SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[X] Definitive Additional Materials by Rule14a-6(e)(2))
[_] Soliciting Material Under Rule 14a-12
VITESSE SEMICONDUCTOR CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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VITESSE SEMICONDUCTOR CORPORATION
741 Calle Plano
Camarillo, CA 93012
(805) 388-3700
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on January 29, 2002
----------------
Dear Vitesse Stockholder:
The Annual Meeting of Stockholders (the "Annual Meeting") of Vitesse
Semiconductor Corporation ("Vitesse" or the "Company"), a Delaware corporation,
will be held on Tuesday, January 29, 2002, at the Renaissance Hotel located at
30100 Agoura Road, Agoura Hills, California 91301. The meeting will begin at
10:30 a.m.
Only stockholders who owned stock at the close of business on December 4,
2001 can vote at this meeting or any adjournments that may take place. At the
meeting we will:
1. Elect a Board of Directors.
2. Approve an amendment to our 1991 Employee Stock Purchase Plan to
reserve an additional 5,500,000 shares of Common Stock for issuance
thereunder.
3. Approve the appointment of our independent auditors for 2002.
4. Attend to other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of the three
proposals outlined in this Proxy Statement.
If your shares are held of record by a broker, bank or other nominee and you
wish to attend the Annual Meeting, you must notify your broker, bank or other
nominee and obtain the proper documentation to vote your shares at the Annual
Meeting.
At the meeting we will also report on Vitesse's fiscal 2001 business results
and other matters of interest to stockholders.
Vitesse recently mailed a copy of its 2001 Annual Report to all
stockholders. The approximate date of mailing for this notice, proxy statement
and proxy card is December 19, 2001.
THE BOARD OF DIRECTORS
December 14, 2001
Camarillo, California
YOUR VOTE IS IMPORTANT
In order to assure your representation at the Annual Meeting, you are
requested to complete, sign, and date the enclosed proxy as promptly as
possible and return it in the enclosed envelope (to which no postage need be
affixed if mailed in the United States). Please reference the information on
page 1, "How do I vote?" for alternative voting methods.
VITESSE SEMICONDUCTOR CORPORATION
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
January 29, 2002
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Vitesse Semiconductor Corporation
("Vitesse" or the "Company") of proxies to be voted at the Annual Meeting of
Stockholders to be held on Tuesday, January 29, 2002, at 10:30 a.m., and at any
adjournments that may take place.
The Annual Meeting will be held at the Renaissance Hotel located at 30100
Agoura Road, Agoura Hills, California 91301. Vitesse anticipates sending the
proxy materials to stockholders on or about December 19, 2001.
The following is important information in a question-and-answer format
regarding the Annual Meeting and this Proxy Statement.
Q: What may I vote on?
A: (1) The election of six nominees to serve on our Board of Directors.
(2) The amendment of our 1991 Employee Stock Purchase Plan to reserve an
additional 5,500,000 shares of Common Stock for issuance thereunder.
(3) The approval of the appointment of our independent auditors for fiscal
2002.
(4) Any other business properly presented at the meeting.
Q: How does the Board recommend I vote on the proposals?
A: The Board recommends a vote FOR each of the director nominees, FOR the
amendment of the 1991 Employee Stock Purchase Plan, and FOR the appointment
of KPMG LLP as independent auditors for fiscal 2002.
Q: Who is entitled to vote?
A: Stockholders as of the close of business on December 4, 2001 (the "Record
Date") are entitled to vote at the Annual Meeting. Each stockholder is
entitled to one vote for each share of common stock held on the Record Date.
As of the Record Date, 199,936,864 shares of the Company's common stock were
issued and outstanding.
Q: How do I vote?
A: There are three ways you can vote:
(1) Sign and date each proxy card you receive and return it in the prepaid
envelope.
(2) Vote through the Internet or telephone voting system more fully
described on your proxy card.
(3) Vote in person at the Annual Meeting. If your shares are held of record
by a broker, bank or other nominee and you wish to attend the Annual
Meeting, you must notify your broker, bank or other nominee and obtain
the proper documentation to vote your shares at the Annual Meeting.
1
Q: How can I change my vote or revoke my proxy?
A: You have the right to revoke your proxy and change your vote at any time
before the meeting by notifying the Company's Secretary, or returning a
later-dated proxy card, or by internet or telephone as more fully described
on your proxy card. You may also revoke your proxy and change your vote by
voting in person at the meeting.
Q: What does it mean if I get more than one proxy card?
A: It means you hold shares registered in more than one account. Sign and
return all proxies to ensure that all your shares are voted.
