our Forms 10-K for the years ended September 30, 2009 and prior.
(2)Mr. Adams became a director on October 25, 2007 and resignedLaRosa served as a director effective October 30, 2009. Option awards amount reflects compensation costs recognized in fiscal year 2009 for stock option grants with the following fair values asmember of the grant date: 75,000 options granted on October 25, 2007 with a grant date fair value of $46,500 and 40,000 options granted on January 1, 2009 with a grant date fair value of $9,796. As of September 30, 2009, Mr. Adams had 115,000 options outstanding.
(3)Dr. Chan resigned as a director on July 7, 2009. Option awards amount reflects compensation costs recognized in fiscal year 2009 for stock option grants with the following fair values as of the grant date: 40,000 options granted on January 1, 2004 with a fair value of $179,851, 40,000 options granted on January 1, 2005 with a fair value of $86,583, and 40,000 options granted on January 1, 2006 with a fair value of $57,531. As of September 30, 2009, Dr. Chan had 100,000 options outstanding.
(4)Mr. Hanson became a director on August 16, 2007. Option awards amount reflects compensation costs recognized in fiscal year 2009 for 75,000 options granted on August 16, 2007 with a grant date fair value of $49,655 and 40,000 options granted on January 1, 2009 with a grant date fair value of $9,796. As of September 30, 2009, Mr. Hanson had 115,000 options outstanding.
(5)Mr. Lundy became a director on May 2, 2008 and resigned as a director effective October 30, 2009. Option awards amount reflects compensation costs recognized in fiscal year 2009 for a stock option grant of 75,000 options granted on May 2, 2008 with a grant date fair value of $29,250 and 40,000 options granted on January 1, 2009 with a grant date fair value of $9,796. As of September 30, 2009, Mr. Lundy had 115,000 options outstanding.
(6)Mr. Rogas became a director on January 24, 2006. Option awards amount reflects compensation costs recognized in fiscal year 2009 for 40,000 options granted on January 24, 2006 with a grant date fair value of $75,732 and 40,000 options granted on January 1, 2009 with a grant date fair value of $9,796. As of September 30, 2009, Mr. Rogas had 80,000 options outstanding.
(7)Ms. Shire became a director on June 26, 2007 and resigned as a director effective October 30, 2009. Option awards amount reflects compensation costs recognized in fiscal year 2009 for stock option grants with the following fair values as of the grant date: 40,000 options granted on June 26, 2007 with a grant date fair value of $29,179, 35,000 options granted on July 27, 2007 with a grant date fair value of $25,172, and 40,000 options granted on January 1, 2009 with a grant date fair value of $9,796. As of September 30, 2009, Ms. Shire had 115,000 options outstanding.
Vote Required
If a quorum is present, the five (5) nominees receiving the highest number of votes will be elected to the Board. See "Information Concerning Solicitation and Voting—Quorum; Abstentions; Broker Non-Votes."
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE FIVE NOMINEES
PRESENTED HEREIN.
PROPOSAL TWO
APPROVAL OF THE VITESSE SEMICONDUCTOR CORPORATION 2010 INCENTIVE PLAN
Our board of directors believes that the effective use of stock-based, long-term incentive compensation is vital to our ability to achieve continued strong performance in the future by providing a direct link between executive compensation and long-term stockholder value creation. Accordingly, we are seeking stockholder approval of the Vitesse Semiconductor Corporation 2010 Incentive Plan, or the "2010 Incentive Plan." The board adopted the 2010 Incentive Plan, upon recommendation of its Compensation Committee, subject to stockholder approval at the Annual Meeting.
If the 2010 Incentive Plan is approved by stockholders, it will replace the Vitesse Semiconductor Corporation 2001 Stock Incentive Plan, which we refer in this proposal as the "Current Incentive Plan" and in the text of the 2010 Incentive Plan as the "Prior Plan." If stockholders approve the 2010 Incentive Plan, no new awards will be granted under the Current Incentive Plan. If stockholders do not approve the 2010 Incentive Plan, the Current Incentive Plan will remain available for new grants until it expires on October 17, 2010.
The 2010 Incentive Plan authorizes the issuance of 50,000,000 shares of our common stock. As of March 26, 2010, 4,957,794 shares were available for issuance under the Current Incentive Plan, and these shares will be cancelled if the stockholders approve the 2010 Incentive Plan. The Board believes that these additional reserved shares are required in order for us to have an appropriate reserve of equity incentives to recruit, hire and retain the top talent that we will require to successfully execute our business strategy.
As of March 26, 2009, we had outstanding 404,841,802 shares of our common stock. The new shares authorized for issuance under the 2010 Incentive Plan represent approximately 11.1% of our shares of common stock currently outstanding. We anticipate granting awards for up to approximately 3.7% of the outstanding shares per year, as compared to the average run rate of 3% to 4% for our industry group. We anticipate that with the additional shares for which we are seeking stockholder approval, we will have sufficient shares reserved for our equity compensation program through fiscal year 2012, and that we will need to seek stockholder approval for additional shares at our 2012 annual stockholders meeting.
While authorizing these additional shares for issuance under the 2010 Incentive Plan will increase the potential dilution represented by equity compensation awards, the potential dilution represented by our current outstanding equity compensation awards is very small relative to our peer group companies. The primary reason for this is that we have granted equity compensation awards with respect to relatively few shares over the past three years. In addition, a significant number of our outstanding stock options are "underwater" (the exercise prices are above the current market price of our common stock), which means that these stock options are unlikely to be exercised before they expire.
In addition to the new shares authorized for issuance under the 2010 Incentive Plan, up to 40,577,825 shares subject to awards outstanding under the Current Incentive Plan may become available for issuance under the 2010 Incentive Plan to the extent that these shares on or after the date of stockholder approval of the 2010 Incentive Plan, cease to be subject to the awards (such as by expiration, cancellation or forfeiture of the awards).
Although currently our common stock is not listed on any stock exchange, we are voluntarily soliciting stockholder approval of the 2010 Incentive Plan to provide the Compensation Committee with the flexibility to grant incentive stock options to employees under the 2010 Incentive Plan and certain awards that qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. See "U.S. Federal Income Tax Information."
The principal features of the 2010 Incentive Plan are summarized below. This summary does not contain all information about the 2010 Incentive Plan. A copy of the complete text of the 2010 Incentive Plan is included as Appendix A to this proxy statement, and the following description is qualified in its entirety by reference to the text of the 2010 Incentive Plan.
DESCRIPTION OF THE 2010 INCENTIVE PLAN
Nominating and Governance Committee during fiscal year 2011.
Purpose(6)
The purpose of the 2010 Incentive Plan is to attract, retain and motivate our employees, officers and directors by providing them with the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of our stockholders. The 2010 Incentive Plan would also allow us to provide the same opportunity to consultants, agents, advisors and independent contractors.
Administration
The Compensation Committee of our Board of Directors will administer the 2010 Incentive Plan, except that the board will administer the 2010 Incentive Plan with respect to our non-employee directors. The Board or the Committee may delegate administration of the 2010 Incentive Plan in accordance with its terms. References to the "Committee" in this Proposal Two are,Mr. Lyon served as applicable, toChairman of the Compensation Committee during fiscal year 2011.
(7)Mr. Rogas served as Chairman of the Board or other delegate, including an officerand as a member of the Company authorized byAudit Committee and the board or Compensation Committee to make grants to certain eligible employees of the Company.
Eligibility
Awards may be granted under the 2010 Incentive Plan to employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its subsidiaries and affiliates. As of March 26, 2009, approximately 439 employees, 3 executive officers, and 4 non-employee directors were eligible to receive awards under the 2010 Incentive Plan.
Number of Shares
The number of shares of common stock authorized for issuance under the 2010 Incentive Plan is 50,000,000. In addition, any shares subject to outstanding awards under the Current Incentive Plan as of the date of stockholder approval of the 2010 Incentive Plan that cease to be subject to these awards (other than from exercise or settlement of the awards in shares) will automatically become available for issuance under the 2010 Incentive Plan, up to an aggregate maximum of up to 40,577,825 shares. The maximum number of shares of common stock that may be issued pursuant to the exercise of incentive stock options is the same as the total number of shares authorized under the 2010 Incentive Plan.
The following shares will be available again for issuance under the 2010 Incentive Plan:
•shares subject to awards that lapse, expire, terminate or are canceled prior to issuance of the underlying shares;
•shares subject to awards that are subsequently forfeited to or otherwise reacquired by us;
•shares related to an award that is settled in cash or in another manner where some or all of the shares covered by the award are not issued; and
•shares subject to an award that are tendered or withheld in payment of purchase price or tax withholding obligations.
Awards granted in assumption of or substitution for previously granted awards in acquisition transactions will not reduce the number of shares authorized for issuance under the 2010 Incentive Plan.
If any change in our stock occurs by reason of any stock dividend, stock split, spin-off, recapitalization, merger, consolidation, combination or exchange of shares, distribution to stockholders other than a normal cash dividend or other change in our corporate or capital structure, the Committee will make proportional adjustments to the maximum number and kind of securities (a) available for issuance under the 2010 Incentive Plan, (b) issuable as incentive stock options, (c) issuable to certain individuals subject to Code Section 162(m), and (d) subject to any outstanding award, including the per share price of such securities.
Types of Awards
The 2010 Incentive Plan permits the grant of any or all of the following types of awards.
Stock Options. The Committee may grant either incentive stock options, which must comply with Code Section 422, or nonqualified stock options. The committee sets option exercise prices and terms, except that the exercise price of stock options granted under the 2010 Incentive Plan must be at least 100% of the fair market value of the common stock on the date of grant, except in the case of options granted in connection with assuming or substituting options in acquisition transactions. At the time of grant, the Committee determines when stock options are exercisable and when they expire, except that the term of a stock option cannot exceed ten years. Unless the committee otherwise determines, fair market value means, as of a given date, the closing price of our common stock.during fiscal year 2011.
Stock Appreciation Rights (SARs).(8) The committee may grant SARs as a right in tandem with the numberOn January 10, 2011, each of shares underlying stock options granted under the 2010 Incentive Plan or on a stand-alone basis. SARs are the right to receive payment per share ofMessrs. Hanson, Hugar, Lyon and Rogas received an exercised SAR in stock or cash, or a combination of stock and cash, equal to the excess of the share's fair market value on the date of exercise over its fair market value on the date the SAR was granted. Exercise of an SAR issued in tandem with stock options will result in the reduction of the number of shares underlying the related SAR to the extent of the SAR exercised. The term of a stand-alone SAR cannot be more than ten years, and the term of a tandem SAR will not exceed the term of the related option.
Stock Awards, Restricted Stock and Stock Units. The Committee may grant awards of shares of common stock, or awards designated in units of common stock, under the 2010 Incentive Plan. These awards may be made subject to repurchase or forfeiture restrictions at the Committee's discretion. The restrictions may be based on continuous service with us or the achievement of specified performance criteria, as determined by the Committee.
Performance Awards. The Committee may grant performance awards in the form of performance shares or performance units. Performance shares are units valued by reference to a designated number ofRSU award for 13,253 shares of common stock and performance units are units valued by reference toMr. LaRosa received a designated amount of cash. Either may be payable in stock or cash, or a combination of stock and cash, upon the attainment of performance criteria and other terms and conditions as established by the committee.
Other Stock or Cash-Based Awards. The Committee may grant other incentives payable in cash or inpro-rated RSU award for 5,522 shares of common stock, subject to the terms of the 2010 Incentive Plan and any other terms and conditions determined by the Committee.
Repricingstock. Each RSU will vest in full on January 10, 2012.
The 2010 Incentive Plan prohibits
14
PROPOSAL TWO
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Committee, withoutDodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), we are required to include in this proxy statement and present at the Annual Meeting a non-binding stockholder approval, from loweringvote to approve the pricecompensation of an option after it is granted, except in connection with adjustments provided under the 2010
Incentive Plan, taking any other action that is treated as a repricing under generally accepted accounting principles, or canceling an option at a time when its strike price exceeds the fair market value of the underlying stock, in exchange for another option, restricted stock or units, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction.
Performance-Based Compensation under Code Section 162(m)
Performance Goals and Criteria. If the Committee intends to qualify an award under the 2010 Incentive Plan as "qualified performance-based compensation" under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the performance goals selected by the Committee may be based on the attainment of specified levels of one, or any combination, of the following performance criteria for the Company as a whole or any business unit, as reported or calculated by the Company: cash flows (including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); working capital; earnings per share; book value per share; operating income (including or excluding depreciation, amortization, extraordinary items, restructuring charges or other expenses); revenues; operating margins; return on assets; return on equity; debt; debt plus equity; market or economic value added; stock price appreciation; total stockholder return; cost control; strategic initiatives; market share; net income; return on invested capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, subscriber, cash management or asset management metrics.
The performance goals also may be based on the achievement of specified levels of performance for the Company as a whole or any business unit or applicable affiliate under one or more of the performance goals described above relative to the performance of other corporations.
The Committee may provide in any award that any evaluation of performance may include or exclude any of the following events that occur during a performance period: asset write-downs, litigation or claim judgments or settlements, the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, any reorganization and restructuring programs, extraordinary nonrecurring itemsour executives, as described in Accounting Principles Board Opinion No. 30 and/this proxy statement, pursuant to the compensation disclosure rules of the SEC. This proposal, commonly known as a “say on pay” vote, gives stockholders the opportunity to endorse or not endorse the compensation of our executives as disclosed in Management'sthis proxy statement. This proposal will be presented at the Annual Meeting as a resolution in substantially the following form:
RESOLVED, that the stockholders approve the compensation of the Company’s executives, as disclosed in the Compensation Discussion and Analysis, of Financial Conditionthe compensation tables and Results of Operations appearingrelated narrative disclosure in the Company's annual report to stockholdersCompany’s proxy statement for the applicable year, acquisitions or divestitures, foreign exchange gainsAnnual Meeting.
This vote will not be binding on our Board of Directors and losses, and gains and losses on asset sales.
Adjustments and Certification. The Committee may adjust the amount payable pursuant to an award under the 2010 Incentive Plan that is intended to qualify as "performance-based compensation" under Section 162(m) downward, but not upward. The Committee may not waive the achievement of performance goals related to an award except in the case of a participant's death or disability. Section 162(m) requires that the Committee certify that performance goals were achieved before the payment of the "performance-based compensation."
Limitations. Subject to certain adjustments, participants who are granted awards intended to qualify as "performance-based compensation" under Section 162(m) may not be granted awards, other than performance units, for more than 5,000,000 shares of common stock in any calendar year, except that additional awards for up to 5,000,000 shares may be granted to newly hired or promoted individuals in any calendar year. The maximum dollar value payable to any participant with respect to performance units or other awards payable in cash that are intended to qualifyconstrued as "performance-based compensation" cannot exceed $3,000,000 in any calendar year.
Change of Control
Under the 2010 Incentive Plan, unless otherwise provided in the instrument evidencing an award or inoverruling a written employment, services or other agreement between the participant and us, in the event of a change of control:
•Upon certain changes of control, such as specified reorganizations, mergers or consolidations, the awards will become fully and immediately exercisable, and all applicable deferral and restriction limitations or forfeiture provisions will lapse, only if and to the extent the awards are not converted, assumed or replaced by a successor company. Except for such specified types of changes of control, all outstanding awards, other than performance shares and performance units, will become fully and immediately exercisable and all applicable deferral and restriction limitations or forfeiture provisions will lapse, immediately prior to the change of control and the awards will terminate at the effective time of the change of control.
•All performance shares and performance units will be payable based on targeted performance being attained as of the effective date of the change of control and will be paid in accordance with the payout schedule for the award.
•In the event of certain reorganizations, mergers or consolidations, the Committee may, in its discretion, instead provide that a participant's outstanding awards will be cashed out.
Definition of Change of Control. Unless the committee determines otherwise with respect to an award at the time it is granted or unless otherwise defined for purposes of an award in a written employment, services or other agreement between a participant and us, a change of control of the Company generally means the occurrence of any of the following events:
•an acquisition by any individual, entity or group of beneficial ownership of 40% or more of either (a) the then outstanding shares of common stock or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (excluding generally any acquisition directly from the Company, any acquisition by the Company, any acquisition by any employee benefit plan of the Company or an affiliate, or the completion of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company pursuant to which specific requirements are met);
•a change in the composition of the board of directors in any two-year period with the result that the incumbent board members cease to constitute at least a majority of the board (not including directors whose election, or nomination for election by stockholders, was approved by a majority of the incumbent board); or
•completion of specified reorganizations, mergers or consolidations or other disposition of all or substantially all of the assets of the Company.
Amendment and Termination
The Board of Directors or the committee may amend the 2010 Incentive Plan, except that if any applicable statute, rule or regulation requires stockholder approval for an amendment to the 2010 Incentive Plan, then to the extent so required, stockholder approval will be obtained. The Board or the Committee may also suspend or terminate all or any portion of the 2010 Incentive Plan at any time, but any suspension or termination may not, without a participant's consent, materially adversely affect any rights under any outstanding award. Unless sooner terminateddecision by the Board or creating or implying any change to the fiduciary duties of the Board. The vote will not affect any compensation previously paid or awarded to any executive. The Compensation Committee and the 2010 Incentive Plan will terminate ten years afterBoard may, however, take into account the dateoutcome of the vote when considering future executive compensation arrangements.
The purpose of our compensation programs is to attract and retain experienced, highly qualified executives critical to our long-term success and enhancement of stockholder approvalvalue.
Required Vote
Endorsement of the 2010 Incentive Plan.
U.S. Federal Income Tax Information
The following is a brief summary of the U.S. federal income tax consequences of the 2010 Incentive Plan generally applicable to us and to participants in the 2010 Incentive Plan who are subject to U.S. federal taxes. The summary is based on the Code, applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws.
Nonqualified Stock Options. A participant generally will not recognize income upon the grant or vesting of a nonqualified stock option with an exercise price at least equal to the fair market valuecompensation of our common stock on the date of grant and no additional deferral feature. When a nonqualified stock option is exercised, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the option on the date of exercise and the option exercise price. When a participant sells the shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the option exercise price.
Incentive Stock Options. A participant generally will not recognize income upon the grant of an incentive stock option. If a participant exercises an incentive stock option during employment as an employee or within three months after his or her employment ends (12 months in the case of permanent and total disability), the participant will not recognize income at the time of exercise for regular U.S. federal income tax purposes (although the participant generally will recognize income for alternative minimum tax purposes at that time as if the option were a nonqualified stock option). If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year from the date the participant exercised the option and (b) two years from the grant date of the option, the participant generally will recognize long-term capital gain or loss equal to the difference between the amount the participant received in the disposition and the option exercise price. If a participant sells or otherwise disposes of shares acquired upon exercise of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a "disqualifying disposition," and the participant generally will recognize taxable ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the option exercise price (or, if less, the excess of the amount realized on the disposition of the shares over the option exercise price). The balance of the participant's gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be.
With respect to both nonqualified stock options and incentive stock options, special rules apply if a participant uses shares of common stock already held by the participant to pay the exercise price.
Stock Appreciation Rights. A participant generally will not recognize income upon the grant or vesting of an SAR with a grant price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of an SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the grant price of the SAR.
Unrestricted Stock Awards. Upon receipt of an unrestricted stock award, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair
market value of the shares at such time over the amount, if any, paid by the participant with respect to the shares.
Restricted Stock Awards. Upon receipt of a restricted stock award, a participant generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for the shares. Instead of postponing the federal income tax consequences of a restricted stock award until the restrictions lapse, a participant may elect to recognize compensation taxable as ordinary income in the year of the award in an amount equal to the fair market value of the shares at the time of receipt. This election is made under Section 83(b) of the Code. In general, a Section 83(b) election is made by filing a written notice with the Internal Revenue Service within 30 days of the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements.
The tax treatment of a subsequent disposition of restricted stock will depend upon whether a participant has made a timely and proper Section 83(b) election. If a participant makes a timely and proper Section 83(b) election, when the participant sells the restricted shares, the participant generally will recognize short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant receives from the sale and the tax basis of the shares sold. If no Section 83(b) election is made, any disposition after the restriction lapses generally will result in short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the amount, if any, the participant paid for the shares plus the amount of taxable ordinary income recognized either at the time the restrictions lapsed or at the time of the Section 83(b) election, if an election was made. If a participant has to forfeit the shares to us (e.g., upon the participant's termination prior to expiration of the restriction period), the participant may not claim a deduction for the amount of compensation income recognized as a result of making the Section 83(b) election, and the participant generally will have a capital loss equal to the amount, if any, paid for the shares.
Restricted Stock Units. A participant generally will not recognize income at the time a stock unit is granted. When any part of a stock unit is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the then fair market value of any shares, cash or property the participant receives.
Performance Shares and Performance Units. A participant generally will not recognize income upon the grant of performance shares or performance units. Upon the distribution of cash, shares or other property to the participant pursuant to the terms of the performance shares or units, the participant generally will recognize compensation taxable as ordinary income equal to the excess of the amount of cash or the fair market value of any property transferred to the participant over any amount paid by the participant with respect to the performance shares or units.
Tax Consequences to the Company. In the foregoing cases, we generally will be entitled to a deduction at the same time and in the same amount as a participant recognizes ordinary income, subject to certain limitations imposed under the Code.
Code Section 409A. We intend that awards granted under the 2010 Incentive Plan comply with, or otherwise be exempt from, Code Section 409A, but make no representation or warranty to that effect.
Code Section 162(m). Under Code Section 162(m), we are generally prohibited from deducting compensation paid to "covered employees" in excess of $1,000,000 per person in any year. "Covered employees" are defined as the principal executive officer and any one of the three highest paid executive officers (other thanwill require the principal executive officer or the principal financial officer) as of the
close of the applicable taxable year. Compensation that qualifies as "performance-based" is excluded for purposes of calculating the amount of compensation subject to the $1,000,000 limit. In general, one of the requirements that must be satisfied to qualify as performance-based compensation under Code Section 162(m) is that the material terms of the performance goals under which the compensation may be paid must be disclosed to and approved by a majorityaffirmative vote of our stockholders. Accordingly, stockholder approval of the 2010 Incentive Plan is necessary to ensure that we have the ability to exclude taxable compensation attributable to stock options, stock appreciation rights and performance-based awards under the 2010 Incentive Plan that are intended to qualify as "qualified performance-based compensation" under Code Section 162(m) from the limits on tax deductibility imposed by Section 162(m).
Tax Withholding. We are authorized to deduct or withhold from any award granted or payment due under the 2010 Incentive Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of common stock or otherwise settle an award under the 2010 Incentive Plan until all tax withholding obligations are satisfied.
Plan Benefits
All awards to employees, officers, directors and consultants under the 2010 Incentive Plan are made at the discretion of the Compensation Committee. Therefore, the benefits and amounts that will be received or allocated under the 2010 Incentive Plan are not determinable at this time. However, please refer to the description of grants made to our named executive officers in the last fiscal year described in the "Grants of Plan-Based Awards in Fiscal Year 2009" table. Grants made to our non-employee directors in the last fiscal year are described in the "Director Compensation" section. The closing price of our common stock, as reported on the Pink Sheets on March 26, 2010, was $0.349 per share.
EQUITY COMPENSATION PLAN INFORMATION
Equity Compensation Plan Information Table
The following table provides information as of September 30, 2009 concerning securities authorized for issuance under equity compensation plans of the Company.
| | | | | | | | | | | |
| | A | | B | | C | |
|---|
Plan Category | | Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights | | Weighted
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights | | Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column A) | |
|---|
Equity Compensation Plans approved by Shareholders(1) | | | 21,939,222 | (2) | $ | 4.56 | (3) | | 25,394,347 | |
Equity Compensation Plans not approved by Shareholders(4) | | | 2,696,743 | | | 6.05 | | | 560,215 | |
| | | | | | | | |
| | Total(5) | | | 24,635,965 | | $ | 4.72 | | | 25,954,562 | |
| | | | | | | | |
(1)Consists of the 2001 Stock Incentive Plan, the 1991 Stock Option Plan, the 1991 Directors' Stock Option Plan and the 1991 Employee Stock Purchase Plan. No additional awards are being made under the 1991 Stock Option Plan or the 1991 Directors' Stock Option Plan. The 1991 Employee Stock Purchase Plan was suspended in July 2006.
(2)Includes 3,443,253 RSUs, which do not have an exercise price.
(3)Includes weighted average exercise price for stock options only.
(4)Consists of the Vitesse International Inc. 1999 International Stock Option Plan, which was adopted in 1999 to provide for the grant to international employees of incentive stock options and the assumption of options under plans of foreign subsidiaries. The Vitesse International Inc. 1999 International Stock Option Plan expired on October 31, 2009.
(5)The table does not include information for equity compensation plans assumed by the Company in connection with acquisitions of the companies that originally established those plans. As of September 30, 2009, a total of 56,971 shares of the Company's common stock were issuable upon exercise of outstanding options under those assumed plans. The weighted average exercise price of those options outstanding is $19.55 per share. No additional options may be granted under those assumed plans.
Vote Required
If a quorum is present, the approval of the 2010 Incentive Plan will require a majority of the shares votingof Common Stock present or represented and entitled to vote at the Annual Meeting.Meeting with respect to such proposal. See "Information“Information Concerning Solicitation and Voting—Quorum; Abstentions;Quorum, Abstentions, Broker Non-Votes."Non-Votes, Required Votes.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOUA VOTE "FOR"
APPROVAL“FOR” ENDORSEMENT OF THE VITESSE SEMICONDUCTOR CORPORATION 2010 INCENTIVE PLAN.COMPENSATION OF OUR EXECUTIVE OFFICERS.
15
PROPOSAL THREE
ADVISORY VOTE ON THE FREQUENCY OF
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Act, in addition to providing stockholders with the opportunity to cast an advisory vote on executive compensation, we are required this year to include in this proxy statement and present at the Annual Meeting a non-binding stockholder vote on whether an advisory vote on executive compensation should be held every year, every two years or every three years.
The Board believes that holding an advisory vote on executive compensation every year is the optimal interval for conducting and responding to a “say on pay” vote, so that, stockholders may annually express their views on Vitesse’s executive compensation program.
Stockholders have the opportunity to choose among four options (holding the advisory vote on executive compensation every year, every two years, every three years, or abstaining) and, therefore, stockholders will not be voting to approve or disapprove the Board’s recommendation.
Although this advisory vote on the frequency of the “say on pay” vote is nonbinding, the Board and the Compensation Committee may take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR A “SAY ON PAY” FREQUENCY OF “EVERY YEAR”.
16
PROPOSAL FOUR
RATIFICATION OF APPOINTMENTSELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected BDO Seidman,USA, LLP, an independent registered public accounting firm, to audit our financial statements for the fiscal year ending September 30, 2010,2012, and recommends that stockholders vote for ratification of such appointment. BDO Seidman,USA, LLP has audited our financial statements since the fiscal year ended September 30, 2008. Although ratification by stockholders is not required by law, the Audit Committee has determined that it is desirable to request ratification of this selection by the stockholders as a matter of good corporate practice. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interest of Vitesse and its stockholders. If the stockholders do not ratify the appointment of BDO Seidman,USA, LLP, the Audit Committee may reconsider its selection. The Audit Committee selected BDO Seidman, LLP to audit our financial statements for the fiscal year ended September 30, 2009.
Representatives of BDO Seidman,USA, LLP are expected to be present at the meeting and will be afforded the opportunity to make a statement if they desire to do so. The representatives of BDO Seidman,USA, LLP are also expected to be available to respond to appropriate questions.
Principal Accounting Fees and ServicesPaid to BDO USA, LLP
The following table shows the approximatesets forth fees billedfor services paid to us by BDO Seidman,USA, LLP, our independent registered public accounting firm:
| | | | | | | |
| | 2009 | | 2008 | |
|---|
Audit Fees | | $ | 2,694,422 | | $ | 2,376,850 | |
Audit-Related Fees | | |
140,958 | | |
— | |
Tax Fees | | |
309,892 | | |
120,450 | |
All Other Fees | | |
— | | |
— | |
| | | | | | |
Total | |
$ |
3,145,272 | |
$ |
2,497,300 | |
| | | | | | |
Audit Feesfirm, for the fiscal years ended September 30, 2011 and 2010:
This category includes
| | 2011 | | 2010 | |
Audit Fees (1) | | $ | 529,069 | | $ | 899,937 | |
Audit-Related Fees (2) | | 13,288 | | — | |
Tax Fees (3) | | 273,090 | | 207,175 | |
All Other Fees | | — | | — | |
Total | | $ | 815,447 | | $ | 1,107,112 | |
(1)Audit fees include the audit of our annual financial statements, the audit of management’s assessment of our internal control over financial reporting and BDO USA, LLP’s audit of our internal control over financial reporting, review of financial statements included in our Form 10-Q quarterly reports, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. This category also includes advice on accounting matters that arose during, or as a result of, the audit or the review of interim financial statements, statutory audits required by non-U.S. jurisdictions and the preparation of an annual "management letter"“management letter” on internal control matters.
Audit-Related Fees(2)Audit related fees relate to the 401k plan audit for calendar year ended December 31, 2010.
(3)Tax fees consist of tax services for tax compliance and tax preparation plus tax services relating to our global restructuring project which was completed in May 2011.
This category consists of professional services rendered primarily in connection with our debt restructuring activities. These professional services continued through consummation of the debt restructuring on October 30, 2009, as discussed in our annual report on Form 10-K for the year ended September 30, 2009.
17
Tax FeesApproval Procedures
This category consists of professional services rendered primarily in connection with computation of our tax provision as well as tax compliance activities, including the preparation of tax returns in certain overseas jurisdictions and technical tax advice related to the preparation of tax returns.
Pre-Approval Policies and Procedures
The Audit Committee, inat its sole discretion, pre-approved and reviewed audit and non-audit services performed by our independent registered public accounting firm, as well as the fees charged for such services. Requests for approval are considered at each regularly scheduled Audit Committee meeting or, if necessary, are approved by the unanimous consent of all members of the Audit Committee. In its pre-approval and review of non-audit service fees, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditors'auditors’ independence. The Audit Committee considered and pre-approved all services rendered during fiscal years 20092011 and 2008.2010.
Vote Required
If a quorum is present, the
The approval of the ratification of the appointment of BDO Seidman,USA, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 20102012, will require the affirmative vote of a majority of the shares votingof Common Stock present or represented and entitled to vote at the Annual Meeting.Meeting with respect to such proposal. See "Information“Information Concerning Solicitation and Voting—Quorum; Abstentions;Quorum, Abstentions, Broker Non-Votes."Non-Votes, Required Votes.”
THE AUDIT COMMITTEEBOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERSA VOTE "FOR" THE“FOR” RATIFICATION OF THE APPOINTMENTSELECTION OF BDO SEIDMAN,USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2010.FIRM.
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certainpresents information regarding the beneficial ownership of shares of our common stock based on 404,841,802 shares of common stock outstanding as of March 26, 2010 by: (i) all thosewith respect to:
·Each person who is known byto us to be the beneficial ownersowner of more than five5 percent of the outstanding shares(5%) of our common stock; (ii) eachoutstanding Common Stock;
·Each of our executive officers named in the Summary Compensation Table; (iii) eachDirectors and nominees;
·Each of our current directors;named executive officers; and (iv) all
·All of our currentDirectors and executive officers and directors as a group. Five percent or greater shareholder
This information is basedas of December 5, 2011, except for information on information containedgreater than 5 percent (5%) stockholders. Amounts reported under “Number of Shares of Common Stock Beneficially Owned” include the number of shares subject to stock options and RSUs that become exercisable or vest, and the number of shares that can be acquired upon conversion of Series B convertible preferred stock and debentures, within 60 days of December 5, 2011 (which shares are shown in Schedule 13D/13G filings.the columns to the right). Unless otherwise indicated, the persons named in this table have sole voting and sole investment power with respect to all shares shown as beneficially owned, subject to community property laws where applicable. Unless otherwise indicated, the address of each of the beneficial ownersperson listed in this table is:is c/o Vitesse Semiconductor Corporation, 741 Calle Plano, Camarillo, California 93012.
| | Number of Shares
of Common Stock
Beneficially
Owned (1) | | Percent
of Class | | Number of
Shares Subject
to Options
Exercisable
Within 60 Days | | Number of
Shares Subject
to RSUs That
Vest Within
60 Days | | Number of Shares
Subject to Series B
Preferred Stock and
Debentures Convertible
Within 60 Days (2) | |
Directors, Nominees and Named Executive Officers: | | | | | | | | | | | |
Christopher R. Gardner | | 198,165 | | * | | 117,400 | | 36,850 | | — | |
Steven P. Hanson | | 28,410 | | * | | 7,750 | | 13,253 | | — | |
James H. Hugar | | 42,310 | | * | | 5,750 | | 13,253 | | — | |
G. William LaRosa | | 17,253 | | * | | — | | 5,522 | | — | |
G. Grant Lyon | | 38,310 | | * | | 5,750 | | 13,253 | | — | |
Martin S. McDermut | | 22,039 | | * | | 10,416 | | 10,416 | | — | |
Martin C. Nuss. | | 40,644 | | * | | 24,950 | | 10,050 | | — | |
Steve Perna | | 19,168 | | * | | 7,900 | | 3,350 | | — | |
Edward Rogas, Jr. | | 26,560 | | * | | 6,000 | | 13,253 | | — | |
Richard C. Yonker | | — | | * | | — | | — | | — | |
Directors and officers as a Group (9 persons) | | 432,859 | | 1.8 | % | 185,916 | | 119,200 | | — | |
| | | | | | | | | | | |
Greater Than 5% Stockholders: | | | | | | | | | | | |
Linden Capital, L.P (3). | | 1,425,918 | | 5.7 | % | — | | — | | 588,888 | |
CNH CA Master Account, L.P.(4) | | 2,476,333 | | 9.2 | % | — | | — | | 2,476,333 | |
Whitebox Advisors, LLC (5) | | 2,535,078 | | 9.6 | % | — | | — | | 1,887,234 | |
Kopp Investment Advisors, LLC (6) | | 2,326,759 | | 9.5 | % | — | | — | | — | |
AQR Capital Management, LLC (7) | | 1,429,000 | | 5.7 | % | — | | — | | 382,333 | |
Aristeia Capital L.L.C. (8) | | 2,211,111 | | 9.0 | % | — | | — | | — | |
Columbia Pacific Opportunity Fund, L.P. (9) | | 2,744,128 | | 11.2 | % | — | | — | | — | |
ABN AMRO Bank N.V., London Branch (10) | | 1,187,778 | | 4.6 | % | — | | — | | 1,187,778 | |
Raging Capital, LP (11) | | 2,006,927 | | 8.2 | % | — | | — | | — | |
New Vernon Investment Management LLC (12) | | 1,282,900 | | 5.2 | % | — | | — | | — | |
| | | | | | | | | | | | | | | | | |
Name of Individuals or Identity of Group | | Shares
Beneficially
Owned | | Shares
Exercisable
Within 60
Days of
March 26,
2010 | | Total Shares
Beneficially
Owned Plus
Exercisable
Within 60
Days of
March 26,
2010 | | Additional
Shares
Exercisable
Within 60 Days
of March 26,
2010 and upon
the Company's
Listing on an
Exchange | | Percent of
Total
Shares
Outstanding | |
|---|
AQR Capital Management, LLC; AQR | | | 33,677,288 | (1) | | 7,329,630 | | | 41,006,918 | | | — | | | 9.9 | % |
| | Absolute Return Master Account L.P. | | | | | | | | | | | | | | | | |
| | Two Greenwich Plaza, 3rd Floor | | | | | | | | | | | | | | | | |
| | Greenwich, CT 06830 | | | | | | | | | | | | | | | | |
CNH CA Master Account, L.P. | | |
39,980,338 |
(2) | |
403,798 | | |
40,384,136 | | |
— | | |
9.9 |
% |
| | Two Greenwich Plaza, 3rd Floor | | | | | | | | | | | | | | | | |
| | Greenwich, CT 06830 | | | | | | | | | | | | | | | | |
Linden Capital, L.P. | | |
12,471,723 |
(3) | |
30,934,598 | | |
43,406,321 | | |
— | | |
9.9 |
% |
| | c/o Wakefield Quin | | | | | | | | | | | | | | | | |
| | Victoria Place | | | | | | | | | | | | | | | | |
| | 31 Victoria Street | | | | | | | | | | | | | | | | |
| | Hamilton HM10, Bermuda | | | | | | | | | | | | | | | | |
Whitebox Advisors, LLC | | |
40,712,026 |
(4) | | | | |
40,712,026 | | |
— | | |
9.9 |
% |
| | 3033 Excelsior Boulevard, Suite 300 | | | | | | | | | | | | | | | | |
| | Minneapolis, MN 55416 | | | | | | | | | | | | | | | | |
Aristeia Master, L.P. | | |
30,811.017 |
(5) | |
— | | |
30,811,017 | | |
— | | |
7.6 |
% |
| | 136 Madison Avenue, 3rd Floor | | | | | | | | | | | | | | | | |
| | New York, NY 10016 | | | | | | | | | | | | | | | | |
ABN AMRO Bank N.V., | | |
26,726,116 |
(6) | |
— | | |
26,726,116 | | |
— | | |
6.6 |
% |
| | London Branch | | | | | | | | | | | | | | | | |
| | c/o RBS Global Banking & Markets | | | | | | | | | | | | | | | | |
| | 600 Washington Boulevard | | | | | | | | | | | | | | | | |
| | Stamford, CT 06901 | | | | | | | | | | | | | | | | |
Kopp Investment Advisors, LLC | | |
21,138,676 |
(7) | |
— | | |
21,138,676 | | |
— | | |
5.2 |
% |
| | 7701 France Avenue South, | | | | | | | | | | | | | | | | |
| | Suite 500 | | | | | | | | | | | | | | | | |
| | Edina, MN 55435 | | | | | | | | | | | | | | | | |
Lake Union Capital Fund, L.P. | | |
20,210,000 |
(8) | | | | |
20,210000 | | | | | |
5.0 |
% |
| | 600 University Street, Suite 1520 | | | | | | | | | | | | | | | | |
| | Seattle, WA 98101 | | | | | | | | | | | | | | | | |
Christopher R. Gardner | | |
399,316 | | |
1,677,885 | | |
2,077,021 | | |
300,000 |
(9) | |
* | |
Richard C. Yonker | | |
— | | |
225,000 | | |
225,000 | | |
150,000 |
(10) | |
* | |
Dr. Martin C. Nuss | | |
— | | |
100,000 | | |
100,000 | | |
75,000 |
(11) | |
* | |
Steven P. Hanson | | |
— | | |
49,500 | | |
49,500 | | |
40,000 |
(12) | |
* | |
| | | | | | | | | | | | | | | | |
Name of Individuals or Identity of Group | | Shares
Beneficially
Owned | | Shares
Exercisable
Within 60
Days of
March 26,
2010 | | Total Shares
Beneficially
Owned Plus
Exercisable
Within 60
Days of
March 26,
2010 | | Additional
Shares
Exercisable
Within 60 Days
of March 26,
2010 and upon
the Company's
Listing on an
Exchange | | Percent of
Total
Shares
Outstanding | |
|---|
Edward Rogas, Jr. | | | — | | | 40,000 | | | 40,000 | | | 40,000 | (12) | | * | |
G. Grant Lyon | | |
— | | |
— | | |
— | | |
— | | |
* | |
James H. Hugar | | |
— | | |
— | | |
— | | |
— | | |
* | |
All executive officers and Directors as a group (7 persons) | | |
399,316 | | |
2,092,385 | | |
2,491,701 | | |
605,000 | | |
* | |
Former Executive Officers: | | | | | | | | | | | | | | | | |
Michael B. Green(13) | | |
— | | |
— | | |
— | | |
— | | |
— | |
- *
- Less than 1%.
(1)Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to such shares. Shares of Common Stock that presently, or within 60 days of the date of this information, may be acquired by a holder upon exercise of warrants or options or conversion of preferred stock or convertible debt, or that vest under restricted stock units, are deemed outstanding Common Stock.for purposes of computing the percentage ownership of the person holding such securities, but are not deemed outstanding for computing the percentage ownership of any other person. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding at December 5, 2011.
19
(1)A Schedule 13G/A was filed on February 11, 2010(2)Pursuant to the terms of Series B convertible preferred stock and convertible debentures held by AQR Capital Management, LLCcertain of our stockholders, the maximum number of shares that may be acquired by any such stockholder upon conversion of the Series B convertible preferred stock or convertible debentures is limited to the extent necessary to ensure that, following such exercise, the total number of shares of common stock then beneficially owned by such stockholder and its affiliates which together beneficially own an aggregateand any other persons whose beneficial ownership of 33,677,288common stock would be aggregated with the stockholder for purposes of Section 13(d) of the Exchange Act, does not exceed 9.99% of the total number of issued and outstanding shares of common stock then outstanding. The shares of common stock and debt securities thatpercentage ownership listed in this table reflect these contractual limitations on a stockholder’s ability to acquire shares of common stock upon conversion of its Series B convertible preferred stock or convertible debentures.
(3)As of December 5, 2011, based on information set forth in a Schedule 13G/A filed with the SEC on January 26, 2011, Linden Capital, L.P., Linden Capital, L.P., Linden GP LLC and Siu Min Wong, collectively, beneficially own: (i) 837,030 shares of Common Stock, and (ii)$2,650,000 principal amount of the Company’s 8.00% Convertible Second Lien Debentures due 2014 which are convertible into 7,329,630588,888 shares of Common Stock, and report shared voting and dispositive power over 1,425,918 shares of our common stock.
(2) The mailing address for Linden Capital, L.P. is c/o Wakefield Quin, Victoria Place, 31 Victoria Street, Hamilton HM10, Bermuda.
(4)As of December 5, 2011, CNH CA Master Account, L.P. and its affiliates beneficially own an aggregate of 134,718.9320,200 shares of Series B Preferred Stock that are convertible into an aggregate of 13,471,893101,000 shares of common stock and $10,689,000 aggregate principal amount of debt securities that are convertible into an aggregate of 47,506,6662,375,333 shares of common stock. The sharesmailing address for CNH CA Master Account, L.P. is Two Greenwich Plaza, 3rd Floor, Greenwich, CT 06830.
(5)As of Series B Preferred Stock and the Debt securities are convertible into shares of common stock but only to the extent that conversion would not cause the holder to becomeDecember 5, 2011, based on information set forth in a beneficial owner of more than 9.99% of the shares of common stock outstanding.
(3)A Schedule 13G/A was filed by Linden Capital, L.P. ("Linden Capital"), Linden GP LLC ("Linden GP") and Siu Min Wong with the SEC on January 15, 2010. Linden GP is the general partner of Linden Capital and Mr. Wong is the managing member of Linden GP. Therefore, Linden GP and Mr. Wong may each be deemed to beneficially own the shares of common stock owned by Linden Capital. Linden Capital, Linden GP and Mr. Wong have shared power to vote or direct the vote and to dispose or direct the disposition of the shares held by Linden Capital. The shares exercisable within 60 days include shares of common stock issuable upon conversion of the 187,503.01 shares of Series B Preferred Stock and $6,150,000 principal amount of debt securities held by Linden Capital. The shares of Series B Preferred Stock and the debt securities are convertible into shares of common stock but only to the extent that conversion would not cause the holder to become a beneficial owner of more than 9.99% of the shares of common stock outstanding.
(4)A Schedule 13G/A was filed on February 16, 2010 by11, 2011, Whitebox Advisors, LLC and its affiliates who, as of such date, together beneficially owned (i) an aggregate of 448,563.71 shares of Series B Preferred Stock that were convertible into an aggregate of 44,856,371owns 647,844 shares of common stock and (ii) $16,963,000$9,341,807 aggregate principal amount of debt securities that are convertible into an aggregate of 75,391,1101,887,234 shares of common stock. The shares of Series B Preferred Stock and the debt securities are convertible into shares of common stock but only to the extent that conversion would not cause the holder to become a beneficial owner of more than 9.99% of the shares of common stock outstanding. The Schedule 13G/A does not identify the number of outstanding shares of common stock owned beneficially bymailing address for Whitebox Advisors, and its affiliates.
(5)On February 16, 2010, a Schedule 13G was filed by Aristeia Capital LLC ("ACLLC") as the investment manager for the 30,810,017 shares held by Aristeria Master L.P., Aristeia International Limited and Aristeia Partners, L.P. (the "Aristeia Funds") for which it has shared voting and investment control. ACLLC and its affiliates disclaim beneficial ownershipis 3033 Excelsior Boulevard, Suite 300, Minneapolis, MN 55416.
(6)As of the shares held by the Funds except to the extent of their respective economic interestsDecember 5, 2011, based on information set forth in each Fund.
(6)ABN AMRO Bank N.V., London Branch beneficially owns $5,345,000 aggregate principal amount of debt securities that are convertible into an aggregate of 23,755,556 shares of common stock. The debt securities are convertible into shares of common stock but only to the extent that conversion would not cause the holder to become a beneficial owner of more than 9.99% of the shares of common stock outstanding.
(7)On January 22, 2010, a Schedule 13D/A was filed with the SEC on November 5, 2010 and a Schedule 13F filed with the SEC on October 28, 2011 by Kopp Investment Advisors, LLC ("KIA"(“KIA”), Kopp Holding Company, LLC ("KHCLLC"(“KHCLLC”), and LeRoy C. Kopp with the SEC. With respect to the shares reported on the Schedule 13D/A,Kopp. KIA is an investment advisor managing discretionary accounts owned by numerous third-party clients, KHCLLC is a holding company, and the parent company of KIA, engaged in the investment industry, and Mr. Kopp is serving as the sole governor, chairman and chief investment officer of KIA and KHCLLC. As reported in the Schedule 13D/A,13F, KIA has sole voting power with respect to 21,074,776 shares and shared dispositive power with respect to
7,887,676 shares, KHCLLC does not have voting or dispositive with respect to any shares, but beneficially owns 21,074,776 shares, and Mr. Kopp has sole dispositive power with respect to 13,251,000981,550 shares, shared dispositive power with respect to 1,345,209 shares, and beneficially owns 21,138,6762,326,759 shares. The mailing address for Kopp Investment Advisors, LLC is 7701 France Avenue South, Suite 500, Edina, MN 55435.