Q: Who will count the vote?
A: Representatives of EquiServe, the Company's transfer agent, will count the
votes and act as the Inspector of Election. The Company believes that the
procedures to be used by the Inspector to count the votes are consistent
with Delaware law concerning voting of shares and determination of a quorum.
Q: What is a "quorum"?
A: A "quorum" is a majority of the outstanding shares. They may be present at
the meeting or represented by proxy. There must be a quorum for the meeting
to be held and action to be validly taken. If you submit a properly executed
proxy card, even if you abstain from voting, then you will be considered
part of the quorum. Abstentions are not counted in the tally of votes FOR or
AGAINST a proposal. A withheld vote is the same as an abstention. If a
broker indicates on a proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter (broker non-votes), those
shares will not be counted as present with respect to that matter for
purposes of establishing a quorum.
Q: Who can attend the Annual Meeting?
A: All stockholders as of the Record Date can attend. If your shares are held
of record by a broker, bank or other nominee and you wish to attend the
Annual Meeting, you must notify your broker, bank or other nominee and
obtain the proper documentation to vote your shares at the Annual Meeting.
Q: How will voting on any other business be conducted?
A: We do not know of any business to be considered at the 2002 Annual Meeting
other than the proposals described in this proxy statement. However, because
the Company did not receive notice of any other proposals to be brought
before the meeting by November 8, 2001 (45 days prior to the month and day
of last year when proxy materials for the 2001 Annual Meeting were mailed to
stockholders), if any other business is properly presented at the Annual
Meeting, your signed proxy card gives authority to Pierre R. Lamond,
Vitesse's Chairman, and Louis R. Tomasetta, Vitesse's President and Chief
Executive Officer, to vote on such matters at their discretion.
Q: Who are the largest principal stockholders?
A: Fidelity Management and Research Corporation owned 19,780,244 shares, or
9.9%, as of September 30, 2001, according to information provided by
Fidelity Management and Research Corporation.
Q: How and when may I submit proposals for the 2003 Annual Meeting?
A: To have your proposal included in the Company's Proxy Statement for the 2003
Annual Meeting, you must submit your proposal in writing by August 21, 2002,
to the Company's Secretary, c/o Vitesse Semiconductor Corporation, 741 Calle
Plano, Camarillo, California 93012.
2
If you submit a proposal for the 2003 Annual Meeting after November 4, 2002,
the proxy for the 2003 Annual Meeting may confer upon management
discretionary authority to vote on your proposal.
You should also be aware of certain other requirements you must meet to have
your proposal included in the Company's Proxy Statement for the 2003 Annual
Meeting that are explained in Rule 14a-8 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
Q: How much did this proxy solicitation cost?
A: Georgeson Shareholder Communications, Inc. was hired to assist in the
distribution of proxy materials and solicitation of votes for $6,000, plus
certain out-of-pocket expenses. We also reimburse brokerage houses and
persons representing beneficial owners of shares for their reasonable out-
of-pocket expenses in forwarding solicitation materials to such beneficial
owners. Certain of the Company's directors, officers or employees may also
solicit proxies in person or by telephone, but they will not receive any
additional compensation for doing so.
3
PROPOSALS YOU MAY VOTE ON
Proposal 1: Election of Directors.
The Company has nominated six (6) candidates for election to the Board this
year. Detailed information on each of the Company's nominees is provided on
page 7. All directors are elected annually and serve a one-year term until the
next Annual Meeting. If any director is unable to stand for re-election, the
Board may reduce the size of the Board, designate a substitute or leave a
vacancy unfilled. If a substitute is designated, proxies voting on the original
director candidate will be cast for the substituted candidate. We expect that
each nominee listed on page 7 will be able and will not decline to serve as a
director.
Vote Required; Recommendation of the Board of Directors
With respect to the election of directors, the six candidates receiving the
highest number of FOR votes shall be elected to the Company's Board of
Directors. An abstention will have the same effect as a vote withheld for the
election of directors, and, pursuant to Delaware law, a broker non-vote will
not be treated as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 2: Approval of Amendment to the Company's Employee Stock Purchase Plan
The Vitesse Semiconductor Corporation 1991 Employee Stock Purchase Plan (the
"Purchase Plan") was adopted by the Board of Directors and approved by the
shareholders in August 1991 and has been amended from time to time. A total of
7,500,000 shares of Common Stock has been reserved for issuance under the
Purchase Plan. Of these reserved shares, 998,030 shares remained for future
grant under the Purchase Plan as of November 30, 2001. The Board of Directors
has adopted an amendment to the Purchase Plan (the "Purchase Plan Amendment"),
subject to approval by the shareholders, to increase the number of shares
reserved for issuance under the Purchase Plan by an additional 5,500,000 shares
to an aggregate total of 13,000,000 shares. The Board further amended the
Purchase Plan to change the length of the offering periods from six months to
twenty-four months. The shareholders are being asked to approve the Purchase
Plan Amendment to increase the number of shares available under the Purchase
Plan.