(8)On March(7)As of December 5, 2010,2011, based on information set forth in a Schedule 13G/A was filed by Lake Union Capital Fund, LP ("LULP"), Lake Unionwith the SEC on February 10, 2011, AQR Capital Management, LLC, ("LULLC"),AQR Capital Management, LLC and Michael Self with the SEC. As reported in the Schedule 13G, LULP, LULLCAQR Absolute Return Master Account LP, collectively, beneficially own and Mr. Self havereport shared voting and dispositive power over 1,046,667 shares of our common stock, and own debt securities that are convertible into an aggregate of 382,333. The mailing address for AQR Capital Management, LLC and AQR Absolute Return Master Account L.P. is Two Greenwich Plaza, 3rd Floor Greenwich, CT 06830.
(8)As of December 5, 2011, based on information set forth in a Schedule 13G/A filed with respectthe SEC on February 14, 2011, Aristeia Capital L.L.C. (“ACLLC”), as the investment manager for Aristeia Master L.P., Aristeia International Limited and Aristeia Partners, L.P. (the “Funds”), collectively, report shared voting and dispositive power over 2,211,111 shares of our common stock. Based on the information reported in the Schedule 13G/A, ACLLC shares voting and investment control over shares held by the Funds, and ACLLC and its affiliates disclaim beneficial ownership of the shares held by the Funds except to all 20,210,000 shares.
- the extent of their respective economic interests in each Fund. The mailing address for Aristeia Capital L.L.C. is 136 Madison Avenue, 3rd Floor, New York, NY 10016.
(9)
Represents vested restricted stock unitsAs of December 5, 2011, based on information set forth in a Schedule 13G/A filed with the SEC on June 10, 2011, Columbia Pacific Opportunity Fund, L.P., Columbia Pacific Advisors, LLC (“CPA”), Alexander B. Washburn, Daniel R. Baty, Stanley L. Baty, and options asBrandon D. Baty, collectively, beneficially own and report sole voting and dispositive power over 2,744,128 shares of March 26, 2010 orour common stock. The mailing address for Columbia Pacific Opportunity Fund, L.P. is 1910 Fairview Avenue East, Suite 500, Seattle, WA 98102.(10)As of December 5, 2011, ABN AMRO Bank N.V., London Branch beneficially owns $5,345,000 aggregate principal amount of debt securities that will become vested within 60 daysare convertible into an aggregate of March 26, 2010. Each restricted stock unit represents a right to receive one share1,187,777 shares of common stock. Of 200,000 restricted stock units grantedThe mailing address for ABN AMRO Bank N.V., London Branch is c/o RBS Global Banking & Markets 600 Washington Boulevard Stamford, CT 06901.
(11)As of December 5, 2011, based on information set forth in a Schedule 13G filed with the SEC on October 13, 2008, 50% vested17, 2011, Raging Capital Fund, LP, Raging Capital Fund (QP), LP, Raging Capital Management, LLC, and William C. Martin, collectively, beneficially own and report shared voting and dispositive power over 2,006,927 shares of our common stock. The mailing address for Raging Capital Fund is 254 Witherspoon Street, Princeton, NJ 08542.
(12)As of December 5, 2011, based on October 14, 2009,information set forth in a Schedule 13G filed with the remainder vesting in two annual installmentsSEC on February 11, 2011, New Vernon Investment Management LLC, New Vernon Aegir Master Fund Ltd., New Vernon Partners LLC, and Trent Stedman, collectively, beneficially own and report sole voting and dispositive power over 1,282,900 shares of 25% each on October 13, 2010 and October 13, 2011, respectively. Such vested options are not exercisable nor are the shares underlying restricted stock units deliverable until the Company's common stock is listed on a national security exchange.
(10)Represents vested restricted stock units and options as of March 26, 2010 or that will become vested within 60 days of March 26, 2010. Each restricted stock unit represents a right to receive one share ofour common stock. Of 100,000 restricted stock units granted on October 13, 2008, 50% vested on October 14, 2009, with the remainder vesting in two annual installments of 25% each on October 13, 2010 and October 13, 2011, respectively. Such vested options are not exercisable nor are the shares underlying restricted stock units deliverable until the Company's common stockThe mailing address for New Vernon Investment Management LLC is listed on a national security exchange.
(11)Represents vested restricted stock units and options as of March 26, 2010 or that will become vested within 60 days of March 26, 2010. Each restricted stock unit represents a right to receive one share of common stock. Of 50,000 restricted stock units granted on October 13, 2008, 50% vested on October 14, 2009, with the remainder vesting in two annual installments of 25% each on October 13, 2010 and October 13, 2011, respectively. Such vested options are not exercisable nor are the shares underlying restricted stock units deliverable until the Company's common stock is listed on a national security exchange.
(12)Represents options vested as of March 26, 2010 or that become vested within 60 days of March 26, 2010. Such vested options are not exercisable nor are the shares underlying restricted stock units deliverable until the Company's common stock is listed on a national security exchange.
(13)Mr. Green resigned from the Company effective as of February 5, 2010.
Section 16(a) Beneficial Ownership Reporting Compliance799 Central Ave. Suite 350. Highland Park, Illinois 60035.
Section 16(a) of the Exchange Act requires our executive officers, directors, and persons who own beneficially more than 10 percent of a registered class of our equity securities to file reports of ownership and changes in ownership within specified periods with the SEC. To our knowledge, based solely on our review of the copies of Section 16(a) forms required to be furnished to us with respect to fiscal year 2009 and any written representations that no other reports were required, the Section 16(a) reporting requirements for reports required to be filed for fiscal year 2009 were met.
20
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
Executive Officers
Set forth below is information regarding our executive officers, other than Christopher R. Gardner, our President and Chief Executive Officer, for whom information is set forth above in Proposal One under "Nominees."“Directors’ Principal Occupation, Business Experience and Qualifications.”
Richard C. YonkerMartin S. McDermut, age 62,60, was appointed our Chief Financial Officer on December 14, 2006.July 27, 2011. Prior to joining Vitesse, Mr. YonkerMcDermut provided chief financial officer and interim management advisory services since 2007. From January 2009 to July 2011, Mr. McDermut served as Managing Director of Avant Advisory Group, a financial advisory and management consulting firm to entrepreneurial and middle market companies. From May to November 2010, Mr. McDermut was the Interim Chief Financial Officer of Capella Photonics,IRIS International, Inc., a telecommunications company,publicly traded diagnostic medical equipment manufacturer. Prior to joining Avant Advisory Group, from October 20052007 to November 2006.December 2008, Mr. McDermut provided financial and management consulting services to various clients as principal of his own financial consulting firm. Prior to this role, his career included chief financial officer positions at publicly traded, entrepreneurial and early-stage companies. Mr. McDermut also worked for the certified public accounting and consulting firm Coopers & Lybrand L.L.P. (now known as PricewaterhouseCoopers LLP) where he was a partner and the practice leader of the firm’s Los Angeles Entrepreneurial Advisory Services Group. Mr. McDermut is a Certified Public Accountant, Certified Merger & Acquisitions Advisor, Certified Insolvency and Restructuring Advisor, and Certified Fraud Specialist. He also served as Chief Financial Officer of Avanex Corporation,holds an optical telecommunications company, from April 2005 to September 2005; Actelis Networks, a telecommunications company, from May 2004 to April 2005; Bermai, a WiFi semiconductor company, from November 2003 to April 2004; Gluon Networks, a telecommunications switch company, from February 2003 to October 2003; and Agility Communications, a telecommunications company, from November 2000 to January 2003. Mr. Yonker served as a director of LogicVision, a semiconductor company providing built-in-self-test and diagnostic solutions, from January 2005 until the company merged with Mentor Graphics in August 2009. Mr. Yonker holds a bachelor'sMBA degree in industrial engineeringFinance and Accounting from the General Motors InstituteUniversity of Chicago and a master'sBA degree in finance managementEconomics from the Massachusetts InstituteUniversity of Technology.Southern California.
Dr. Martin C. Nuss, age 53,54, was appointed our Vice President of Technology and Strategy onin November 16, 2007. Prior to joining Vitesse, Dr. Nuss was most recentlyserved as Vice President and Chief Technology Officer of Ciena'sthe Optical Ethernet group.group of Ciena provides leadingCorporation, a network infrastructure solutions and intelligent software. Prior to Ciena's acquisition of the companysoftware provider. Dr. Nuss founded Internet Photonics in 2004, he was founder2000, and served as its Chief Technology Officer of Internet Photonics since 2000. Heuntil the company was acquired by Ciena in 2004. Dr. Nuss also served 15 years at Bell Labs in various technical and management roles including Director of the Optical Data Networks Research Department. He is a Fellow of the Optical Society of America and a member of IEEE. Dr. Nuss holds a doctorate in applied physics from the Technical University in Munich, Germany.
Compensation DiscussionSteve Perna, age 53, was appointed our Vice President of Product Marketing in August 2010. Prior to joining Vitesse, Mr. Perna held the position of President and Analysis
OverviewChief Executive Officer at Wiquest Communications, a wireless networking start-up, from 2007 to 2009. From 1995 to 2007, Mr. Perna held various vice president and executive-level roles at PMC-Sierra. Prior to PMC-Sierra, he spent 15 years as the Director of Marketing and Management at Texas Instruments in Dallas. Mr. Perna earned a BS degree in chemical engineering from the University of Notre Dame in 1980. He also earned an MBA degree in marketing management and an MS degree in corporate finance from the University of Dallas, as well as an MS degree in biomedical/electrical engineering from the University of Texas.
The Compensation Committee of the Board of Directors determines the overall executive compensation practices for our named executive officers. For fiscal year 2009, our named executive officers were: Christopher R. Gardner, Chief Executive Officer; Richard C. Yonker, Chief Financial Officer; Dr. Martin C. Nuss, Vice President, Technology and Strategy; and Michael B. Green, Vice President, General Counsel and Secretary. Mr. Green resigned from the Company effective as February 5, 2010.
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COMPENSATION DISCUSSION AND ANALYSIS
Executive compensation for our named executive officers consists of three components:
•Base Salary—the fixed amount of compensation paid to our named executive officers for performing their day-to-day duties;
•Annual Cash Bonus—the annual cash bonus or incentive award payment, generally calculated as a percentage of base salary pursuant to an incentive plan or awarded at the discretion of the Compensation Committee; and
•Equity Compensation—the high-risk, long-term incentive award that is designed to retain the named executive officers and align their financial interests with our stock price performance and other factors that directly and indirectly affect shareholder value. Equity awards are generally granted at the beginning of each fiscal year.
Compensation Philosophy and Objectives
The basic
Vitesse’s compensation philosophy of the Compensation Committee is to pay our executive officers a reasonable and competitive base salary, and to reward named executive officers fortheir achievements during the previous fiscal year, and to incentivize their performance in future years. ItsOur overall compensation goal is to establish and administer an executive compensation program that effectively attracts and retains highly skilled executive officers, enhances shareholderstockholder value, motivates technological innovation, and rewards executive officers who contribute to the Company'sCompany’s long-term success.
We attempt to achieve these objectives by offering a compensation program comprised of base salary, annual cash incentive awards, and equity-based compensation. We use all three components of compensation in an effort to create a balanced compensation package that provides adequate incentives for outstanding performance without creating undue incentives for excessive risk taking by our executives.
Compensation PracticesOur executive compensation strategy is to provide compensation opportunities at the 40th to 75th percentiles of market, depending on the compensation component and assuming acceptable levels of performance achievement. Specifically, we:
Each
·Target base salary levels between the market 40th and 60th percentiles in aggregate;
·Provide target bonus opportunities to earn between the market 50th and 75th percentiles of total cash compensation (base salary plus annual cash bonus) for achieving key business objectives and results; and
·Grant long-term incentives annually such that total direct compensation (total cash plus long-term incentive) is positioned between the market 50th and 75th percentiles if performance objectives are achieved.
As part of our compensation strategy, we monitor our compensation mix relative to market. We generally design our compensation program with the intent of providing a compensation mix (i.e., distribution between elements) similar to the market.
Determining Executive Compensation
The Compensation Committee of our Board of Directors is primarily responsible for determining the annual salaries and other compensation of executive officers. The Compensation Committee has adopted a general approach of compensating executives with cash salaries commensurate with the experience and expertise of the executive and competitive with median salaries paid to executives at comparable companies. To reward executives for their contributions to the achievement of Company-wide performance goals, incentive target bonus awards are established at a level designed to ensure that when such payouts are added to the executive’s base salary, the target total compensation for meeting performance expectations will be near the median at comparable companies (with above-median compensation opportunities for exceeding performance goals). In addition, to align our executives’ compensation with our business strategies, values and management initiatives, both short- and long-term, executive officers are provided with long-term performance incentives.
We also consider the compensation levels of executive officers at other publicly traded companies. We have collected information regarding compensation levels at other companies over the last several years from a variety of sources, including proxy statements, compensation reports and surveys published or prepared by compensation consulting firms. Using this information, we generally establish compensation levels (including salary, cash bonus and equity-based compensation) comparable to the median compensation levels of our counterparts at comparable companies.
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The Chief Executive Officer makes compensation recommendations for named executive officers (other than the Chief Executive Officer) and other senior executives. He actively participates in the annual executive compensation assessment (other than for the Chief Executive Officer position). In developing his recommendations, the Chief Executive Officer takes into account a number of factors, including individual performance and contribution level, current compensation relative to market, past awards, compensation level relative to internal peer positions, and internal compensation expense budgets. The Chief Executive Officer does not attend executive sessions of the Board or meetings where his own compensation is being determined.
The independent directors of the Board conduct a formal performance review of the named executive officers, including the Chief Executive Officer, which includes an assessment of financial and non-financial accomplishments. At the beginning of each fiscal year, the Chief Executive Officer develops management performance objectives for the named executive officers (other than the Chief Executive Officer) and assigns weights to each objective which vary differently from year-to-year depending on our priorities. These objectives are then submitted to the independent Directors of the Board for review. At the conclusion of each fiscal year, the Chief Executive Office and the independent Directors then evaluate the named executive officers’ (other than the Chief Executive Officer) actual performance against the pre-established objectives to determine compensation awards for the named executive officers.
Should a restatement of earnings occur upon which incentive compensation awards were based, the Compensation Committee has the discretion to take necessary actions to protect the interests of stockholders, including actions to recover such awards. Additionally, each of Messrs. Gardner’s, McDermut’s and Perna’s employment agreement requires such executive to return to us any bonus payments if we are required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement due to material noncompliance with any financial reporting requirement under the federal securities laws, if the Board determines that misconduct by the executive occurred and caused such restatement. The executive would be required to disgorge any bonus or other incentive-based or equity-based compensation he received from us during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the financial document embodying such error, and any net profits realized by the executive from the sale of our stock during that 12-month period.
The Compensation Committee has the authority to engage the services of one or more independent compensation consultants to provide advice on executive compensation matters. The Compensation Committee has the discretion to hire and fire the compensation consultant, as described in the Compensation Committee’s charter. The Compensation Committee determines the amountsscope of each named executive officer's base salary, annual cash bonus,the consultant’s engagement and equity grants.compensation for the consultant’s services. The compensation consultant may not provide any services to Vitesse other than advice on compensation matters, and works with management only at the request and subject to the oversight of the Compensation CommitteeCommittee. Management reviews industry data as described below to gain an understandingconsultant invoices, and approves and remits payment in accordance with the terms of compensation levels within the industry for each executive position.engagement.
The Compensation Committee previously reviewed the Radford Executive Survey to obtain industry data. Starting in fiscal year 2009,
In 2010, the Compensation Committee contracted with DolmatConnell,engaged the services of Connell & Partners, independent compensation consultants, to assess its competitors'conduct a peer group compensation survey for senior executive officers, including chief executive officers. Connell & Partners provides pay data for semiconductor companies, including the majority of our competitors, consisting of executive compensation levels for base salary, annual cash bonus and equity awards.
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The Compensation Committee considers industry
In October 2010, Connell & Partners compared the compensation data because it wishes to provide compensation packages that are neither at the low nor high ends of the range of comparable companies but, instead, are targeted toward the mid-point of the range of comparable companies. Overall, the Company's compensation for fiscal year 2009 for its namedour senior executive officers is competitive with the market. While base salaries slightly lagged the market by approximately five to 15 percent, bonus targets bring total cash compensation to the 50th percentile for comparable companies. Equity or long-term incentive compensation for fiscal year 2009 for named executives is in line with or slightly below the 50th percentile for comparable companies. The Compensation Committee's determinations regarding individual compensation elements are based on several factors beyond industry data, including, but not limited to, the criticality of the position, individual performance and company performance. After reviewing industry data and assessing the role and performance of each named executive officer, the Compensation Committee uses its discretion to set compensation levels for each of the three components for the named executive officers.
Consideration of Competitors' Compensation
The Compensation Committee selected independent compensation consultants, DolmatConnell, to conduct a peer group compensation survey. DolmatConnell provides pay data of semiconductorpublicly traded companies. The peer group selection criteria used by Connell & Partners consisted of firms that have similar products and/or services to ours and that have revenues and market capitalizations that are one-half to two times those of Vitesse. Due to the relative lack of companies includingwithin these desired ranges, we chose to expand our scope to include companies that fall within one-third to three times our metrics. We employed a revenue range of $50M to $500M, reflecting the majority ofexpanded range around our competitors.most recent four quarters’ revenue. Consistent with our previous methodology, the following factors were used to redefine our peer group:
DolmatConnell's October 28, 2008 study benchmarked Vitesse's executive compensation
·Status as a public, US-based and long-term incentives against 19 peer firms:non-subsidiary firm;
·Revenue between $50 million and $500 million;
| | |
Actel Corporation | | Magma Design Automation, Inc. |
Anadigics, Inc. | | Mindspeed Technologies, Inc. |
Applied Digital Solutions, Inc. | | MIPS Technologies, Inc. |
Applied Micro Circuits Corporation | | Nanometrics, Inc. |
Cirrus Logic, Inc. | | Oplink Communications, Inc. |
DSP Group, Inc. | | Pericom Semiconductor Corporation |
Emcore Corporation | | Sigma Designs, Inc. |
Entropic Communications, Inc. | | Silicon Image, Inc. |
Ikanos Communications, Inc. | | Sirf Technology Holdings, Inc. |
IXYS Corporation | | |
·Market capitalization between $30 million and $300 million; and
·Product and industry similarity, which included the following industries: communication integrated circuits; networking integrated circuits; and design, foundry and packaging services industries.
DolmatConnell
Connell & Partners reviewed the potential peer landscape by assessing direct product competitors listed in Hoover'sHoover’s database, companies that listed Vitesse in their peer groups, local labor market companies, and firms in Vitesse'sVitesse’s related industries as referenced in Hoover'sHoover’s database. The resultingCompensation benchmarking for our executive officers included information published in the peer group’s most recent proxy statements and Radford’s Executive Compensation survey data.
Based on these objective criteria, which were intended to recognize pay practices related to both Vitesse’s industry and size, the Compensation Committee selected the following sixteen peer group of 19 companies was then selected usingtaking into account input from management and the following criteria:recommendation from Connell & Partners:
•Status as a U.S.-based, non-subsidiary public and actively traded firm;
•Revenues between $100 million and $400 million;
•Market capitalization between $60 million and $600 million; and
•Product and industry similarity, as defined as communications chips, design foundry and packaging services and network chips.
The
Anadigics, Inc. | Magma Design Automation, Inc. |
Applied Micro Circuits Corporation | Mindspeed Technologies, Inc. |
Conexant Systems, Inc. | Nanometrics, Inc. |
DSP Group, Inc. | Oplink Communications, Inc. |
EMCORE Corporation | Pericom Semiconductor Corporation |
Exar Corporation | Sigma Designs, Inc. |
Ikanos Communications, Inc. | Silicon Image, Inc. |
IXYS Corporation | Supertex, Inc |
While the firms included in our peer group used in the compensation survey is representative of the market for executive talent in which Vitesse competes, although some of these firms may not be in direct competition with Vitesse.Vitesse, we believe that our peer group is representative of our market for executive talent.
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Compensation Elements
Our compensation package for executive officers consists of base salary, annual cash incentive (bonus) awards and long-term equity-based compensation. The listexecutive officers are also differs fromeligible to participate in all of our employee benefit plans.
Base Salaries. We provide competitive base salaries to pay for day-to-day service in position that reflect an individual’s duties and responsibilities, experience, expertise, and individual performance. The salaries are generally set to approximate the previous Radford Executive Survey, as methodology and criteria were altered50th percentile market levels for the positions at each level, although there may be variations by individual to reflect company size and market capitalization.
The Rolerecognize the importance of Management in Setting Executive Compensationthe position or the experience of the individual.
Compensation
Individual salary levels are determined based on assessments of:
·Internal job responsibilities;
·Experience in role; and
·Market levels for comparable positions.
Salary increases are determined based on an assessment of individual performance in the role and relative to individual objectives established for the year.
The base salaries for our named executive officers other thanwere last increased in February and May, 2010. The Compensation Committee awarded merit increases in base salary for our Chief Executive Officer Christopher R. Gardner, is established byin February 2010 and for Messrs. Nuss and Yonker in May 2010. We did not increase base salaries for our named executive officers during fiscal year 2011. In November 2011, the Compensation Committee considered increases in base salaries for our named executive officers for fiscal year 2012, and resolved to maintain base salaries at current levels. Annual base salaries for fiscal years 2010, 2011 and 2012 for the named executive officers are as follows:
| | Fiscal Year 2010 | | Fiscal Year 2011 | | Fiscal Year 2012 | |
Executive | | Annual Base Salary(1) | | Annual Base Salary | | Annual Base Salary | |
Christopher R. Gardner | | $ | 366,667 | | $ | 375,000 | | $ | 375,000 | |
Martin S. McDermut (2) | | — | | 285,000 | | 285,000 | |
Richard C. Yonker (3) | | 279,167 | | 285,000 | | — | |
Martin C. Nuss | | 226,250 | | 235,000 | | 235,000 | |
Steve Perna | | 235,000 | | 235,000 | | 235,000 | |
| | | | | | | | | | |
(1)Pro-rated to reflect merit increases in base salaries for Mr. Gardner and Mr. Yonker and Dr. Nuss in February 2010 and May 2010, respectively.
(2)Mr. McDermut’s employment with Vitesse commenced in July 2011.
(3)Mr. Yonker’s employment with Vitesse terminated in July 2011.
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Annual Cash Bonus. We provide eligible employees, including the Chief Executive Officer and other named executive officers, the opportunity to earn annual cash awards upon the recommendation of Mr. Gardner. With regard toachieving predetermined performance goals and objectives and, for our named executive officers other than the Chief Executive Officer, Vitesse achieving a minimum level of financial performance for the fiscal year, typically determined by reference to the Company’s Adjusted EBITDA for the year. The purpose is to reward attainment of Company financial goals and individual performance objectives, with threshold, target and maximum award opportunities expressed as a percentage of base salary. Target bonuses generally vary by executive level and are set at levels that, when combined with base salaries, will deliver market 50th percentile levels of total cash compensation if financial and performance objectives are met and above the 50th percentile levels if targets are exceeded.
The following are our fiscal year 2011 threshold, target and maximum annual cash bonus opportunities as a percentage of base salary for our named executive officers assuming 100% of their individual performance objectives are achieved:
Executive | | Threshold | | Target | | Maximum | |
Christopher R. Gardner | | 50 | % | 100 | % | 150 | % |
Martin S. McDermut (1) | | 4.2 | % | 6.7 | % | 10 | % |
Richard C. Yonker | | 25 | % | 40 | % | 60 | % |
Martin C. Nuss | | 15 | % | 30 | % | 50 | % |
Steve Perna | | 15 | % | 30 | % | 50 | % |
(1)Mr. McDermut joined Vitesse in July 2011, and was eligible for the same annual cash bonus opportunity as his predecessor, Mr. Yonker, pro-rated for the portion of fiscal year 2011 during which Mr. McDermut was employed by Vitesse.
We select different financial performance metrics and individual performance objectives to reward performance and to motivate desired behaviors. Performance weightings vary by executive. For the Chief Executive Officer, weightings are generally 40% to 50% on achieving specific Company-wide financial metrics and 50% to 60% on execution of our annual operating plan and improvements to Vitesse’s market position vis-à-vis its competitors. For the Chief Financial Officer, the performance objectives are generally 50% on achieving company-wide financial metrics and 50% on goals specific to the finance department and Vitesse’s financial liquidity and capital resources. For other named executive officers, the performance objectives are generally weighted 50% on goals related to revenue growth and 50% on goals specific to the executive’s department.
The rationale for the mix of financial and strategic objectives is to recognize that Vitesse must improve its short-term financial performance while at the same time invest in new products and organizational improvements that will lead to long-term revenue growth and financial stability. Vitesse considers both revenue and gross margins in the portion of the bonus plan that is focused on financial performance because Vitesse believes top line growth and profitable operations are both equally necessary to support and increase the stock price for investors. Additionally, Vitesse includes cash in the bonus plan for our Chief Executive Officer and Chief Financial Officer in recognition of the need to build cash balances to pay down our substantial indebtedness that matures in 2014. At the conclusion of each fiscal year, the Compensation Committee evaluates the named executive officers’ actual performance against the pre-established objectives to determine compensation awards for the named executive officers. If minimum thresholds are not achieved, no cash incentive is paid.
The bonus payments, if any, for a fiscal year are paid by the end of the first quarter of the following fiscal year, or as soon as practicable after determination and certification of the actual financial performance levels for the year and grant of approval by the Compensation Committee in a duly held meeting, but, in no event, later than March 15 of the following fiscal year.
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Chief Executive Officer. The bonus payment to our Chief Executive Officer is determined at the discretion of the Compensation Committee after assessing Vitesse’s financial performance and reviewing Mr. Gardner’s achievement of individual performance objectives. Mr. Gardner’s fiscal year 2011 financial goals and individual performance objectives, as well as the portion of Mr. Gardner’s potential bonus payment related to each performance metric, were determined in December 2010 and are summarized in the following table. Mr. Gardner recommendsis able to achieve between zero percent and 150% of each financial goal and individual performance metric, with achievement below a minimum threshold of 50% assigned a zero percent. Based on the Compensation Committee’s evaluation of Mr. Gardner’s performance relative to his financial and individual performance metrics, the Compensation Committee determined that Mr. Gardner achieved an overall bonus payment percentage of 50% of his potential bonus payment for fiscal year 2011, as follows:
Performance Metric | | Weighting of Each
Metric as a
Percentage of
Total Potential
Bonus Payment | | Percentage
Achievement of
Performance
Metric (Between
0% and 150%) | | Bonus Payment
as a Percentage
of Potential
Bonus Payment | |
Financial Performance Metrics: | | | | | | | |
Revenue from Operations | | 10 | % | 0 | % | 0 | % |
Gross Margin | | 10 | % | 150 | % | 15 | % |
Cash | | 10 | % | 0 | % | 0 | % |
EBITDA | | 20 | % | 0 | % | 0 | % |
Execution of Annual Operating Plan | | 15 | % | 0 | % | 0 | % |
Execution of Senior Debt Refinancing | | 5 | % | 100 | % | 5 | % |
Execution of Carrier Ethernet Strategy | | 20 | % | 100 | % | 20 | % |
Strengthening the Organization | | 10 | % | 100 | % | 10 | % |
| | | | | | | |
Total: | | 100 | % | | | 50 | % |
The substantial majority of Mr. Gardner’s individual performance objectives were defined in advance by reference to quantified goals and presentsspecific achievement dates, and thus, the Compensation Committee was able to evaluate Mr. Gardner’s actual performance against objectives without substantial subjective analysis. With the exception of gross margin, Mr. Gardner did not achieve any of his financial performance objectives, as revenue from operations, cash and EBITDA were below minimum thresholds. Mr. Gardner did exceed the maximum achievement criteria for gross margin, earning him 150% of this objective’s bonus weighting. With respect to refinancing our senior debt and strengthening the organization, Mr. Gardner met the target dates for achieving these goals by refinancing the debt in February 2011, improving financial reporting and hiring a successor chief financial officer in July 2011. Mr. Gardner’s execution of all of the Company’s annual operating plan elements fell below the minimum of 80% achievement threshold for this objective, as determined by the Compensation Committee and measured by periodic reporting that occurred throughout fiscal year 2011. Mr. Gardner was successful in executing on elements of our Carrier Ethernet strategy, which was measured by projected revenues derived from eligible design wins achieved during fiscal year 2011.
Based on Mr. Gardner’s achievement of an overall bonus goals percentage of 50%, he was entitled to a cash bonus of $187,500 for fiscal year 2011. However, Vitesse did not achieve the minimum level of Adjusted EBITDA for fiscal year 2011 that was a condition to the payout of any bonus to our other executive officers. Although achieving a minimum Adjusted EBITDA was not a factor in determining Mr. Gardner’s bonus, he nevertheless recommended to the Compensation Committee, his subjective evaluation of the other named executive officers in executive sessions. After consideration of Mr. Gardner's presentation, the ultimate decision as to compensation to be paid to those named executive officers is made byand the Compensation Committee.
The Compensation Committee is solely responsible for setting compensation for the Chief Executive Officer, including establishing goals and evaluating performance.agreed, that Mr. Gardner does not participate in any Compensation Committee decisions regarding his own compensation.
Fiscal Year 2009 Compensation Practices
The Compensation Committee determined bonusesreceive a cash bonus for executives for the fiscal year based on 1) the Company's attainment of specific financial performance objectives for the fiscal year and 2) the executive's achievement of personal goals, including the successful restructuring of the Company's debt in fiscal year 2009.2011.
For named
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Other Named Executive Officers. Named executive officers other than Mr. Gardner theparticipate in our Executive Bonus Plan, under which their bonus amount ispayments are based partially on Vitesse’s Adjusted EBITDA and partially on achievement of personal goals, according to the Company achieving a minimum Adjusted EBITDA. following formula:
Total
Bonus | = | Base
Salary | X | % of Total Bonus with 100% of Goals Achieved
for the respective Adjusted EBITDA | x | % of Personal
Goals Achieved |
Adjusted EBITDA is calculated as net income before interest, expenses for taxes, depreciation, amortization, deferred stock compensation, and non-recurring professional fees, with the possibility of adjustment for certain unusual or non-recurring events. The Company under-performed itstable below shows the fiscal year 2011 Adjusted EBITDA goals (expressed as a percentage of our target Adjusted EBITDA for the fiscal year) and minimum, target and maximum bonus payments for each level of Adjusted EBITDA assuming achievement of all personal performance goals (expressed as a percentage of annual base salary).
| | Adjusted EBITDA | | Total Bonus with
100% of Goals
Achieved for
CFO | | Total Bonus with
100% of Goals
Achieved for Other
Named Executive
Officers (other than
the CEO and CFO) | |
Below Minimum | | Less than 67.6% of Target | | 0 | % | 0 | % |
| | | | | | | |
Minimum | | 67.6% of Target | | 25 | % | 15.0 | % |
| | | | | | | |
Target | | 100% of Target | | 40 | % | 30.0 | % |
| | More than 118.2% of Target | | 50 | % | 40.0 | % |
| | | | | | | |
Maximum | | More than 141.9% of Target | | 60 | % | 50.0 | % |
For fiscal year 2011, Vitesse achieved an Adjusted EBITDA that was below the minimum level of Adjusted EBITDA for the payment of bonuses under the plan. As a result, none of the named executive officers participating in the Executive Bonus Plan received a cash bonus for fiscal year 20092011, irrespective of the percentage of personal goals achieved by the named executive officer. Mr. Yonker was not employed by us at fiscal year-end, and thus this elementnot eligible for an annual bonus for 2011. Mr. McDermut joined us in July 2011, and was rated with zero weighteligible for these officers in 2009. a pro-rated 2011 bonus.
The Company requested, and the SEC granted, confidential treatmentindividual performance goals for each of the EBITDA goals innamed executive officers other than our Chief Executive Officer for the Company's 2009fiscal year 2011 Executive Bonus Plan based on potential competitive injury towere initially established by Mr. Gardner at the Company if such information were disclosed. The EBITDA goals were established at multiple tiersbeginning of difficulty, with lower payouts at moderate 'plan' performance levels and higher payouts at higher 'stretch' performance levels. EBITDA goals were also used as a financial measure for bonuses in fiscal year 2008.
Because the minimum Adjusted EBITDA goal was not met, the maximum bonus under the formal 2009 Executive Bonus Plan for personal performance was 15% for each of Mr. Green and Dr. Nuss and 25% for Mr. Yonker.2011. Following fiscal year-end 2011, Mr. Gardner made a subjective determination regarding the extent to which Messrs. Nuss and Perna met their individual performance goals. Mr. Gardner did not evaluate Mr. Yonker’s performance, as he was not employed at fiscal year-end, or Mr. McDermut’s performance, as he was employed with Vitesse for only two months during fiscal year 2011 and a performance evaluation was not necessary to determine any bonus due to Vitesse’s failure to achieve minimum Adjusted EBITDA for the year.
The financial goals and individual performance objectives for each of Messrs. Yonker, Nuss and Perna, as well as the portion of each named executive officer’s potential bonus payment related to each performance metric are summarized in the following tables. Additionally, for Messrs. Nuss and Perna, the CEO’s determination to what extent each metric was achieved is also presented. Each named executive officer is able to achieve between zero percent and 100% of each individual performance metric, with achievement below a minimum threshold of 50% assigned a zero percent.
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Richard C. Yonker
Performance Metric |
| Weighting of Each Metric
as a Percentage of Total
Potential Bonus Payment |
|
Financial Performance Metrics: | | | |
Cash | | 20 | % |
Gross Margin | | 10 | % |
EBITDA | | 20 | % |
| | | |
Execution of Senior Debt Refinancing | | 20 | % |
Strengthening the Organization | | 30 | % |
| | | |
Total: | | 100 | % |
Mr. Yonker’s employment with Vitesse terminated in July 2011, and consequently he was not eligible for a fiscal year 2011 annual bonus. Upon joining Vitesse in July 2011, Mr. McDermut succeeded to the individual performance objectives established for Mr. Yonker. It was not necessary to conduct a performance evaluation of Mr. McDermut, who replaced Mr. Yonker, as he was employed with Vitesse for only two months during fiscal year 2011 and due to Vitesse’s failure to achieve minimum Adjusted EBITDA for the year no bonus would be awarded.
Martin C. Nuss
Performance Metric | | Weighting of Each
Metric as a
Percentage of
Total Potential
Bonus Payment | | Percentage
Achievement of
Performance
Metric (Between
0% and 100%) | | Bonus Payment
as a Percentage
of Potential
Bonus Payment | |
Creation of Long Range Plan | | 10 | % | 50 | % | 5 | % |
Execution of Carrier Ethernet Strategy | | 20 | % | 100 | % | 20 | % |
Defining Next Generation Products | | 20 | % | 75 | % | 15 | % |
Improving Industry Perception | | 20 | % | 100 | % | 20 | % |
Understanding the End Customer | | 10 | % | 100 | % | 10 | % |
Strengthening the Organization | | 10 | % | 0 | % | 0 | % |
IP Portfolio Management | | 10 | % | 75 | % | 7.5 | % |
| | | | | | | |
Total: | | 100 | % | | | 77.5 | % |
The substantial majority of Dr. Nuss’ individual performance objectives were defined in advance by reference to quantified goals and specific achievement dates, and thus, Mr. Gardner and the Compensation Committee were able to evaluate Dr. Nuss’ actual performance against objectives without substantial subjective analysis. Dr. Nuss achieved his target completion for the Long Range Plan, which consisted of identifying target markets, business plan and technical analysis. Dr. Nuss achieved the maximum achievement criteria for executing our Carrier Ethernet strategy, which was measured by projected revenues derived from eligible design wins achieved during fiscal year 2011. Dr. Nuss achieved slightly above target criteria for defining next-generation products. He achieved the maximum criteria for improving industry perception and understanding the end-customer by advancing Vitesse as a thought leader in Carrier Ethernet and packet synchronization and timing technologies at the majority of industry-leading OEMs. Dr. Nuss did not achieve the target criteria for strengthening and growing his organization. Dr. Nuss achieved slightly above target criteria for managing our IP patent portfolio by maximizing the value of our critical IP via management of our patent and IP process.
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Steve Perna
Performance Metric | | Weighting of Each
Metric as a
Percentage of
Total Potential
Bonus Payment | | Percentage
Achievement of
Performance
Metric (Between
0% and 100%) | | Bonus Payment
as a Percentage
of Potential
Bonus Payment | |
Revenue from Operations | | 10 | % | 0 | % | 0 | % |
Execution of Carrier Ethernet Strategy | | 20 | % | 100 | % | 20 | % |
Improving Industry Perception | | 40 | % | 75 | % | 30 | % |
Strengthening the Organization | | 20 | % | 50 | % | 10 | % |
Personal Goal | | 10 | % | 0 | % | 0 | % |
| | | | | | | |
Total: | | 100 | % | | | 60 | % |
The majority of Mr. Perna’s individual performance objectives were defined in advance by reference to quantified goals and specific achievement dates, and thus, Mr. Gardner and the Compensation Committee were able to evaluate Mr. Perna’s actual performance against objectives without substantial subjective analysis. Mr. Perna did not achieve his minimum objective for revenue from operations as the Company’s revenue declined in fiscal year 2011. Mr. Perna achieved the maximum achievement criteria for executing our Carrier Ethernet strategy, which was measured by projected revenues derived from eligible design wins achieved during fiscal year 2011 as well as go-to-market plans for new products. Mr. Perna exceeded target criteria for improving industry perception by successfully advancing Vitesse’s new Carrier Ethernet and packet synchronization and timing products at our Tier 1 and Tier 2 customer base, creating design opportunities and design wins. Mr. Perna achieved his target criteria for strengthening his organization to improve focus on major product lines and the ability of the organization to develop and growth our business. Mr. Perna did not achieve the target level for his personal goal.
Long-term (Equity) Incentives. Annual awards of equity compensation vary by executive level and are generally set to approximate the market 50th to 75th percentile levels, with a desire of achieving target total direct compensation between the median and 75th percentile. Officer awards are granted based on their performance in the previous year, the importance of their role in the current year, and a subjective assessment of the other named executive officers' performance, including his viewdifficulty in achieving Vitesse’s corporate goals.
We deliver the long-term incentive value through a mix of Mr. Yonker'sstock options and Mr. Green's performance with respectrestricted stock units to the Company's legalour employees. The percentage mix of stock options and financial reporting, Mr. Green'srestricted stock units varies by level and Dr. Nuss' achievement of intellectual property and patent sales, Dr. Nuss' contribution to the development of the Company's strategic directions and plan, and Mr. Yonker's contribution towards the Company's financial performance measures such as gross margin and cash. Based on this assessment,by year. For the named executive officers, earned 55%the long-term incentive compensation awards in fiscal year 2011 were paid 33% in stock options and 67% in RSUs.
From 2006 until March 2011, we were limited in our ability to 70%grant equity compensation awards to our named executive officers. With respect to equity awards granted after fiscal year 2007, such awards could not vest until Vitesse’s common stock was once again listed on the NASDAQ Global Market, which occurred on March 2, 2011. As a consequence of the personal goalslimitations on our ability to effectively use long-term equity incentives as a component of their incentive compensation.executive compensation, we believe that our Chief Executive Officer and certain of our other named executive officers hold fewer long-term equity awards than similarly situated executives within our peer group creating a potential disadvantage in terms of employee retention.
Because
Commencing in fiscal year 2010, the Compensation Committee consideredresolved to grant larger equity awards to our named executive officers over a three year period that approximate the debt restructuring asmarket 75th percentile level in an important Company objective,effort to close the gap in equity ownership by our named executive officers relative to their peers. The final awards under this three year plan will occur in fiscal year 2012, after which the Compensation Committee also included in this year's bonus program a component to rewardexpects that future long-term equity incentives will more closely approximate the named executive officers for the extra time and effort required during fiscal year 2009 in negotiating and supporting the debt restructuring that was successfully completed on October 30, 2009. Such component was awarded based on the named executive officer's contribution to such successful debt restructuring. Because Mr. Yonker and Mr. Green contributed a substantial portion of the effort on the debt restructuring, they earned the larger portion of this component resulting in a 25% incremental incentive payment based on this goal. Dr Nuss, who had a less substantial role in the debt restructuring, received an incremental 8.3% incentive payment. The total incentive based on personal performance as described in this and the prior paragraph is set forth for the named executive officers in the Summary Compensation Table.
The bonus payment to the Chief Executive Officer for fiscal year 2009 was determined at the discretion of the Compensation Committee after assessing the Company's financial performance and reviewing Mr. Gardner's achievement in the following three areas: strategic execution (strategic plan, product execution), financial performance (revenue, gross margin, cash) and market position (growth, customer position) with strategic execution and financial performance weighted twice as heavily as market position. Based on achieved financial performance of the Company and a subjective evaluation of Mr. Gardner's performance, the Compensation Committee determined Mr. Gardner's incentive compensation to be 75% of his base salary, as reflected in the Summary Compensation Table.50th percentile level.
30
In prior years, bonus payments were made in two equal installments, one before the end of the second quarter of the following fiscal year and one before the end of the fourth quarter of the following fiscal year. The bonus payments for 2009 are to be made in a lump sum in the second quarter of fiscal yearDecember 2010, or as soon as practicable after determination by the Compensation Committee, but in no event later than March 15, 2010, in order to comply with Section 409A of the IRS tax code.
In October 2008, the Compensation Committee determined that it was appropriate to grant equity awards to itsour named executive officers in a manner consistent with its three year plan to raise levels of equity ownership by executive officers. SuchThe grants were weighted in such a way to achieve short termshort-term retention by granting restricted stock awardsRSUs and with a focus towards long termlong-term incentive and retention by granting stock options. The number of grants of each type of award made to executive officers was determined at the discretion of the Compensation Committee after consultation with DolmatConnell and taking into consideration market data provided by Connell and Partners and each officer'sofficer’s total percent of stock ownership. The grantsequity awards were considered by DolmatConnell to be within the low- to mid-endpaid 33% in stock options and 67% in RSUs, calculated as a percentage of ranges of equity grants based on peer group market data.
shares underlying such awards. The Compensation Committee determined that these grants shouldthe RSUs would have a three rather thanyear vesting while the stock options would have a four year vesting schedule to promote retention. The Compensation Committee may consider a four year vesting schedule for future grants. As part of the terms of the awards, the Compensation Committee determined that regardless of the vesting schedule no options would be exercisable, nor would any restricted stock unitsRSUs be converted to shares of common stock until theVitesse’s shares of the Company were listed on a national exchange.
Fiscal Year 2009 Actionssecurities exchange, which occurred on March 2, 2011.
On January 26, 2009, pursuant
Mr. McDermut received an equity award of RSUs and stock options in August 2011 shortly following the commencement of his employment with Vitesse. Mr. McDermut received RSUs for 50,000 shares and stock options for 50,000 shares, which equity awards vest in 24 consecutive equal monthly installments. Mr. McDermut’s equity award was for the same number of total shares that were issued to an interimMr. Yonker during fiscal year 2011, which award we determined to be within our peer group range and temporary plan designed to protectin the immediate operating performance and cash position of the Company, we reduced the base salaries of our named executive officers, effective February 1, 2009 through thelower end of the fiscal year, as follows: (i)range for a newly hired chief financial officer. We did provide Mr. Gardner—20% reduction; (ii)McDermut with a more favorable vesting of his equity awards than we provided to Mr. Yonker—10% reduction; (iii) Dr. Nuss—10% reduction; and (iv)Yonker. The rationale was to make the initial hiring package sufficiently attractive for Mr. Green—10% reduction. Also effective February 1, 2009,McDermut to join the Company, suspended all matching contributions for its named executive officersand to recognize that Mr. McDermut’s equity awards were weighted more heavily in connection withstock options than RSUs and in amounts that were in the Company's 401(k) plan. In addition, there were reduced wages and benefits to substantially all other employees of the Company. These actions remained in effect through thelower end of the Company's 2009 fiscal year. These temporary salary reductions were not intended to reduce potential payments upon termination or change in control. Earned bonuses pursuant to therange for a newly hired chief financial officer.
The named executive officers’ long-term incentive awards for fiscal year 2009 Executive Bonus Plan were calculated based upon the officers' full salaries before the temporary salary reduction.2011 are reported below.
The Compensation Committee thought it appropriate to offer its named executive officers Change in Control Agreements in response to uncertainties surrounding the Company's imminent debt restructuring. Details of these agreements for Mr. Yonker and Mr. Green are set forth below under Employment Agreements. The Compensation Committee also agreed during the year to amend and restate Mr. Gardner's agreement to address certain tax issues as well as to incorporate an obligation to disgorge to the Company certain bonus payments and profits if the Company is required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement
| | 2011 Awards | |
Officer | | RSUs
(#) | | Options
(#) | |
| | | | | |
Christopher R. Gardner | | 147,400 | | 72,600 | |
Richard C. Yonker | | 67,000 | | 33,000 | |
Martin S. McDermut | | 50,000 | | 50,000 | |
Martin C. Nuss | | 40,200 | | 19,800 | |
Steve Perna | | 13,400 | | 6,600 | |
included in a report on Form 10-Q or Form 10-K due to material noncompliance with any financial reporting requirement under the federal securities laws, and the Company's board of directors determines that misconduct by Mr. Gardner has occurred and caused such restatement. The Compensation Committee also later agreed to extend the term of Mr. Gardner's agreement until January 27, 2010. Mr. Gardner's agreement terminated by its terms on January 27, 2010. On February 12, 2010 the Company entered into a new Employment Agreement with Mr. Gardner (see "Employment Agreements" below for a discussion of its terms).