The following is a summary of the material provisions of the Purchase Plan,
as amended and restated, a copy of which may be obtained from the Company or
its publicly filed documents. The Purchase Plan, which qualifies under Section
423 of the Internal Revenue Code, provides for eligible employees to purchase
shares of the Company's Common Stock during offering periods of overlapping
twenty-four months that commence on February 1 and August 1 of each year and
end twenty-four months later on January 31 and July 31, respectively, before
the next period commences. Each offering period will be comprised of four
successive six-month purchase periods. Deductions will be made from a
participating employee's salary during each purchase period, and if the
employee has not withdrawn by the last day of the purchase period, stock will
be purchased for the account of the employee at the end of the purchase period
at the price as set forth below.
Employees are eligible to participate after one month of employment if they
are regularly employed by the Company for at least 20 hours per week and more
than five months per calendar year. Employees who would immediately after the
grant own 5% or more of the total combined voting power or value of the stock
of the Company or any subsidiary are not eligible to participate. As of
November 30, 2001, approximately 1,100 of the Company's employees were eligible
to participate in the Purchase Plan. Because participation in the Purchase Plan
is voluntary, the Company cannot now determine the number of shares of Common
Stock to be purchased by any particular individual or group of individuals.
4
The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed 20% of an employee's base
compensation, including commissions, but excluding overtime and bonuses, at a
price equal to 85% of the fair market value of the Common Stock at the
beginning of the offering period or at the end of each purchase period,
whichever is lower. In the event that the fair market value at the beginning of
the offering period in which the participating employee is enrolled is higher
than at the beginning of any immediately subsequent offering period, the
participating employee shall automatically be re-enrolled for such subsequent
offering period, which results in participating employees having the
opportunity to buy stock at the lower values. Employees may end their
participation in the Purchase Plan at any time, and participation ends
automatically on termination of employment with the Company. In no event shall
any employee be permitted to purchase shares of Common Stock under the Purchase
Plan at a rate which exceeds $25,000 in fair market value (as measured at the
time the option is granted) of such Common Stock for each calendar year. In the
event of a proposed sale of all or substantially all the assets of the Company
or a merger of the Company with or into another corporation, the Purchase Plan
provides that each option under the Purchase Plan be assumed or an equivalent
option be substituted by the successor or purchaser corporation, unless the
Board decides to shorten the offering period or purchase period.
Unless terminated sooner, the Purchase Plan will terminate 20 years from its
effective date. The Board has authority to amend or terminate the Purchase
Plan, provided that no such action may adversely affect the rights of any
participant.
Vote Required; Recommendation of the Board of Directors
Approval of the Purchase Plan Amendment requires the affirmative vote of a
majority of the shares represented by person or by proxy and voting at the
Annual Meeting. Abstentions and broker non-votes are not counted as affirmative
votes with respect to approval of proposals such as the Purchase Plan
Amendment.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to be able to continue to offer its present and
prospective employees the option to participate in the Purchase Plan in order
to advance the interests of the Company shareholders. Absent the approval of
this Proposal Two, it is expected that the Purchase Plan would terminate in
August 2002 as a result of an absence of shares available for issuance under
the Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
Proposal 3: Approval of the Appointment of KPMG LLP as Independent Auditors
The Audit Committee has recommended, and the Board has approved, the
appointment of KPMG LLP ("KPMG") as our independent auditors for fiscal 2002
subject to your approval. KPMG has served as our independent auditors since
1991. Representatives of KPMG will attend the Annual Meeting to answer
appropriate questions. They also may make a statement.
Audit services provided by KPMG during fiscal 2001 included an audit of the
Company's consolidated financial statements, a review of the Company's Annual
Report and certain other filings with the Securities and Exchange Commission
("SEC") and certain other governmental agencies. In addition, KPMG provided
various non-audit services to the Company during 2001.
Audit Fees
The aggregate fees billed for professional services rendered by KPMG LLP for
the audit of our annual financial statements for the year ended September 30,
2001, and the reviews of the condensed financial statements included in our
quarterly reports on Forms 10-Q for the year ended September 30, 2001, were
$241,000.