Other Compensation
. The named executive officers enjoy the same benefits as all other employees of the Company,Vitesse, including medical, dental, vision, accidental death and dismemberment, group term life insurance in the amount of two times annual compensation (up to $280,000), business travel insurance, and a 401(k) plan.plan, and long-term disability pay of up to 60% of salary (with a salary cap of $10,000 per month) with an option to buy up to 67% of salary (with a salary cap of $15,000 per month). Paid leave benefits include vacation, sick leave, holidays and a sabbatical after 10 years of employment. The CompanyVitesse offers education assistance and a health/fitness benefit of $100 per year for health club membership or health/fitness classes. The CompanyVitesse also offers monetary rewards for patents.
31
Chief Executive Officer Compensation
The total compensation paid to Mr. Gardner was 9.8% lower in fiscal year 2011 compared to fiscal year 2010, as shown in the table below.
| | CEO Compensation | |
| | 2010 | | 2011 | |
| | | | | |
Base Salary (1) | | $ | 367,404 | | $ | 377,644 | |
Annual Bonus | | 206,250 | | — | |
Long-term Incentives (2) | | 815,760 | | 875,688 | |
All Other Compensation | | — | | — | |
Total | | $ | 1,389,414 | | $ | 1,253,332 | |
| | | | | |
Percent Change | | | | -9.8 | % |
(1)Salary amounts for 2010 include four (4) months of salary at an annual rate of $350,000 and eight (8) months of salary at an annual rate of $375,000.
(2)Long-term incentives include value of stock and option awards.
Mr. Gardner’s base salary was last increased in February 2010, when the Compensation Committee Report
The followingawarded him an increase in annual base salary from $350,000 to $375,000. Mr. Gardner did not receive an increase in base salary for fiscal year 2011, and in November 2011, after considering an increase in base salaries for executive officers for fiscal year 2012, the Compensation Committee Report does not constitute soliciting materials and shall not be deemed filed or incorporated by reference into any other filings by usresolved to maintain base salaries for named executive officers, including Mr. Gardner, at current levels.
For fiscal year 2011, Mr. Gardner was entitled to a cash bonus of $187,500 based on his achievement of individual performance objectives under the Securities Act of 1933 or the Exchange Act, excepthis executive bonus plan. Mr. Gardner, however, recommended to the extent we specifically incorporate this Compensation Committee Report by reference therein.that he not receive a cash bonus for fiscal year 2011 because of Vitesse’s failure to achieve the minimum level of Adjusted EBITDA for fiscal year 2011 that was a condition to the payout of any bonus to executive officers other than Mr. Gardner. The Compensation Committee accepted Mr. Gardner’s recommendation, and he was not awarded a cash bonus for fiscal year 2011.
Chief Financial Officer Compensation
Mr. McDermut joined Vitesse as our Chief Financial Officer in July 2011. Mr. McDermut’s base salary, cash bonus opportunity and long-term equity incentive compensation was negotiated with Mr. McDermut prior to him joining the Company. His compensation package was based in part on benchmark data provided by Connell & Partners in November 2010 and consisted of the same base salary and cash bonus compensation of Mr. Yonker, who Mr. McDermut replaced as Chief Financial Officer. Mr. McDermut did receive a different long-term equity compensation package than Mr. Yonker received in December 2011. Mr. McDermut’s equity compensation of 100,000 shares of common stock was awarded 50% in RSUs and 50% in stock options, vesting in equal monthly installments over a two year period. Mr. Yonker’s equity compensation of 100,000 shares of common stock was awarded 67% in RSUs and 33% in stock options, vesting in equal annual installments over a four year period. We provided Mr. McDermut with a more favorable vesting of his equity awards to make the initial hiring package sufficiently attractive for Mr. McDermut to join the Company, and to recognize that Mr. McDermut’s equity awards were weighted more heavily in stock options than RSUs and in amounts that were in the lower end of the range for a newly hired chief financial officer.
32
Report of Compensation Committee
The Board'sCompensation Committee of our Board of Directors is primarily responsible for determining the annual salaries and other compensation of executive officers and administering our stock incentive and stock purchase plans. The Compensation Committee has submitted the following report for inclusion in this Amendment:
We have reviewed and discussed the Compensation Discussion and Analysis contained insection of this Amendment with management. Based on our review of and the discussionsproxy statement with management with respect to the Compensation Discussion and Analysis, the Compensation Committeebased on such review and discussion has recommended to theour Board of Directors that the Compensation Discussion and Analysis section be included in Vitesse’s 2011 Annual Report on Form 10-K and in this Amendment.proxy statement.
The foregoing report is provided by the following directors, who constitute the Compensation Committee:
| Compensation Committee |
| G. Grant Lyon |
| Edward Rogas, Jr. |
| G. William LaRosa |
G. Grant Lyon, Chairman
Edward Rogas, Jr., member
33
Compensation Committee Interlocks and Insider Participation
EXECUTIVE COMPENSATION
The Compensation Committee currently consists of G. Grant Lyon, Chairperson, and Edward Rogas, Jr. Former directors Guy W. Adams, Vincent Chan, Robert A. Lundy, and Willow B. Shire served as members of the Compensation Committee during fiscal year 2009. No director who served on the Compensation Committee of our Board during fiscal year 2009 currently is, or during fiscal year 2009, was an officer or employee of the Company or had any relationship requiring disclosure by us under Item 404 of Regulation S-K. In addition, no member of our Compensation Committee is, or during fiscal year 2009 was, employed by a company whose Board of Directors includes or included any members of our management.
Fiscal Year 2009 Summary Compensation Table
The following table sets forth, the compensation earned byas to each person (referred to as our named executive officers) serving as Chief Executive Officer and Chief Financial Officer during fiscal year 2011, and the most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer who were serving as executive officers at the end of fiscal year 2011 whose compensation exceeded $100,000 (of which we only had two), information concerning all compensation paid for services renderedto us in all capacities to the Company during the fiscal years ended September 30, 2009, 20082011, 2010 and 2007:2009.
Name and
Principal Position | | Year | | Salary (1) | | Stock
Awards (2) | | Option
Awards (2) | | Non-Equity
Incentive Plan
Compensation | | All Other
Compensation | | Total | |
| | | | | | | | | | | | | | | |
Christopher R. Gardner | | 2011 | | $ | 377,644 | | $ | 642,664 | | $ | 233,024 | | $ | — | | $ | — | | $ | 1,253,332 | |
Chief Executive Officer | | 2010 | | 367,404 | | 468,000 | | 347,760 | | 206,250 | | — | | 1,389,414 | |
| | 2009 | | 303,333 | | 74,000 | | 90,160 | | 262,500 | | — | | 729,993 | |
| | | | | | | | | | | | | | | |
Martin S. McDermut (3) | | 2011 | | 53,529 | | 166,500 | | 117,815 | | — | | — | | 337,844 | |
Chief Financial Officer | | 2010 | | — | | — | | — | | — | | — | | — | |
| | 2009 | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | |
Richard C. Yonker (4) | | 2011 | | 254,856 | | 292,120 | | 105,920 | | — | | 285,000 | (6) | 937,896 | |
Chief Financial Officer | | 2010 | | 278,846 | | 234,000 | | 173,790 | | 33,915 | | — | | 720,551 | |
| | 2009 | | 256,667 | | 37,000 | | 45,080 | | 116,875 | | — | | 455,622 | |
| | | | | | | | | | | | | | | |
Dr. Martin C. Nuss | | 2011 | | 249,311 | | 175,272 | | 63,552 | | — | | — | | 488,135 | |
Vice President, | | 2010 | | 225,769 | | 104,000 | | 77,240 | | 24,675 | | — | | 431,684 | |
Technology and Strategy | | 2009 | | 205,333 | | 18,500 | | 22,540 | | 38,133 | | — | | 284,506 | |
| | | | | | | | | | | | | | | |
Steve Perna (5) | | 2011 | | 240,273 | | 58,424 | | 21,184 | | — | | 75,000 | (7) | 394,881 | |
Vice President, Product | | 2010 | | 36,154 | | 95,750 | | 70,203 | | — | | 75,000 | (7) | 277,107 | |
Marketing | | 2009 | | — | | — | | — | | — | | — | | — | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary(1) | | Bonus(2) | | Stock
Awards(3) | | Option
Awards(3) | | Non-Equity
Incentive Plan
Compensation(4) | | All Other
Compensation(5) | | Total(6) | |
|---|
Christopher R. Gardner | | | 2009 | | $ | 303,333 | | $ | — | | $ | 23,788 | | $ | 273,218 | | $ | 262,500 | | $ | 1,212 | | $ | 864,051 | |
| | Chief Executive Officer | | | 2008 | | | 350,000 | | | 262,500 | | | — | | | 316,679 | | | — | | | 6,926 | | | 936,105 | |
| | | 2007 | | | 328,462 | | | 175,000 | | | — | | | 320,540 | | | — | | | 5,723 | | | 829,725 | |
Richard C. Yonker | | |
2009 | | |
256,667 | | |
— | | |
11,894 | | |
54,457 | | |
116,875 | | |
2,689 | | |
442,582 | |
| | Chief Financial Officer | | | 2008 | | | 275,000 | | | — | | | — | | | 41,098 | | | 74,250 | | | 7,734 | | | 398,082 | |
| | | 2007 | | | 223,438 | | | 25,000 | | | — | | | 30,939 | | | 80,000 | | | 6,029 | | | 365,406 | |
Dr. Martin C. Nuss | | |
2009 | | |
205,333 | | |
— | | |
5,947 | | |
7,246 | | |
38,133 | | |
2,539 | | |
259,198 | |
| | Vice President, Technology | | | 2008 | | | 193,991 | | | — | | | — | | | 23,672 | | | 66,000 | | | 5,312 | | | 288,975 | |
| | and Strategy | | | | | | | | | | | | | | | | | | | | | | | | | |
Michael B. Green(7) | | |
2009 | | |
205,333 | | |
— | | |
5,947 | | |
5,797 | | |
73,150 | | |
2,400 | | |
292,627 | |
| | Vice President, General | | | 2008 | | | 205,000 | | | — | | | — | | | — | | | 53,300 | | | 6,150 | | | 264,450 | |
| | Counsel and Secretary | | | 2007 | | | 153,750 | | | 20,000 | | | — | | | — | | | 41,000 | | | 4,021 | | | 218,771 | |
- (1)
- Salary amounts reflect the actual base salary payments,
madeas of the end of the respective fiscal year, to the named executive officers in fiscal years 2009, 2008 and 2007.
- officers.
(2)
Bonus amounts for fiscal years 2009, 2008 and 2007 reflect non-incentive plan based cash payments.
(3)Amounts reflected forThese amount represent the grant date fair value of the stock and stock option awards are the dollar amounts recognized for financial reporting purposes in fiscal years 2009, 2008 and 2007determined in accordance with ASC Topic 718. The dollar amount recognized is computed under ASC 718, applyingThese amounts may not correspond to the same valuation model and assumptionsactual value eventually realized by the officer, which depends in part on the market value of our Common Stock in future periods. Assumptions used for financial reporting purposes, disregardingin calculating these amounts are set forth in the estimate of forfeitures relatedNotes to service-based vesting conditions. SeeConsolidated Financial Statements included in our annual report on Form 10-K for the yearsyear ended September 30, 2009 and prior for the weighted-average assumptions used2011.(3)Mr. McDermut’s employment with Vitesse commenced on July 27, 2011.
(4)Mr. Yonker’s employment with Vitesse terminated on July 29, 2011.
(5)Mr. Perna’s employment with Vitesse commenced on August 2, 2010.
(6)Consists of severance pay.
(7)Consists of a relocation allowance of $150,000, paid out in calculating the ASC 718 grant date fair values of all awards and options.
(4)Non-equity incentive plan compensation represents incentive bonuses earned for services rendered during fiscal years 2009, 2008 and 2007. The bonus payments for 2009 are to be madetwo installments in a lump sum by the end of the second quarter of fiscal year 2010 or as soon as practicable after determination by the Compensation Committee, but in no event later than March 15,2011 and 2010.
(5)Represents matching contributions to the Company's 401(k) plan from October 1, 2008 through January 31, 2009, and for fiscal years 2008 and 2007. Effective February 1, 2009, the Company suspended all matching contributions to the Company's 401(k) plan for its named executive officers.
(6)Compensation reflected in the table does not include perquisites, personal benefits and other compensation amounts that do not, in the aggregate for each named individual for each year, exceed $10,000.
(7)Mr. Green resigned from the Company effective as February 5, 2010.
34
Grants of Plan-Based Awards in Fiscal Year 20092011
The following table sets forth information relating to plan-based awards granted to our named executive officers in fiscal year 2009:2011:
| | Estimate Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Grant | | All Other
Stock Awards:
Number of | | All Other
Option
Awards:
Number of
Securities
Underlying | | Exercise Price
of Options | | Grant Date
Fair Value of
Stock and
Option | |
Name | | Threshold | | Target | | Maximum | | Date | | Stock Units | | Options | | (Per Share) (2) | | Awards (3) | |
| | | | | | | | | | | | | | | | | |
Christopher R. Gardner | | $ | — | | $ | 375,000 | | $ | 562,500 | | | | | | | | | | | |
| | | | | | | | 12/9/2010 | | 147,400 | | | | | | 642,664 | |
| | | | | | | | 12/9/2010 | | | | 72,600 | | $ | 4.36 | | 233,024 | |
| | | | | | | | | | | | | | | | | |
Martin S. McDermut | | $ | — | | $ | 19,000 | | $ | 28,500 | | | | | | | | | | | |
| | | | | | | | 8/10/2011 | | 50,000 | | | | | | 166,500 | |
| | | | | | | | 8/10/2011 | | | | 50,000 | | 3.33 | | 117,815 | |
| | | | | | | | | | | | | | | | | |
Richard C. Yonker | | $ | — | | $ | 114,000 | | $ | 171,000 | | | | | | | | | | | |
| | | | | | | | 12/9/2010 | | 67,000 | | | | | | 292,120 | |
| | | | | | | | 12/9/2010 | | | | 33,000 | | 4.36 | | 105,920 | |
| | | | | | | | | | | | | | | | | |
Dr. Martin C. Nuss | | $ | — | | $ | 70,500 | | $ | 117,500 | | | | | | | | | | | |
| | | | | | | | 12/9/2010 | | 40,200 | | | | | | 175,272 | |
| | | | | | | | 12/9/2010 | | | | 19,800 | | 4.36 | | 63,552 | |
| | | | | | | | | | | | | | | | | |
Steve Perna | | $ | — | | $ | 70,500 | | $ | 117,500 | | | | | | | | | | | |
| | | | | | | | 12/9/2010 | | 13,400 | | | | | | 58,424 | |
| | | | | | | | 12/9/2010 | | | | 6,600 | | 4.36 | | 21,184 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| |
| | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units | | All Other
Option
Awards:
Number of
Securities
Underlying
Options | |
| |
| |
|---|
| | Estimate Future
Payouts Under Non-Equity
Incentive Plan Awards(1) | |
| |
| | Grant Date
Fair Value
of Stock
and Option
Awards(2) | |
|---|
| |
| | Exercise
Price of
Options
(Per Share) | |
|---|
Name | | Threshold | | Target | | Maximum | | Grant Date | |
|---|
Christopher R. Gardner | | $ | — | | $ | 350,000 | | $ | 525,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 10/13/2008 | | | | | | 400,000 | | $ | 0.37 | | $ | 90,160 | |
| | | | | | | | | | | | 10/13/2008 | | | 200,000 | | | | | | | | | 74,000 | |
Richard C. Yonker | | |
— | | |
110,000 | | |
165,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 10/13/2008 | | | | | | 200,000 | | | 0.37 | | | 45,080 | |
| | | | | | | | | | | | 10/13/2008 | | | 100,000 | | | | | | | | | 37,000 | |
Dr. Martin C. Nuss | | |
— | | |
66,000 | | |
88,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 10/13/2008 | | | | | | 100,000 | | | 0.37 | | | 22,540 | |
| | | | | | | | | | | | 10/13/2008 | | | 50,000 | | | | | | | | | 18,500 | |
Michael B. Green(3) | | |
— | | |
66,000 | | |
88,000 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 10/13/2008 | | | | | | 80,000 | | | 0.37 | | | 18,032 | |
| | | | | | | | | | | | 10/13/2008 | | | 50,000 | | | | | | | | | 18,500 | |
- (1)
- Represents possible payouts for fiscal year
20092011 for the named executive officers under their respective bonus plans. Amounts actually earned are displayed in the Summary Compensation Table.
(2)
- The exercise price of all stock options is equal to the closing price of our Common Stock on the grant date.
(3)The grant date fair value of the stock and stock option awards has been calculatedis determined in accordance with ASC 718. In contrastTopic 718, but disregarding the estimate of forfeitures related to how we presentservice-based vesting conditions. Assumptions used in calculating these amounts are set forth in the "SummaryNotes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended September 30, 2011.
Narrative Disclosure to Summary Compensation Table" we report and Grants of Plan-Based Awards Table
Salary amounts reported in the Summary Compensation Table reflect the actual base salary payments made to the named executive officer in the respective fiscal year. Non equity incentive plan compensation amounts reported in this column without apportioning the amount oversummary compensation tablereflect non-incentive plan based cash payments. Non-equity incentive plan compensation represents incentive bonuses earned for services rendered during the applicable servicerespective fiscal year. The non-equity incentive plan compensation payments for fiscal year 2011 are paid in a lump sum by the end of the first quarter of the fiscal year following the year in which the bonus is earned, or vesting period.
(3)Mr. Green resigned fromas soon as practicable after determination and certification of the Company effective as of February 5, 2010.
actual financial performance levels for the year and approval by the Compensation Committee but, in no event, later than March 15, 2012.Vested options were exercisable and the shares underlying RSU awards were deliverable starting March 2, 2011, the day the Company’s Common Stock commenced listing on NASDAQ Global Market.
35
Outstanding Equity Awards at Fiscal Year-End 20092011
The following table provides information regarding the holdings of equity awards by our named executive officers at September 30, 2009:2011:
| | | | Option Awards | | Stock Awards | |
Name | | Grant Date | | Number of
Securities
Underlying
Unexercised
Options
Exercisable | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | Option
Exercise
Price per
Share | | Option
Expiration
Date | | Number of
Shares or
Units of
Stock That
Have Not
Vested | | Market Value
of Shares or
Units of
Stock That
Have Not
Vested (a) | |
Christopher R. Gardner | | | | | | | | | | | | 209,900 | (21) | $ | 619,205 | |
| | 10/2/2001 | | 6,000 | (1) | | | $ | 145.40 | | 10/2/2011 | | | | | |
| | 10/2/2001 | | 1,000 | (2) | | | 145.40 | | 10/2/2011 | | | | | |
| | 10/2/2001 | | 144 | (3) | | | 145.40 | | 10/2/2011 | | | | | |
| | 10/2/2001 | | 13,530 | (4) | | | 145.40 | | 10/2/2011 | | | | | |
| | 10/2/2001 | | 1,470 | (5) | | | 145.40 | | 10/2/2011 | | | | | |
| | 10/17/2002 | | 11,250 | (6) | | | 16.52 | | 10/17/2012 | | | | | |
| | 10/27/2004 | | 5,000 | (7) | | | 139.40 | | 10/20/2013 | | | | | |
| | 10/27/2004 | | 3,750 | (8) | | | 51.60 | | 10/27/2014 | | | | | |
| | 10/27/2004 | | 3,750 | (9) | | | 51.60 | | 10/27/2014 | | | | | |
| | 10/27/2004 | | 5,625 | (10) | | | 51.60 | | 10/27/2014 | | | | | |
| | 10/27/2004 | | 1,875 | (11) | | | 51.60 | | 10/27/2014 | | | | | |
| | 12/2/2005 | | 5,500 | (12) | | | 48.00 | | 12/2/2015 | | | | | |
| | 6/21/2006 | | 20,000 | (13) | | | 30.60 | | 6/21/2016 | | | | | |
| | 10/13/2008 | | 15,000 | (14) | 5,000 | (14) | 7.40 | | 10/13/2018 | | | | | |
| | 2/12/2010 | | 22,500 | (15) | 67,500 | (15) | 5.20 | | 2/12/2020 | | | | | |
| | 12/9/2010 | | | | 72,600 | (16) | 4.36 | | 12/9/2020 | | | | | |
| | | | | | | | | | | | | | | |
Martin McDermut | | | | | | | | | | | | | | | |
| | 8/10/2011 | | 2,083 | (17) | 47,917 | (17) | 3.33 | | 8/10/2021 | | 47,917 | (22) | 141,355 | |
| | | | | | | | | | | | | | | |
Dr. Martin C. Nuss | | | | | | | | | | | | | | | |
| | 11/16/2007 | | 7,500 | (18) | 2,500 | (18) | 19.80 | | 11/16/2017 | | 54,158 | (23) | 159,766 | |
| | 10/13/2008 | | 3,750 | (14) | 1,250 | (14) | 7.40 | | 10/13/2018 | | | | | |
| | 2/25/2010 | | 5,000 | | 15,000 | (19) | 5.20 | | 2/25/2020 | | | | | |
| | 12/9/2010 | | | | 19,800 | (16) | 4.36 | | 12/9/2020 | | | | | |
| | | | | | | | | | | | | | | |
Mr. Steve Perna | | | | | | | | | | | | | | | |
| | 8/11/2010 | | 6,250 | | 18,750 | (20) | 3.83 | | 8/11/2020 | | 25,900 | (24) | 76,405 | |
| | 12/9/2010 | | — | | 6,600 | (16) | 4.36 | | 12/9/2020 | | | | | |
| | | | | | | | | | | | | | | | | |
36
| | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
|---|
Name | | Number of
Securities
Underlying
Unexercised
Options
Exercisable | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | Option
Exercise
Price per
Share | | Option
Expiration
Date | | Number of
Shares or Units
of Stock That
Have Not
Vested | | Market Value of
Shares or Units of
Stock That Have
Not Vested(a) | |
|---|
Christopher R. Gardner | | | 120,000 | (1) | | — | | $ | 35.91 | | | 10/19/2009 | | | 200,000 | (b) | $ | 74,000 | |
| | | 200,000 | (2) | | — | | | 17.44 | | | 4/6/2011 | | | | | | | |
| | | 120,000 | (3) | | — | | | 7.27 | | | 10/2/2011 | | | | | | | |
| | | 20,000 | (4) | | — | | | 7.27 | | | 10/2/2011 | | | | | | | |
| | | 2,885 | (5) | | — | | | 7.27 | | | 10/2/2011 | | | | | | | |
| | | 270,600 | (6) | | — | | | 7.27 | | | 10/2/2011 | | | | | | | |
| | | 29,400 | (7) | | — | | | 7.27 | | | 10/2/2011 | | | | | | | |
| | | 225,000 | (8) | | — | | | 0.83 | | | 10/17/2012 | | | | | | | |
| | | 100,000 | (9) | | — | | | 6.97 | | | 10/20/2013 | | | | | | | |
| | | 75,000 | (10) | | — | | | 2.58 | | | 10/27/2014 | | | | | | | |
| | | 75,000 | (11) | | — | | | 2.58 | | | 10/27/2014 | | | | | | | |
| | | 112,500 | (12) | | — | | | 2.58 | | | 10/27/2014 | | | | | | | |
| | | — | | | 37,500 | (13) | | 2.58 | | | 10/27/2014 | | | | | | | |
| | | 82,500 | (14) | | 27,500 | (14) | | 2.40 | | | 12/2/2015 | | | | | | | |
| | | 300,000 | (15) | | 100,000 | (15) | | 1.53 | | | 6/21/2016 | | | | | | | |
| | | — | | | 400,000 | (16) | | 0.37 | | | 10/13/2018 | | | | | | | |
Richard C. Yonker | | |
150,000 |
(17) | |
150,000 |
(17) | |
0.86 | | |
12/11/2016 | | |
100,000 |
(b) | |
37,000 | |
| | | — | | | 200,000 | (16) | | 0.37 | | | 10/13/2018 | | | | | | | |
Dr. Martin C. Nuss | | |
50,000 |
(18) | |
150,000 |
(18) | |
0.99 | | |
11/16/2017 | | |
50,000 |
(b) | |
18,500 | |
| | | — | | | 100,000 | (16) | | 0.37 | | | 10/13/2018 | | | | | | | |
Michael B. Green | | |
— | | |
80,000 |
(16) | |
0.37 | | |
10/13/2018 | | |
50,000 |
(b) | |
18,500 | |
(1)Annual Grant: Vested 20%(A)The market value of the stock awards is based on 10/1/00, 20%the closing price per share of Vitesse’s stock on 10/1/01, 20% on 10/1/02, 20% on 10/1/03, and 20% on 10/1/04
(2)Annual Grant: Vested 20% on 1/1/02, 20% on 1/1/03, 20% on 1/1/04, 20% on 1/1/05, and 20% on 1/1/06
(3)- September 30, 2011, which was $2.95 per share.
(1) Special Grant: Vested 25% on 10/1/01, 25% on 10/1/02, 25% on 10/1/03, and 25% on 10/1/04
(4)(2)Special Grant: Vested 20% on 1/1/02, 20% on 1/1/03, 20% on 1/1/04, 20% on 1/1/05, and 20% on 1/1/06
(5)(3) Special Grant: Vested 100% on 12/31/02
(6)(4)Annual Grant: Vested 22% on 10/1/02, 22% on 10/1/03, 22% on 10/1/04, 17% on 10/1/05, and 17% on 10/1/06
(7)(5)Annual Grant: Vested 1% on 10/1/02, 1% on 10/1/03, 4% on 10/1/04, 47% on 10/1/05, and 47% on 10/1/06
(8)(6)Annual Grant: Vested 20% on 10/17/02, 20% on 4/17/03, 20% on 10/17/03, 20% on 4/17/04, and 20% on 10/17/04
(9)(7)Annual Grant: Vested 25% on 10/20/04, 25% on 10/20/05, 25% on 10/20/06, and 25% on 10/20/07
(10)(8)Annual Grant: Vested 50% on 10/27/07 and 50% on 10/27/08
(11)(9)Annual Grant: Vested 50% on 10/27/05 and 50% on 10/27/06
(12)(10)Annual Grant: Vested 33% on 10/27/06, 33% on 10/27/07, and 34%33% on 10/27/08
(13)(11)Annual Grant: Vested 100% on 10/27/09
(14)- (12)Annual Grant: Vested 25% on 12/2/06, 25% on 12/2/07, 25% on 12/2/08, and 25% on 12/2/09
(15)(13)Retention Grant: Vested 25% on 6/21/07, 25% on 6/21/08, and 25% on 6/21/09 and vests 25% on 6/21/10
(16)Annual Grant: Vested 50% on 10/14/09 and vests 25% on 10/13/10 and 25% on 10/13/11. Mr. Green resigned from the Company effective as February 5, 2010.
(17)Employment Agreement Grant: Vested 25% on 12/11/07, 25% on 12/11/08, and 25% on 12/11/09 and vests 25% on 12/11/10
(18)Employment Agreement Grant: Vested 25% on 11/16/08 and 25% on 11/16/09 and vests 25% on 11/16/10 and 25% on 11/16/11
(a)The market value of the stock awards is based on the closing price per share of Vitesse's stock on September 30, 2009, which was $0.37.
(b)(14)Annual Grant: Vested 50% on 10/14/09 and vests 25% on 10/13/10 and 25% on 10/13/11
Stock Option Exercises(15)Employment Agreement Grant: Vested 25% on 2/12/11, 25% on 2/12/12, and 25% on 2/12/13 and vests 25% on 2/12/14
(16)Annual Grant: Vested 25% on 12/10/11, 25% on 12/10/12, 25% on 12/10/13, and 25% on 12/10/14
(17)Employment Agreement Grant: Vests monthly for 24 months.
(18)Employment Agreement Grant: Vested 25% on 11/16/08, 25% on 11/16/09, and 25% on11/16/10 and vests 25% on 11/16/11
(19)Employment Agreement Grant-20,000: Vested 33% on 2/25/11 and 33% on 2/25/12 and vests 33% on 2/25/13
(20)Employment Agreement Grant: Vested 25% on 8/11/11 and 25% on 8/11/12 and vests 25% on 8/11/13 and 25% on 8/11/14
(21)Annual Grant-10,000: Vested 50% on 10/14/09 and vests 25% on 10/13/10 and 25% on 10/13/11; Employment Agreement Grant-90,000: Vested 33% on 2/12/11 and 33% on 2/12/12 and vests 33% on 2/12/13; and Annual grant - 147,400: Vested 25% on 12/9/11, 25% on 12/9/12, 25% on 12/9/13 and 25% on 12/9/14.
(22)Employment Agreement Grant - 50,000: Vests monthly for 24 months.
(23)Annual Grant-2500: Vested 50% on 10/14/09 and vests 25% on 10/13/10 and 25% on 10/13/11; Employment Agreement Grant-20,000: Vested 33% on 2/25/11 and 33% on 2/25/12 and vests 33% on 2/25/13; and Annual grant - 40,200: Vested 25% on 12/9/11, 25% on 12/9/12, 25% on 12/9/13 and 25% on 12/9/14.
(24)Employment Agreement Grant-25,000: Vested 50% on 8/11/11 and 50% on 8/11/12; and Annual grant - 13,400: Vested 25% on 12/9/11, 25% on 12/9/12, 25% on 12/9/13 and 25% on 12/9/14.
There were no stock options exercised by our named executive officers or
Option Exercises and Stock Vested in Fiscal Year 2011
The following table provides information on RSU vesting for each of restricted stock awards held by ourthe named executive officers during fiscal year 2009.
Pension Benefits and Nonqualified Deferred Compensation for Fiscal Year 2009
We do not have any plans that provide pension benefits to our2011. No named executive officers, nor do we have any nonqualified deferred compensation plans that provide for deferred compensation to our named executive officers.officer exercised stock options during the year.
| | Stock Awards | |
Name | | Number of Shares
Acquired on Vesting | | Value Realized on Vesting | |
| | | | | |
Christopher R. Gardner | | 37,500 | | $ | 205,875 | |
Martin S. McDermut | | 2,083 | | 6,770 | |
Martin C. Nuss | | 8,542 | | 46,896 | |
Steve Perna | | 12,500 | | 44,250 | |
Richard C. Yonker | | 18,750 | | 102,938 | |
| | | | | | |
37
Employment Agreements
Mr. Gardner's compensation was established by his employment agreement, initially dated June 26, 2006. On July 27, 2007, the employment agreement with Mr. Gardner was amended. Under the amended agreement, his base salary was increased to $350,000 per year, effective April 1, 2007. On February 23, 2009, his agreement was amended and restated (as amended, the "Prior Gardner Agreement") with no change in salary to address certain tax issues and provide for a return of bonuses paid under certain circumstances described below. During 2009, the Company implemented several measures to reduce expenses, including reductions in executive salaries. Effective February 1, 2009, Mr. Gardner's base salary was reduced by 20%, which reduction remained in effect through September 30, 2009. On July 8, 2009, his contract was amended to extend the term of the contract to January 27, 2010.
On February 12, 2010, the Companywe entered into a new Employment Agreementtwo year employment agreement with Christopher Gardner, our President and Chief Executive Officer. Pursuant to his employment agreement, Mr. Gardner (the "2010 Employment Agreement"). Pursuant to the terms of the 2010 Employment Agreement, Mr. Gardner will receive areceives an annual base salary of $375,000 and is eligible to receiveparticipate in a cash incentive plan for which provides him with the opportunity to earn a target bonus of 100% of his base salary and a maximum bonus of 150% of his base salary. Thesalary, with the amount of any suchhis bonus is subject todetermined at the discretion of the Company's Compensation Committee. InMr. Gardner is eligible to receive equity awards under the Company’s stock incentive plans and, in connection with entering into the 2010 Employment Agreement, the Company's Compensation Committee grantedhis employment agreement, Mr. Gardner 1,800,000 restricted stock units ("RSUs") andreceived stock options to purchase 1,800,000 shares. The90,000 shares of our common stock and RSUs and stock options were granted pursuant to the termsfor 90,000 shares of the Company's amended and restated 2001 Stock Incentive Plan.our common stock. The stock options have an exercise price of $0.26$5.20 per share and vest 25% per year over four years. The RSUs vest over three years, with one-third of the RSU grantRSUs vesting on each one-year anniversary of the date of grant. Mr. Gardner is entitled to five weeks of vacation per year, and is entitled to all other employee benefits provided to other senior executives.
If Mr. Gardner'sGardner’s employment is terminated by him for Good Reasongood reason or by Vitesse other than For Cause,for cause, Mr. Gardner would beis entitled to receive a lump sum payment equal to (a) two years of his
base salary, plus (b) two times his maximum target bonus, plus (c) a pro ratapro-rata portion (based upon the portion of the fiscal year prior to his termination date) of either (i) his target bonus or (ii) inbonus. In the case of a termination for such reasons within 24 months following a Changechange of Control Event, a pro rata portioncontrol of Vitesse, Mr. Gardner receives the compensation noted above for items (a) and (b), plus the greater of his target bonus in the fiscal year in which termination occurs or the amount of his bonus in the prior fiscal year, whichever is greater. year.
If Mr. Gardner'sGardner’s employment is terminated by Vitesse other than For Causefor cause during the one-year period prior to a Changechange of Control Eventcontrol of Vitesse and Mr. Gardner can demonstrate that his termination arose in connection with or in anticipation of such Changechange of Control Event (including as a result of the request of a third party which had taken steps reasonably calculated to effect such Change of Control Event),control, then all RSUs which are subject solely to time-based vesting and were outstanding immediately prior to Mr. Gardner'sGardner’s final day of employment will become fully vested and, to the extent such Changechange of Control Eventcontrol occurs during the six-month period following the termination date of Mr. Gardner'sGardner’s employment, all of his outstanding options which are subject solely to time-based vesting shall become fully vested asat the time of the Changechange of Control Event.control. If Mr. Gardner'sGardner’s employment is terminated by him for Good Reasongood reason or by the Company other than For Causefor cause during the 24-month period following a Changechange of Control Event,control, then all outstanding stock options and RSUs which are subject solely to time-based vesting shall become fully vested.
"Change of Control Event" means (i) a consolidation or merger of the Company with or into any other entity or entities or the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of or (ii) a sale, conveyance or disposition of all or substantially all the assets of the Company.
"For Cause" is defined as termination by reason of: (i) the executive's conviction of a felony or plea of guilty or nolo contendere to a felony; (ii) the executive's intentional failure or refusal to performvested and his employment duties and responsibilities; (iii) the executive's intentional misconduct that injures the Company's business; (iv) the executive's intentional violation of any other material provision of his employment agreement or the Company's Code of Business Conduct and Ethics; or (v) as otherwise provided for in Section 8 of the employment agreement. Section 8 of Mr. Gardner's employment agreement is titled"Compliance with Vitesse Policies and Procedures" and states:
"As a member of Vitesse management, Executive will be expected to comply with all provisions of the Vitesse Policies, Procedures Manual and Employee Handbook, as amended from time-to-time. Executive acknowledges, by signature on this Agreement, that failure to comply with and ensure enforcement of Vitesse's policies, procedures and all federal/state laws relating to business operations may result in immediate termination of employment For Cause."
"Good Reason" is defined as the occurrence, without the executive's written consent, of any of the following actions unless the action is fully corrected (if possible) within 15 days after the Company receives written notice of the action from the executive: (i) a material reduction in the executive's base salary; (ii) the Company's failure to pay the executive any material amount that is expressly required to be paid under his employment agreement; (iii) the Company's material and adverse reduction of the nature of the executive's duties and responsibilities, disregarding mere changes in title; or (iv) the Company's requirement that the executive perform his principal employment duties at an office that is more than 35 miles from Camarillo, California.
The 2010 Employment Agreement contains a provision that would require Mr. Gardner to return any bonus payments earned if the Company were required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement included in a report on Form 10-Q or Form 10-K, due to material noncompliance with any financial reporting requirement under the federal securities laws, and the Company's Board of Directors determines that misconduct by Mr. Gardner occurred and caused such restatement.
The 2010 Employment Agreement terminates on February 12, 2012.
Mr. Yonker's compensation was established by his employment agreement, dated November 16, 2006, and was amended on June 26, 2007. An employment agreement dated February 20, 2009 superseded the prior Agreement and Amendment. Under his current agreement, Mr. Yonker receives a base salary of $275,000 per year. During 2009, the Company implemented several measures to reduce expenses, including reductions in executive salaries. Effective February 1, 2009, Mr. Yonker's base salary was reduced by 10%, which reduction remained in effect through September 30, 2009. Mr. Yonker's employment agreement terminates on February 20, 2011, but automatically renews for an additional 24 months if no prior written notice of termination is provided.
If Mr. Yonker's employment is terminated for Good Reason or other than For Cause (defined in a manner substantially the same as in Mr. Gardner's employment agreement), death, or Disability (defined in a manner substantially the same as in Mr. Gardner's employment agreement), he will receive severance pay equal to 12 months of his then base salary and be eligible for his earned bonus, prorated through his date of termination. In addition, if such termination of employment occurs within the 12 months following a change in control (defined in a manner substantially the same as in Mr. Gardner's employment agreement), Mr. Yonker would be entitled to an additional bonus equal to the amount of his maximum potential annual bonus for the fiscal year. If such termination of employment does not occur within 12 months following a change in control, Mr. Yonker would be eligible for an additional bonus equal to a full year bonus based on his performance. In the event of a Change in Control (defined in a manner substantially the same as in Mr. Gardner's employment agreement) of the Company (or its successor) and any involuntary termination other than For Cause or Mr. Yonker's resignation for Good Reason within one year of such a Change in Control, then any equity awards granted prior to the Change in Control would be accelerated and immediately become vested as though the equity awards were vesting over four years in 48 equal monthly amounts, and as though Mr. Yonker had completed an additional two years of service with the Company, and thosestock options would beshall remain exercisable for an additional 90 days following the date of his termination of employment.
"Good Reason" is defined as the occurrence, without the executive's written consent, of any of the following actions unless the action is fully corrected (if possible) within 15 days after the Company receives written notice of the action from the executive: (i) a material reduction in the executive's base salary; (ii) the Company's failure to pay the executive any material amount that is expressly required to be paid under his
Mr. Gardner’s employment agreement; (iii) the Company's material and adverse reduction of the nature of the executive's duties and responsibilities, disregarding mere changes in title; (iv) the Company's requirement that the executive perform his principal employment duties at an office that is more than 35 miles from Camarillo, California or (v) the Company's failure to renew the agreement.
Mr. Yonker is bound by a non-solicitation clause for the duration of his employment pursuant to his agreement and for two years thereafter. This clause precludes him from directly or indirectly soliciting any person who is currently employed or has been employed by the Company within the prior six months. During the term of his agreement, Mr. Yonker is also precluded from influencing customers, vendors, and other partners of the Company in a way that would divert business away from the Company or otherwise materially interfere with any business relationship of the Company.
Mr. Yonker's agreement contains a provision that would require him to return to Vitesse any bonus payments earnedhe received if the Company were required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement included in a report on Form 10-Q or Form 10-K, due to material noncompliance with any financial reporting requirement under the federal securities laws, and the Board determines that misconduct by Mr. YonkerGardner occurred and caused such restatement.
38
Martin S. McDermut
Effective July 27, 2011, we entered into a two year employment agreement with Martin McDermut, our Chief Financial Officer. Pursuant to his employment agreement, Mr. Yonker is also eligible to participate in the Executive Bonus Plan.
On November 16, 2007, the Board of Directors appointed Dr. Martin Nuss as Vice President Technology and Strategy. Dr. Nuss received an employment letter from the Company pursuant to which the Company agreed that he is entitled to receive $220,000 asMcDermut receives an annual base salary. During 2009, the Company implemented several measures to reduce expenses, including reductions in executive salaries. Effective February 1, 2009, Dr. Nuss' base salary was reduced by 10%, which reduction remained in effect through September 30, 2009.
Dr. Nussof $285,000 and is eligible to participate in the Executive Bonus PlanCompany’s cash incentive plan for senior executives which provides him with the opportunity to earn a target bonus of 40% of his base salary and hea maximum bonus of 60% of his base salary, with the amount of his bonus determined at the discretion of the Compensation Committee. Any bonus amount earned for fiscal year 2011 will be prorated based on the portion of the year Mr. McDermut was employed with us. Mr. McDermut is alsoeligible to receive equity awards under the Company’s stock incentive plans and, in connection with entering into his employment agreement, Mr. McDermut received stock options to purchase 50,000 shares of our common stock and RSUs for 50,000 shares of our Common Stock. The stock options have an exercise price of $3.33 per share and the stock options and RSUs vest in equal monthly installments over two years. Mr. McDermut is entitled to three weeks of vacation per year, and is entitled to all other employee benefits provided to other senior executives. In the event that his
If Mr. McDermut’s employment is terminated at any time by the Companyhim for good reason or by Vitesse other than for cause, or he terminates his employment within nine months after a Change in Control resulting in a material change in his position, responsibilities, or compensation, Dr. Nuss will beMr. McDermut is entitled to a lump sum payment equal to 12 months of his then base salary. For this purpose, "for cause" is definedsalary and remains eligible for his earned bonus, prorated using the maximum potential annual bonus amount through his date of termination. In addition, if such termination of employment occurs within the 12 months following a change in a manner substantiallycontrol, Mr. McDermut would be entitled to (a) an additional payment equal to the same as in Mr. Gardner's employment agreement withamount of his maximum potential annual bonus for the addition of failure to effectively perform his job duties and responsibilities and "Change in Control" means the occurrence of any of the following:
•The acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act), of beneficial ownership of more than 51 percent of the aggregate outstanding voting power of the capital stock of the Company;
•The Company's consolidation with or merger into another entity where the Company is not the surviving entity or the Company conveys, transfers, or leases all, or substantially all, of its property and assets to another person;
•Any entity consolidates with or merges into the Company in a transaction pursuant to which the Company's outstanding voting capital stock is reclassified or changed into or exchanged for cash, securities or other property, other than any such transaction described in this clausefiscal year in which no person or group (within the meaning of Section 13(d)(3) of the Exchange Act) has, directly or indirectly, acquired beneficial ownership of more than 51 percent of the Company's outstanding voting capital stock; or
•Approval by the Company's shareholders of the complete liquidation or dissolution of the Company.
Potential Payments upon Termination or Change-in-Control
Under the terms of the Prior Gardner Agreement, if Mr. Gardner's employment were to have been terminated on September 30, 2009, for Good Reason or for reasons other than For Cause, death or disability, he would have received a lump sum severance payment of $1,575,000 and he would be engaged as a consultant at $3,000 per month until the earlier of: (i) three years after thehis termination occurred, (b) immediate vesting of his employment; and (ii) one year after the date we have an effective registration statement under the Securities Actequity compensation awards with respect to the number of shares to be issued upon exercisethat would have vested if Mr. McDermut had completed an additional two years of options granted to him. In addition, Mr. Gardner'scontinuous service and his stock options outstanding onshall remain exercisable for an additional 90 days following the date of his termination of employment, and (c) payment of the cost of continuation of group medical and dental benefits for a period of 24 months.
Mr. McDermut’s employment agreement contains a provision that would continuerequire him to vest normally during his service asreturn to Vitesse any bonus payments he received if the Company were required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement included in a consultantreport on Form 10-Q or Form 10-K, due to material noncompliance with any financial reporting requirement under the federal securities laws, and those optionsthe Board determines that misconduct by Mr. McDermut occurred and caused such restatement. Mr. McDermut would be exercisablerequired to disgorge (i) any bonus or other incentive-based or equity-based compensation he received from the Company during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the financial document embodying such error, and (ii) any net profits realized by Mr. McDermut from the sale of the Company’s stock during that 12-month period.
39
Martin C. Nuss
Dr. Martin Nuss serves as our Vice President Technology and Strategy pursuant to an employment letter agreement with us, dated October 26, 2007, as amended in December 2011. The term of the agreement will continue until terminated by either party. Pursuant to his employment letter agreement, Dr. Nuss receives an annual base salary, which presently is $235,000, and is eligible to participate in the earlierCompany’s cash incentive plan for senior executives which presently provides him with the opportunity to earn a target bonus of 90 days following30% of his termination asbase salary and a consultant andmaximum bonus of 50% of his base salary, with the normal expiration datesamount of those options. Ashis bonus determined at the discretion of September 30, 2009,the Compensation Committee. Dr. Nuss is entitled to all of Mr. Gardner's outstanding stock option awards were out-of-the-money.other employee benefits provided to other senior executives.
If Mr. Yonker'sDr. Nuss’ employment were to have beenis terminated on September 30, 2009,by him for Good Reasongood reason or for reasonsby Vitesse other than For Cause, death or Disability, he would have receivedfor cause, Dr. Nuss is entitled to a lump sum payment equal to 12 months of his annualthen base salary, unless termination occurs within 12 months following a change in control. If such termination of $275,000 plus $233,750 (twice his earned bonus of $116,875). If a Change in Control had occurredemployment occurs within the 12 months priorfollowing a change in control, Dr. Nuss would be entitled to September 30, 2009, Mr. Yonker(a) 9 months of his then base salary, (b) an additional payment equal to one week of base salary for every 12 months Dr. Nuss has been employed by Vitesse, (c) his earned bonus for the fiscal year in which the termination occurred pro-rated based on termination date and subject to other terms and conditions of the bonus plan then in effect, (d) an additional payment equal to 50% of the amount of his maximum potential annual bonus for the fiscal year in which his termination occurred, (e) immediate vesting of his equity compensation awards with respect to the number of shares that would have receivedvested if Dr. Nuss had completed an additional two years of continuous service and his stock options shall remain exercisable for an additional 90 days following the date of his termination of employment, and (f) payment of the cost of COBRA medical and dental benefits for a period of 12 months.
Steve Perna
On August 2, 2010, we entered into an employment agreement with Steve Perna, our Vice President, Product Marketing. The term of the agreement will continue until terminated by either party. Pursuant to his employment agreement, Mr. Perna receives an annual base salary, which presently is $235,000, and is eligible to participate in the Company’s cash incentive plan for senior executives which presently provides him with the opportunity to earn a target bonus of $275,000 plus $281,875 (his30% of his base salary and a maximum bonus of 50% of his base salary, with the amount of his bonus determined at the discretion of the Compensation Committee. Mr. Perna is eligible to receive equity awards under the Company’s stock incentive plans and, in connection with entering into his employment agreement, Mr. Perna received stock options to purchase 25,000 shares of our common stock and RSUs for 25,000 shares of our common stock. The stock options have an exercise price of $3.83 per share and vest 25% per year over four years. The RSUs vest 50% per year over two years. Mr. Perna is entitled to three weeks of vacation per year, and is entitled to all other employee benefits provided to other senior executives.
Mr. Perna also received relocation allowance of $150,000, which required the relocation of Mr. Perna to within 45 miles of the Company’s Camarillo, California office. If Mr. Perna voluntarily terminates employment with Vitesse or is terminated by Vitesse for cause before completing four full years of service, Mr. Perna has agreed to repay the relocation allowance.
If Mr. Perna’s employment is terminated by him for good reason or by Vitesse other than for cause, Mr. Perna is entitled to (i) a lump sum payment equal to six months of his then base salary; (ii) his earned bonus, calculated at the maximum target and prorated through his date of $116,875 andtermination; plus (iii) an additional $165,000 uponbonus equal to his actual earned, pro-rated bonus. If such termination representingof employment occurs within the 12 months following a change in control, Mr. Perna would be entitled to (a) a lump sum payment equal to six months of his maximumthen base salary, plus an additional payment equal to one week of base salary for every 12 months Mr. Perna has been employed by Vitesse; (b) his earned bonus for the year). In addition,fiscal
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year in which termination occurred; (c) a payment equal to the amount of his maximum potential annual bonus for the fiscal year in which his termination occurred; (d) immediate vesting of his equity compensation awards with respect to the number of shares underlyingthat would have vested if Mr. Perna had completed an additional two years of continuous service as though all of Mr. Yonker's outstanding stock options and restricted stock unit awards would be accelerated and immediately become vested as thoughother equity awardsarrangements were vesting over four years in 48 equal monthly amounts, and he had completed an additional 24 months of service with the Company. Thosehis stock options would beshall remain exercisable for an additional 90 days after termination. following the date of his termination of employment; and (e) payment of the cost of COBRA medical and dental benefits for a period of 12 months.
Mr. Perna’s employment agreement contains a provision that would require him to return to Vitesse certain bonus payments and profits he received if the Company were required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement included in a report on Form 10-Q or Form 10-K, due to material noncompliance with any financial reporting requirement under the federal securities laws, and the Board determines that misconduct by Mr. Perna occurred and caused such restatement. Mr. Perna would be required to disgorge (i) any bonus or other incentive-based or equity-based compensation he received from the Company during the 12-month period following the first public issuance or filing with the SEC (whichever first occurs) of the financial document embodying such error, and (ii) any net profits realized by Mr. Perna from the sale of the Company’s stock during that 12-month period.
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Richard Yonker
On July 29, 2011, we entered into a resignation and separation agreement and general release of claims with Richard Yonker in connection with his resignation as our Chief Financial Officer. Pursuant to the agreement, we paid Mr. Yonker severance in the amount of $285,000, representing 12 months of his annual base salary, and Mr. Yonker provided us with a general release of claims and agreed to cooperate with and assist the Company with respect to any pending or future litigation, disputed claims or other matters.
Potential Payments upon Termination or Change-in-Control
As described above, our employment agreements with each of our named executive officers who were employed by Vitesse at September 30, 2011 provide for severance benefits in the event that the executive’s employment is terminated without cause or for good reason. These severance benefits generally increase if any such termination occurs in connection with a change in control of Vitesse. We do not have any agreements or other arrangements that provide for payments solely upon a change in control of Vitesse without the termination of employment.
Without Change in Control
The following table sets forth severance payments and benefits that we would have been obligated to pay to the named executive officers who were employed by us at September 30, 2011, assuming a triggering event had occurred under each of their respective agreements as of September 30, 2009,2011 that did not also involve a change in control of Vitesse:
| | Termination Without Change in Control | |
| | Base Salary
Payment | | Bonus
Payment | | Total
Payout | |
| | | | | | | |
Christopher R. Gardner (1) | | $ | 750,000 | | $ | 1,500,000 | | $ | 2,250,000 | |
Martin S. McDermut (2) | | 285,000 | | 30,780 | | 315,780 | |
Martin C. Nuss (3) | | 235,000 | | — | | 235,000 | |
Steve Perna (4) | | 117,500 | | 235,000 | | 352,500 | |
| | | | | | | | | | |
(1) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to two years of his base salary. Bonus payment represents the sum of (i) two times his maximum bonus opportunity for fiscal year 2011 and (ii) one times his target bonus opportunity for fiscal year 2011.
(2) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to one year of his base salary. Bonus payment represents the prorated sum of (i) one times his maximum bonus opportunity for fiscal year 2011 and (ii) one times his target bonus opportunity for fiscal year 2011.
(3) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to one year of this base salary.
(4) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to six months of his base salary. Bonus payment represents the sum of (i) one times his maximum bonus opportunity for fiscal year 2011 and (ii) one times his prorated target bonus opportunity for fiscal year 2011.
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With Change in Control
The following table sets forth severance payments and benefits that we would have been obligated to pay to the named executive officers who were employed by us at September 30, 2011, assuming a triggering event had occurred under each of their respective agreements as of September 30, 2011 in connection with a change in control of Vitesse:
| | Termination With Change in Control | |
| | Base Salary
Payment | | Bonus
Payment | | Continuation
of Benefits(5) | | Acceleration of
Vesting of Equity
Awards(6) | | Total
Payout | |
| | | | | | | | | | | |
Christopher R. Gardner (1) | | $ | 750,000 | | $ | 1,500,000 | | $ | — | | $ | 619,205 | | $ | 2,869,205 | |
Martin S. McDermut (2) | | 285,000 | | 30,780 | | 36,158 | | 141,355 | | 493,293 | |
Martin C. Nuss (3) | | 235,000 | | — | | — | | — | | 235,000 | |
Steve Perna (4) | | 122,019 | | 235,000 | | 19,314 | | 76,405 | | 452,738 | |
| | | | | | | | | | | | | | | | |
(1) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to two years of his base salary. Bonus payment represents the sum of (i) two times his maximum bonus opportunity for fiscal year 2011 and (ii) one times his target bonus opportunity for fiscal year 2011.
(2) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to one year of his base salary. Bonus payment represents the prorated sum of (i) one times his maximum bonus opportunity for fiscal year 2011 and (ii) one times his target bonus opportunity for fiscal year 2011.
(3) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to one year of this base salary.
(4) Base salary payment represents cash severance payments based on the executive’s salary at September 30, 2011, in an amount equal to 27 weeks of his base salary. Bonus payment represents the sum of (i) one times his maximum earned bonus opportunity for fiscal year 2011 and (ii) one times his target bonus opportunity for fiscal year 2011.
(5) Represents the aggregate amount of all premiums payable for the continuing of Mr. Yonker's outstandingthe executive’s health benefits for the applicable severance period, based on the amounts of such premiums at September 30, 2011.
(6) Represents the value of accelerated “in the money” stock option awards were out-of-the-money. The vesting of 72,917 of Mr. Yonker'soptions and restricted stock units would be accelerated. Based onawards using the closing price per share of the Company's stockour Common Stock on September 30, 20092011 of $0.37,$2.95 per share.
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Equity Compensation Plan Information
The following table provides information as of September 30, 2011 concerning securities authorized for issuance under our equity compensation plans:
| | A | | B | | C | |
Plan Category | | Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants or Rights | | Weighted Average
Exercise Price of
Outstanding
Options (3) | | Number of Shares
Remaining
Available for Future
Issuance Under
Equity
Compensation Plans
(Excluding Shares
Reflected in
Column A) | |
Equity compensation plans approved by security holders (1) | | 2,889,160 | (2) | $ | 16.28 | | 1,656,084 | (4) |
Equity compensation plans not approved by security holders (5) | | 106,002 | | $ | 81.76 | | — | |
Total | | 2,995,162 | | $ | 18.60 | | 1,656,084 | |
(1) Consists of the value2010 Incentive Plan and the 2001 Stock Incentive No additional awards are being made under the 2001 Stock Incentive Plan.
(2) Includes 1,295,979 RSUs, which do not have an exercise price.
(3) Consists of suchthe weighted average exercise price for stock options only
(4) Consists of shares of our common stock reserved for issuance under the 2010 Incentive Plan. Shares available for issuance under the 2010 Incentive Plan can be granted pursuant to stock options, stock appreciation rights, restricted stock or units, subject to accelerated vesting was $26,979.performance units, performance shares and any other stock based award selected by the compensation committee.
If Dr. Nuss' employment were
(5) Consists of the Vitesse International Inc. 1999 International Stock Option Plan, which was adopted in 1999 to provide for the grant to international employees of incentive stock options and the assumption of options under plans of foreign subsidiaries. The Vitesse International Inc. 1999 International Stock Option Plan expired on October 31, 2009. No additional options may be granted under the 1999 International Stock Option Plan.
Risk Assessment Regarding Compensation Policies and Practices
Our compensation program for employees does not create incentives for excessive risk taking by our employees or involve risks that are reasonably likely to have been terminateda material adverse effect on September 30, 2009Vitesse. Our base salary component of compensation does not encourage risk-taking because it is a fixed amount. Our executive bonus plan for senior executives and our equity compensation awards have the following risk-limiting characteristics:
·Cash awards to each executive officer are set in a market range and are limited by the Company other thanterms of the executive bonus plan for cause or by Dr. Nuss within nine monthssenior executives to a fixed maximum specified in the plan;
·Cash awards are made based on a review of a variety of indicators of performance, thus diversifying the risk associated with any single indicator of performance;
·Neither cash nor equity awards are not tied to formulas that could focus executives on specific short-term outcomes;
·Members of the Compensation Committee approve the final cash incentive awards made under the executive bonus plan for senior executives in their discretion, after a Changethe review of executive and corporate performance;
·Members of the Compensation Committee approve all equity awards for senior executives in Control resultingtheir discretion;
·An equity award’s value is delivered in a material change in his position, responsibilities, or compensation, he would have received a lump sum paymentthe form of $220,000.
Upon termination, all namedstock and options that vest over multiple years, which aligns the interests of executive officers would also receive any vacation accruedto long-term shareholder interests; and unpaid as of the date of termination.
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·CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Equity and cash awards, as well as profits realized upon the sale of our securities, may be recovered by us should a restatement of earnings occur upon which incentive compensation awards were based, or in the event of certain other wrong-doing by the recipient.
Certain Relationships and Related Person Transactions
Review and Approval or Ratification of Related Person Transactions
In accordance with the charter for the Audit Committee of the Board, the members of the Audit Committee, all of whom are independent directors, review and approve in advance any proposed related person transactions. Additionally, from time to timetime-to-time the Board may directly consider these transactions. We will report all such material related person transactions under applicable accounting rules and SEC rules and regulations. For purposes of these procedures, the individuals and entities that are considered "related persons"“related persons” include:
•·Any of our directors,Directors, nominees for directorDirector and executive officers;
·
•- Any person known to be the beneficial owner of five percent or more of our
common stockCommon Stock (a "5% Stockholder"“5% Stockholder”); and
·
•- Any immediate family member, as defined in Item 404(a) of Regulation S-K, of a director, nominee for
director,Director, executive officer and 5% Stockholder. We will report all such material related person transactions under applicable accounting rules, federal securities laws and SEC rules and regulations.
Related Person Transactions
Certain Transactions with Related Persons
We are currently a party to a consulting agreement with Lynn Jones, who shares a household with Mr. Gardner, our Chief Executive Officer and a director. Ms. Jones was previously employed with the Company as a paralegal from September 2000 until July 2006. She was asked to assist the Company in fiscal year 2009 because of her experience and her knowledge of the Company, as well as the increasing demands placed on the Company's legal resources as a result of the imminent debt restructuring that was completed on October 30, 2009. From October 1, 2008 through December 31, 2009, we paid Ms. Jones an aggregate of $137,086 in cash compensation, at a rate of $80.00 per hour, pursuant to the consulting agreement for her services as a legal consultant. Ms. Jones' consulting relationship was approved by the Board of Directors which received full disclosure of Mr. Gardner's relationship to Ms. Jones.
The charter of our Board's Audit Committee provides that the Audit Committee is responsible for reviewing, in consultation with our General Counsel,counsel, reports and disclosures of insider and affiliated party transactions and compliance with our policy and procedures with respect to related party transactions. Our policies and procedures regarding related party transactions are evidenced in writing
by our Code of Business Conduct and Ethics, which we refer to as our Employees' Code, and our Code of Business Conduct and Ethics for Members of the Board of Directors, which we refer to as our Directors' Code.Ethics. The Employees' Code requires all Directors, officers and employees to discharge their responsibilities solely on the basis of the Company'sCompany’s best interests, independent of personal interests, considerations or relationships. This codeThe Code also requires anyone who personally becomes involved in a situation that gives rise to an actual or potential conflict of interest to immediately notify our General Counsel.Human Resources department. The Directors' Code requires members of our Board to take all reasonable steps to avoid conflicts of interest with the Company. Additionally, the Directors' Code requires members of our Board to promptly disclose to the Chairperson of our Nominating and Corporate Governance Committee any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company. The charter of our Board'sBoard’s Nominating and Corporate Governance Committee provides that this committee will review potential conflicts of interest involving members of our Board and will determine whether such directorDirector or directorsDirectors may vote on any issue as to which there may be a conflict.
Directors' IndependenceReportable Related Person Transactions
Except for Christopher R. Gardner, our President, Chief Executive Officer,
Since October 1, 2010, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party, in which the amount involved exceeds $120,000 and in which any related person had or will have a director, all of our directors meet the independence requirements set forth in the NASDAQ Listing Rules and our Corporate Governance Guidelines. The members of our Audit Committee also meet the additional independence requirements set forth in the NASDAQ Listing Rules and the SEC rules for Audit Committee members.direct or indirect material interest.
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee is responsible for overseeing our accountingReport does not constitute soliciting materials and financial reporting processes and auditsshall not be deemed filed or incorporated by reference into any other filings by us under the Securities Act of our financial statements. As set forth in its charter,1933 or the Exchange Act, except to the extent we specifically incorporate this Audit Committee acts only in an oversight capacity and relies on the work and assurances of both management, whichReport by reference therein.
The Audit Committee hereby reports as follows:
1.Management has primary responsibilitiesresponsibility for ourthe accuracy and fairness of the Company’s consolidated financial statements and reports, as well as the processes employed to prepare the financial statements, and the system of internal control over financial reporting.
2.The Audit Committee represents the Board of Directors in discharging its responsibilities relating to the Company’s accounting, financial reporting, financial practices, and system of internal controls. As part of its oversight role, the Audit Committee has reviewed and discussed with Company’s management the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2011.
3.The Audit Committee has discussed with the Company’s independent registered public accounting firm, that is responsibleBDO USA, LLP, the overall scope of and plans for expressing an opinion on the conformity of our audited financial statements to generally accepted accounting principles.
their audit. The Audit Committee met sixteen (16) times either in person or by telephone during fiscal year 2009. In the course of these meetings, the Audit Committeehas met with management and our independent auditors and reviewed the results of the audit examinations, evaluations of our internal controls and the overall quality of our financial reporting.
The Audit Committee believes that a candid, substantive and focused dialogue with the independent registered public accounting firm is fundamental to the Audit Committee's oversight responsibilities. To support this belief, the Audit Committee periodically meets separately with the independent auditors, without management present. Inpresent, to discuss the course of its discussions in these meetings, the Audit Committee asked a number of questions intended to bring to light any areas of potential concern related to ourCompany’s financial reporting processes and system of internal controls. These questions include:
•Are there any significant accounting judgments, estimates or adjustments made by managementcontrol over financial reporting in preparing the financial statements that would have been made differently had the auditors themselves prepared and been responsible for the financial statements?
•Based on the auditors' experience, and their knowledge of our business, do our financial statements fairly presentaddition to investors, with clarity and completeness, our financial position and performance for the reporting period in accordance with generally accepted accounting principles and SEC disclosure requirements?
•Based on the auditors' experience, and their knowledge of our business, have we implemented internal controls and internal audit procedures that are appropriate for our business?
The Audit Committee approved the engagement of BDO Seidman, LLP as our independent registered public accounting firm for fiscal year 2009 and reviewed with the independent registered public accounting firm their respective overall audit scope and plans. In approving BDO Seidman, LLP, the Audit Committee considered the qualifications of BDO Seidman, LLP and discussed with BDO Seidman, LLP their independence, including a review of the audit and non-audit services provided by them to us. The Audit Committee also discussed with BDO Seidman, LLP thethose matters required to be discussed by Statement on Auditing Standards No. 61 as amended (AICPA,Professional Standards, Vol. 1I AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T, and it3200T.
4.The Audit Committee has received the written disclosures and the letter from BDO Seidman,USA, LLP required by the applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding BDO Seidman, LLP'sthe independent accountant’s communications with the Audit Committee concerning independence, and has discussed BDO Seidman, LLP's independence with BDO Seidman, LLP.USA, LLP their independence.
Management has reviewed the audited financial statements for fiscal year 2009 with the Audit Committee, including a discussion of the quality and acceptability of the financial reporting, the reasonableness of significant accounting judgments and estimates and the clarity of disclosures in the financial statements. In connection with this review and discussion, the Audit Committee asked a number of follow-up questions of management and the independent registered public accounting firm to help give the Audit Committee comfort in connection with its review.
In reliance5.Based on the reviewsreview and discussions referred to in paragraphs (1) through (4) above, the Audit Committee recommended to the Board (andof Directors and the Board of Directors has approved) thatapproved the inclusion of the audited financial statements be included in the annual reportCompany’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009,2011, for filing with the SEC.
| | Respectfully submitted by |
| |
|
|---|
| | Respectively submitted by
THE AUDIT COMMITTEE |
|
|
|
James H. Hugar, Chair
SteveChairman |
| Steven P. Hanson |
| Edward Rogas, Jr. |
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OTHER MATTERS
We know of no other matters to be submitted to the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed form Proxyproxy to vote the shares they represent as the Board may recommend.
| | |
| |
|
|---|
| | BY ORDER OF THE BOARD OF DIRECTORSBy Order of the Board of Directors, |
Dated: March 31, 2010 |
|
|
 
|
Camarillo, California | Christopher R. Gardner
|
December 6, 2011 | President and Chief Executive Officer |
47
APPENDIX A
VITESSE SEMICONDUCTOR CORPORATION
2010 INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Vitesse Semiconductor Corporation 2010 Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company's stockholders.
SECTION 2. DEFINITIONS
Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.
SECTION 3. ADMINISTRATION
3.1 Administration of the Plan
(a) The Plan shall be administered by the Board or the Compensation Committee, which shall be composed of two or more directors, each of whom is a "non-employee director" within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission , and an "outside director" within the meaning of Section 162(m) of the Code, or any successor provision thereto.
(b) Notwithstanding the foregoing, the Board may delegate concurrent responsibility for administering the Plan, including with respect to designated classes of Eligible Persons, to different committees consisting of one or more members of the Board, subject to such limitations as the Board deems appropriate, except with respect to Awards to Participants who are subject to Section 16 of the Exchange Act or Awards granted pursuant to Section 16 of the Plan. Members of any committee shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Board or the Compensation Committee may authorize one or more officers of the Company to grant Awards to designated classes of Eligible Persons, within limits specifically prescribed by the Board or the Compensation Committee; provided, however, that no such officer shall have or obtain authority to grant Awards to himself or herself or to any person subject to Section 16 of the Exchange Act.
(c) All references in the Plan to the "Committee" shall be, as applicable, to the Board, the Compensation Committee or any other committee or any officer to whom authority has been delegated to administer the Plan.
3.2 Administration and Interpretation by Committee
(a) Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the Board, to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) interpret
and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (viii) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (ix) delegate ministerial duties to such of the Company's employees as it so determines; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
(b) In no event, however, shall the Committee have the right, without stockholder approval, to (i) lower the price of an option after it is granted, except in connection with adjustments provided in Section 15.1; (ii) take any other action that is treated as a repricing under generally accepted accounting principles; or (iii) cancel an option at a time when its strike price exceeds the fair market value of the underlying stock, in exchange for another option, restricted stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction.
(c) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant's reduction in hours of employment or service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Compensation Committee, whose determination shall be final.
(d) Decisions of the Committee shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Committee may determine its actions.
SECTION 4. SHARES SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
(a) 50,000,000 shares; plus
(b) up to 40,457,825 shares subject to outstanding awards under the Company's 2001 Stock Incentive Plan (the "Prior Plan") on the Effective Date that cease to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in shares) subject to adjustment from time to time as provided in Section 15.1, which shares shall cease, as of such date, to be available for grant and issuance under the Prior Plan and shall instead be available for issuance under the Plan.
(c) Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.
4.2 Share Usage
(a) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award, or (ii) covered by an Award that is settled in cash, or in a manner such that some or all of the shares of Common Stock covered by the Award are not issued, shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.
(b) The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.
(c) Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Substitute Awards under the Plan. Substitute Awards shall not reduce the number of shares authorized for issuance under the Plan. In the event that an Acquired Entity has shares available for awards or grants under one or more preexisting plans not adopted in contemplation of such acquisition or combination, then, to the extent determined by the Board or the Compensation Committee, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to holders of common stock of the entities that are parties to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of such preexisting plans, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Company prior to such acquisition or combination. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Committee without any further action by the Committee, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants.
(d) Notwithstanding the other provisions in this Section 4.2 to the contrary, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 15.1.
SECTION 5. ELIGIBILITY
An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company's securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 Form, Grant and Settlement of Awards
The Committee shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Committee shall determine.
6.2 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Committee shall deem advisable and that are not inconsistent with the Plan.
6.3 Dividends and Distributions
Participants may, if the Committee so determines, be credited with dividends paid with respect to shares of Common Stock underlying an Award in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. Notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on the number of shares underlying an Option or a Stock Appreciation Right may not be contingent, directly or indirectly on the exercise of the Option or Stock Appreciation Right, and must comply with or qualify for an exemption under Section 409A. Also notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on Restricted Stock must (i) be paid at the same time they are paid to other shareholders and (ii) comply with or qualify for an exemption under Section 409A.
SECTION 7. OPTIONS
7.1 Grant of Options
The Committee may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.
7.2 Option Exercise Price
Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date (and shall not be less than the minimum exercise price required by Section 422 of the Code with respect to Incentive Stock Options), except in the case of Substitute Awards.
7.3 Term of Options
Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.
7.4 Exercise of Options
(a) The Committee shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Committee at any time.
(b) To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Committee, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Committee, accompanied by payment in full as described in Sections 7.5. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Committee.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares
purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Committee for that purchase, which forms may include:
(a) cash;
(b) check or wire transfer;
(c) having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(d) tendering (either actually or, so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(e) so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or
(f) such other consideration as the Committee may permit.
7.6 Effect of Termination of Service
(a) The Committee shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Committee at any time.
(b) If the exercise of the Option following a Participant's Termination of Service, but while the Option is otherwise exercisable, would be prohibited solely because the issuance of Common Stock would violate the registration requirements under the Securities Act or similar requirements under the laws of any state or foreign jurisdiction, then the Option shall remain exercisable until the earlier of (a)the Option Expiration Date and (b) the expiration of a period of three months (or such longer period of time as determined by the Committee in its sole discretion) after the Participant's Termination of Service during which the exercise of the Option would not be in violation of such Securities Act or other requirements.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
Notwithstanding any other provision of the Plan to the contrary, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code, or any successor provision, and any applicable regulations thereunder.
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights
The Committee may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Committee shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone ("freestanding"). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in
accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Committee determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.
9.2 Payment of SAR Amount
Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Committee as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Committee in its sole discretion.
9.3 Waiver of Restrictions
The Committee, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.
SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS
10.1 Grant of Stock Awards, Restricted Stock and Stock Units
The Committee may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Committee shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.
10.2 Vesting of Restricted Stock and Stock Units
Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant's release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Committee (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.
10.3 Waiver of Restrictions
The Committee, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.
SECTION 11. PERFORMANCE AWARDS
11.1 Performance Shares
The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares shall consist of a unit valued by reference to a designated number of shares of Common Stock, the value of which may be paid to the Participant by delivery of shares of Common Stock or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.
11.2 Performance Units
The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit valued by reference to a designated amount of property other than shares of Common Stock, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Units may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.
SECTION 12. OTHER STOCK OR CASH-BASED AWARDS
Subject to the terms of the Plan and such other terms and conditions as the Committee deems appropriate, the Committee may grant other incentives payable in cash or in shares of Common Stock under the Plan.
SECTION 13. WITHHOLDING
13.1 Payment of Tax Withholding and Other Obligations
The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award ("tax withholding obligations") and (b) any amounts due from the Participant to the Company or to any Related Company ("other obligations"). Notwithstanding any other provision of the Plan to the contrary, the Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.
13.2 Payment Methods
The Committee, in its sole discretion, may permit or require a Participant to satisfy all or part of the Participant's tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, (d) surrendering a number of shares of Common Stock the Participant already owns having
a value equal to the tax withholding obligations and other obligations, (e) selling shares of Common Stock issued under an Award on the open market or to the Company, or (f) taking such other action as may be necessary in the opinion of the Committee to satisfy any applicable tax withholding obligations. The value of the shares so withheld or tendered may not exceed the employer's applicable minimum required tax withholding rate or such other applicable rate as is necessary to avoid adverse treatment for financial accounting purposes, as determined by the Committee in its sole discretion.
SECTION 14. ASSIGNABILITY
No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant's death. During a Participant's lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Committee, in its sole discretion, may permit a Participant to assign or transfer an Award subject to such terms and conditions as the Committee shall specify.
SECTION 15. ADJUSTMENTS
15.1 Adjustment of Shares
(a) In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Committee shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2; (iii) the maximum number and kind of securities set forth in Section 4.3; (iv) the maximum numbers and kind of securities set forth in Section 16.3; and (v) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Committee, as to the terms of any of the foregoing adjustments shall be conclusive and binding.
(b) Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 15.1 but shall be governed by Sections 15.2 and 15.3, respectively.
15.2 Dissolution or Liquidation
To the extent not previously exercised or settled, and unless otherwise determined by the Committee in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right
applicable to an Award has not been waived by the Committee, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.
15.3 Change in Control
Notwithstanding any other provision of the Plan to the contrary, unless the Committee shall determine otherwise in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Change in Control:
(a) All outstanding Awards, other than Performance Shares and Performance Units, shall become fully and immediately exercisable, and all applicable restrictions or forfeiture provisions shall lapse, immediately prior to the Change in Control and shall terminate at the effective time of the Change in Control; provided, however, that with respect to a Change in Control that is a Company Transaction in which such Awards could be converted, assumed or replaced by the Successor Company, such Awards shall become fully and immediately exercisable, and all applicable restrictions or forfeiture provisions shall lapse, only if and to the extent such Awards are not converted, assumed or replaced by the Successor Company.
For the purposes of this Section 15.3(a), an Award shall be considered converted, assumed or replaced by the Successor Company if following the Company Transaction the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash or other securities or property) received in the Company Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Committee may, with the consent of the Successor Company, provide for the consideration to be received pursuant to the Award, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Committee, and its determination shall be conclusive and binding.
(b) All Performance Shares or Performance Units earned and outstanding as of the date the Change in Control is determined to have occurred and for which the payout level has been determined shall be payable in full in accordance with the payout schedule pursuant to the instrument evidencing the Award. Any remaining Performance Shares or Performance Units (including any applicable performance period) for which the payout level has not been determined shall be prorated at the target payout level up to and including the date of such Change in Control and shall be payable in accordance with the payout schedule pursuant to the instrument evidencing the Award. Any existing deferrals or other restrictions not waived by the Committee in its sole discretion shall remain in effect.
(c) Notwithstanding the foregoing, the Committee, in its sole discretion, may instead provide in the event of a Change in Control that is a Company Transaction that a Participant's outstanding Awards shall terminate upon or immediately prior to such Company Transaction and that such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the value of the per share consideration received by holders of Common Stock in the Company Transaction, or, in the event the Company Transaction is one of the transactions listed under subsection (c) in the definition of Company Transaction or otherwise does not result in direct receipt of consideration by holders of Common Stock, the value of the deemed per share consideration received, in each case as determined by the Committee in its sole discretion, multiplied by the number of shares of Common Stock subject to such outstanding Awards (whether or not then vested and exercisable) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such Awards.
15.4 Further Adjustment of Awards
Subject to Sections 15.2 and 15.3, the Committee shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change of control of the Company, as defined by the Committee, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Committee may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Committee may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change of control that is the reason for such action.
15.5 No Limitations
The grant of Awards shall in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
15.6 Fractional Shares
In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.
15.7 Section 409A
Notwithstanding any other provision of the Plan to the contrary, (a) any adjustments made pursuant to this Section 15 to Awards that are considered "deferred compensation" within the meaning of Section 409A shall be made in compliance with the requirements of Section 409A and (b) any adjustments made pursuant to this Section 15 to Awards that are not considered "deferred compensation" subject to Section 409A shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A or (ii) comply with the requirements of Section 409A.
SECTION 16. CODE SECTION 162(m) PROVISIONS
Notwithstanding any other provision of the Plan to the contrary, if the Committee determines, at the time Awards are granted to a Participant who is, or is likely to be as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Section 16 is applicable to such Award.
16.1 Performance Criteria
(a) If an Award is subject to this Section 16, then the lapsing of restrictions thereon and the distribution of cash, shares of Common Stock or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one of or any combination of the following "performance criteria" for the Company as a whole or any business unit of the Company, as reported or calculated by the Company: cash flows (including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); working capital; earnings per share; book value per share; operating income (including or excluding depreciation, amortization, extraordinary items, restructuring charges or other expenses); revenues; operating margins; return on assets; return on equity; debt; debt plus equity; market or economic value added; stock price appreciation; total
stockholder return; cost control; strategic initiatives; market share; net income; return on invested capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, subscriber, cash management or asset management metrics (together, the"Performance Criteria").
(b) Such performance goals also may be based on the achievement of specified levels of Company performance (or performance of an applicable affiliate or business unit of the Company) under one or more of the Performance Criteria described above relative to the performance of other corporations. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder.
(c) The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (iv) any reorganization and restructuring programs, (v) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's annual report to stockholders for the applicable year, (vi) acquisitions or divestitures, (vii) foreign exchange gains and losses, and (viii) gains and losses on asset sales. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that satisfies the requirements for "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
16.2 Compensation Committee Certification; Adjustment of Awards
(a) After the completion of each performance period, the Compensation Committee shall certify the extent to which any performance goal established under this Section 16 has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting, as applicable, of any Award subject to this Section 16.
(b) Notwithstanding any provision of the Plan other than Section 15, with respect to any Award that is subject to this Section 16, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals except in the case of the death or disability of the Covered Employee.
16.3 Limitations
(a) Subject to adjustment from time to time as provided in Section 15.1, no Covered Employee may be granted Awards other than Performance Units subject to this Section 16 in any calendar year period with respect to more than 5,000,000 shares of Common Stock for such Awards, except that the Company may make additional onetime grants of such Awards for up to 5,000,000 shares to newly hired or newly promoted individuals, and the maximum dollar value payable with respect to Performance Units or other awards payable in cash subject to this Section 16 granted to any Covered Employee in any one calendar year is $3,000,000.
(b) The Committee shall have the power to impose such other restrictions on Awards subject to this Section 16 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
SECTION 17. AMENDMENT AND TERMINATION
17.1 Amendment, Suspension or Termination
The Board or the Compensation Committee may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan; and provided, further, that any amendment that requires stockholder approval may be made only by the Board. Subject to Section 17.3, the Committee may amend the terms of any outstanding Award, prospectively or retroactively.
17.2 Term of the Plan
Unless sooner terminated as provided herein, the Plan shall terminate ten years from the Effective Date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the later of (a) the adoption of the Plan by the Board and (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.
17.3 Consent of Participant
The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant's consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 15 shall not be subject to these restrictions.
SECTION 18. GENERAL
18.1 No Individual Rights
No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan. Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant's employment or other relationship at any time, with or without cause.
18.2 Issuance of Shares
(a) Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company's counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.
(b) The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or
issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.
(c) As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant's own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Committee may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.
(d) To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
18.3 Indemnification
(a) Each person who is or shall have been a member of the Board, or a committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf, unless such loss, cost, liability or expense is a result of such person's own willful misconduct or except as expressly provided by statute.
(b) foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.
18.4 No Rights as a Stockholder
Unless otherwise provided by the Committee or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award or Restricted Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.
18.5 Compliance with Laws and Regulations
(a) In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code.
(b) The Plan and Awards granted under the Plan are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the exclusion applicable to stock options, stock appreciation rights and certain other equity-based compensation under Treasury Regulation Section 1.409A-1(b)(5), or otherwise. To the extent Section 409A is applicable to the Plan or any Award granted under the Plan, it is intended that the Plan and any Awards granted under the Plan comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, with respect to any payments and benefits under the Plan or any Award granted under the Plan to which Section 409A applies, all references in the Plan or any Award granted under the Plan to the termination of the Participant's employment or service are intended to mean the Participant's "separation from service," within the meaning of Section 409A(a)(2)(A)(i). In addition, if the Participant is a "specified employee," within the meaning of Section 409, then to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under the Plan or any Award granted under the Plan during the six-month period immediately following the Participant's "separation from service," within the meaning of Section 409A(a)(2)(A)(i), shall not be paid to the Participant during such period, but shall instead be accumulated and paid to the Participant (or, in the event of the Participant's death, the Participant's estate) in a lump sum on the first business day after the earlier of the date that is six months following the Participant's separation from service or the Participant's death. Notwithstanding any other provision of the Plan to the contrary, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A; provided, however, that the Committee makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to Awards granted under the Plan.
18.6 Participants in Other Countries or Jurisdictions
Without amending the Plan, the Committee may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax-efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.
18.7 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.
18.8 Successors
All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.
18.9 Severability
If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Committee's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
18.10 Choice of Law and Venue
The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Delaware.
18.11 Legal Requirements
The granting of Awards and the issuance of shares of Common Stock under the Plan are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.
SECTION 19. EFFECTIVE DATE
The effective date (the "Effective Date") is the date on which the Plan is adopted by the Board. If the stockholders of the Company do not approve the Plan within 12 months after the Board's adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options.
APPENDIX A
DEFINITIONS
As used in the Plan,
"Acquired Entity" means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.
"Award" means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit, Performance Share, Performance Unit, cash-based award or other incentive payable in cash or in shares of Common Stock as may be designated by the Committee from time to time.
"Board" means the Board of Directors of the Company.
"Cause," unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Compensation Committee, whose determination shall be conclusive and binding.
"Change in Control," unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means the occurrence of any of the following events:
(a) an acquisition by any Entity of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (1) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"), provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege where the security being so converted was not acquired directly from the Company by the party exercising the conversion privilege, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Company, or (iv) an acquisition by any Entity pursuant to a transaction that meets the conditions of clauses (i), (ii) and (iii) set forth in the definition of Company Transaction;
(b) a change in the composition of the Board during any two-year period such that the individuals who, as of the beginning of such two-year period, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the beginning of the two-year period, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and provided further, however, that any such individual whose initial assumption of office occurs as a result of or in connection with an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Entity other than the Board shall not be considered a member of the Incumbent Board; or
(c) the consummation of a Company Transaction.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Committee" has the meaning set forth in Section 3.1.
"Common Stock" means the common stock, no par value, of the Company.
"Company" means Vitesse Semiconductor Corporation, a Delaware corporation.
"Company Transaction," unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:
(a) a merger or consolidation of the Company with or into any other company;
(b) a sale in one transaction or a series of transactions undertaken with a common purpose of all of the Company's outstanding voting securities; or
(c) a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of the Company's assets,
excluding, however, in each case, a transaction pursuant to which
(i) the Entities who are the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Company Transaction will beneficially own, directly or indirectly, at least 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Successor Company in substantially the same proportions as their ownership, immediately prior to such Company Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities;
(ii) no Entity (other than the Company, any employee benefit plan (or related trust) of the Company, a Related Company or a Successor Company) will beneficially own, directly or indirectly, 50% or more of, respectively, the outstanding shares of common stock of the Successor Company or the combined voting power of the outstanding voting securities of the Successor Company entitled to vote generally in the election of directors unless such ownership resulted solely from ownership of securities of the Company prior to the Company Transaction; and
(iii) individuals who were members of the Incumbent Board will immediately after the consummation of the Company Transaction constitute at least a majority of the members of the board of directors of the Successor Company.
Where a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated.
"Compensation Committee" means the Compensation Committee of the Board.
"Covered Employee" means a "covered employee" as that term is defined for purposes of Section 162(m)(3) of the Code or any successor provision.
"Disability," unless otherwise defined by the Committee for purposes of the Plan in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company's chief human resources officer or other person performing that
function or, in the case of directors and executive officers, the Compensation Committee, whose determination shall be conclusive and binding.
"Effective Date" has the meaning set forth in Section 19.
"Eligible Person" means any person eligible to receive an Award as set forth in Section 5.
"Entity" means any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
"Fair Market Value" means the closing price for the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Committee using such methods or procedures as it may establish.
"Grant Date" means the later of (a) the date on which the Committee completes the corporate action authorizing the grant of an Award or such later date specified by the Committee and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.
"Incentive Stock Option" means an Option granted with the intention that it qualify as an "incentive stock option" as that term is defined for purposes of Section 422 of the Code or any successor provision.
"Nonqualified Stock Option" means an Option other than an Incentive Stock Option.
"Option" means a right to purchase Common Stock granted under Section 7.
"Option Expiration Date" means the last day of the maximum term of an Option.
"Outstanding Company Common Stock" has the meaning set forth in the definition of "Change in Control."
"Outstanding Company Voting Securities" has the meaning set forth in the definition of "Change in Control."
"Parent Company" means a company or other entity which as a result of a Company Transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries.
"Participant" means any Eligible Person to whom an Award is granted.
"Performance Award" means an Award of Performance Shares or Performance Units granted under Section 11.
"Performance Criteria" has the meaning set forth in Section 16.1.
"Performance Share" means an Award of units denominated in shares of Common Stock granted under Section 11.1.
"Performance Unit" means an Award of units denominated in cash or property other than shares of Common Stock granted under Section 11.2.
"Plan" means the Vitesse Semiconductor Corporation 2010 Incentive Plan.
"Related Company" means any entity that is directly or indirectly controlled by, in control of or under common control with the Company.
"Restricted Stock" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Committee.
"Retirement," unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means "Retirement" as defined for purposes of the Plan by the Committee or the Company's chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches "normal retirement age," as that term is defined in Section 411(a)(8) of the Code.
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"Section 409A" means Section 409A of the Code.
"Stock Appreciation Right" or "SAR" means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.
"Stock Award" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Committee.
"Stock Unit" means an Award denominated in units of Common Stock granted under Section 10.
"Substitute Awards" means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.
"Successor Company" means the surviving company, the successor company or Parent Company, as applicable, in connection with a Company Transaction.
"Termination of Service" means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Compensation Committee, whose determination shall be conclusive and binding. Transfer of a Participant's employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Compensation Committee determines otherwise, a Termination of Service shall be deemed to occur if the Participant's employment or service relationship is with an entity that has ceased to be a Related Company. A Participant's change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor, or independent contractor of the Company or a Related Company or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.
"Vesting Commencement Date" means the Grant Date or such other date selected by the Committee as the date from which an Award begins to vest.
| Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X 0163AD 5 2 D V + PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Annual Meeting Proxy Card . Authorized Signatures — This section must be completed for your vote to be counted — Date and Sign Below C Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. Date (mm/dd/yyyy) — Please print date below. + Change of Address — Please print your new address below. Comments — Please print your comments below. B Non-Voting Items A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3. For Against Abstain 2. To approve the Vitesse Semiconductor Corporation 2010 Incentive Plan. For Against Abstain 3. To ratify the appointment of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2010. Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. 01 - Christopher R. Gardner 04 - G. Grant Lyon 02 - Steve P. Hanson 05 - Edward Rogas, Jr. 03 - James H. Hugar 1. Election of Directors: For Withhold For Withhold For Withhold 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 0 2 5 2 7 1 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND C 1234567890 J N T C123456789 Admission Ticket
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| PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Notice of 20102012 Annual Meeting of Stockholders Proxy Solicited by Board of Directors for Annual Meeting — May 11, 2010January 26, 2012 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 March 31, 2010,December 8, 2011, and hereby appoints Christopher R. Gardner and Richard C. Yonker,Martin S. McDermut, and each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Stockholders of Vitesse Semiconductor Corporation to be held on May 11, 2010January 26, 2012 at 9:00 a.m., local time, at the Hyatt Westlake Plaza in Thousand Oaks, 880 S.South Westlake Blvd.,Boulevard, Westlake Village, California 91361, and at any adjournment(s) thereof and to vote all shares of common stock which the undersigned would be entitled to vote if then and there personally present, on all the matters set forth on the reverse side. THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED (1) TO ENSURE AS MANY OF THE NOMINEES FOR THE ELECTION OF DIRECTORS SET FORTH IN PROPOSAL ONE ARE ELECTED AS DIRECTORS, (2) FOR AN ADVISORY VOTE ON EXECUTIVE COMPENSATION, (3) FOR EVERY ONE YEAR ON THE APPROVALFREQUENCY OF THE VITESSE SEMICONDUCTOR CORPORATION 2010 INCENTIVE PLAN AS SET FORTH IN PROPOSAL TWO, (3)ADVISORY VOTE ON EXECUTIVE COMPENSATION, (4) FOR THE RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS SET FORTH IN PROPOSAL THREE,FOUR, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND ANY ADJOURNMENT(S) THEREOF. Proxy — VITESSE SEMICONDUCTOR CORPORATION 20102012 Annual Meeting Admission Ticket 20102012 Annual Meeting of VITESSE SEMICONDUCTOR CORPORATION May 11, 2010January 26, 2012 at 9:00 a.m. Local Time Hyatt Westlake Plaza in Thousand Oaks 880 S.South Westlake Blvd.Boulevard Westlake Village, California 91361 Upon arrival, please present this admission ticket and photo identification at the registration desk. Directions From Los Angeles Int’lInt'l Airport: Take Century Blvd. to 405 San Diego Freeway North to 101 West/Ventura Fwy.-North. Exit at Westlake Blvd., turn left. Pass over freeway to first signal and turn left. Hotel is on right. From Burbank Airport: Exit to Hollywood Way South. Turn left onto Alameda Ave. Follow signs to 134 Ventura Fwy.-West. Hwy 134 converts to 101 Ventura Fwy.-North. Exit at Westlake Blvd., turn left. Pass over freeway to first signal and turn left. Hotel is on right. IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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| Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X 01DYWC 1 U P X + Annual Meeting Proxy Card . Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below C Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. Date (mm/dd/yyyy) — Please print date below. + A Proposals — The Board of Directors recommends a vote FOR all nominees listed, FOR Proposals 2 and 4 and every 1 YEAR on Proposal 3. For Against Abstain 4. To ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2012. 1. Election of Directors. For Withhold For Withhold For Withhold IMPORTANT ANNUAL MEETING INFORMATION 2. To approve by advisory vote the compensation of the Company’s executives. 1 Year 2 Years 3 Years Abstain 3. To hold an advisory vote on the frequency of the advisory vote on executive compensation. 01 - Christopher R. Gardner 04 - G. Grant Lyon 02 - Steven P. Hanson 05 - Edward Rogas, Jr. 03 - James H. Hugar 06 - G. William LaRosa For Against Abstain Change of Address — Please print your new address below. Comments — Please print your comments below. B Non-Voting Items Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE______________ SACKPACK_____________ 1234 5678 9012 345 1 2 4 3 9 2 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND C 1234567890 J N T C123456789 Admission Ticket IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on January 25, 2012. Vote by Internet • Log on to the Internet and go to www.envisionreports.com/VTSS • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. • Follow the instructions provided by the recorded message. |
QuickLinks
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS May 11, 2010IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 11, 2010YOUR VOTE IS IMPORTANTINFORMATION CONCERNING SOLICITATION AND VOTINGIMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 11, 2010PROPOSAL ONE ELECTION OF DIRECTORSPROPOSAL TWODESCRIPTION OF THE 2010 INCENTIVE PLANEQUITY COMPENSATION PLAN INFORMATIONPROPOSAL THREE RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTEXECUTIVE OFFICERS AND EXECUTIVE COMPENSATIONCERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONSREPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORSOTHER MATTERSVITESSE SEMICONDUCTOR CORPORATION 2010 INCENTIVE PLAN SECTION 1. PURPOSESECTION 2. DEFINITIONSSECTION 3. ADMINISTRATIONSECTION 4. SHARES SUBJECT TO THE PLANSECTION 5. ELIGIBILITYSECTION 6. AWARDSSECTION 7. OPTIONSSECTION 8. INCENTIVE STOCK OPTION LIMITATIONSSECTION 9. STOCK APPRECIATION RIGHTSSECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITSSECTION 11. PERFORMANCE AWARDSSECTION 12. OTHER STOCK OR CASH-BASED AWARDSSECTION 13. WITHHOLDINGSECTION 14. ASSIGNABILITYSECTION 15. ADJUSTMENTSSECTION 16. CODE SECTION 162(m) PROVISIONSSECTION 17. AMENDMENT AND TERMINATIONSECTION 18. GENERALSECTION 19. EFFECTIVE DATEAPPENDIX A DEFINITIONS