5
Financial Information Systems Design and Implementation Fees
The aggregate fees billed for information technology services rendered by
KPMG LLP during the year ended September 30, 2001, were $0.
All Other Fees
The aggregate fees billed for all other services, exclusive of the fees
disclosed above relating to financial statement audit services and financial
information systems design and implementation, rendered by KPMG LLP during the
year ended September 30, 2001, were $1,500,000. These other services consisted
of the following:
- Statutory and Employee Benefit Audits.......................... $ 16,000
- Tax Services................................................... $1,333,000
- Due Diligence.................................................. $ 85,000
- SEC Filings.................................................... $ 66,000
The Audit Committee has determined that the provision of these other
services is compatible with maintaining the independence of KPMG LLP.
Vote Required; Recommendation of the Board of Directors
The Board of Directors has conditioned its appointment of the Company's
independent auditors upon the receipt of the affirmative vote of a majority of
the shares represented, in person or by proxy, and voting at the Annual
Meeting, which shares voting affirmatively also constitute at least a majority
of the required quorum. In the event that the stockholders do not approve the
selection of KPMG, the appointment of the independent auditors will be
reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 3.
6
NOMINEES FOR THE BOARD OF DIRECTORS
Pierre R. Lamond, Age 71, Director since 1987--Mr. Lamond has been the
Chairman of the Board of Directors since the Company was founded in February
1987. Since August 1981, he has been a General Partner of Sequoia Capital, a
venture capital firm. Sequoia has financed companies such as Cypress
Semiconductor Corporation, Cisco Systems, Inc., and C-Cube Microsystems, Inc.
Mr. Lamond was founder and Vice President of National Semiconductor
Corporation. He is also a director of Redback Networks, Versity and a number of
private companies.
Vincent Chan, Ph.D., Age 53, Director since 2000--Since 1998, Dr. Chan has
served on the Massachusetts Institute of Technology's faculty as the Joan and
Irwin Jacobs Professor of Electrical Engineering and Computer Science,
Aeronautics and Astronautics and a member of the Operations Research Center. He
has also been serving as the Director of MIT's Laboratory for Information and
Decision Systems. From 1995 to 1998, he was the Head of the Communications and
Information Technology Division of MIT Lincoln Laboratory. Dr. Chan has over 25
years experience leading the development of advanced communication systems and
networks.
James A. Cole, Age 59, Director since 1987--Mr. Cole has been a General
Partner of Windward Ventures, L.P. since 1997. He was a General Partner of
Spectra/New Enterprise Associates, a venture capital firm, from 1986 through
1997. He was a founder and Executive Vice President of Amplica, Inc., a GaAs
microwave IC and sub-system company. Mr. Cole also serves as a director of
Giga-Tronics, Inc. and a number of private companies.
Alex Daly, Age 40, Director since 1998--Alex Daly is the founder of
ArcSight, Inc., an enterprise network security management company where he
serves as Chairman, President and Chief Executive Officer. From January 1998
through January 2000, he was President and CEO of Cygnus Solutions, a developer
of software tools. From 1995 through 1997, he served as Senior Vice President
of Marketing and then Sales at C-Cube Microsystems, a manufacturer of
integrated circuits for consumer electronics, communications and computer
applications. Prior to that, Mr. Daly served at Intel Corporation, a
semiconductor company, most recently as director of marketing for the mobile
computing group.
John C. Lewis, Age 66, Director since 1990--Mr. Lewis served as Chairman of
the Board of Directors and Chief Executive Officer of Amdahl Corporation, a
manufacturer of large, general purpose computer storage systems and software
products, from August 1977 to March 2001. Before joining Amdahl in 1977, he was
President of Xerox Business Systems. Mr. Lewis also serves as a director of
Cypress Semiconductor Corporation and Pinnacle Systems.
Louis R. Tomasetta, Ph.D., Age 53, Director since 1987--Dr. Tomasetta, a co-
founder of the Company, has been President, Chief Executive Officer and a
Director since the Company's inception in February 1987. From 1984 to 1987, he
served as President of the integrated circuits division of Vitesse Electronics
Corporation. Prior to that he was the director of the Advanced Technology
Implementation department at Rockwell International Corporation. Dr. Tomasetta
has over 25 years experience in the management and development of GaAs based
businesses, products, and technology. Dr. Tomasetta also serves as a director
of a number of private companies.
7
BOARD MEETINGS AND COMMITTEES
The Company's Board usually meets five times a year in regularly scheduled
meetings, but will meet more often if necessary. The Board held eight meetings
during fiscal 2001 and all of the directors attended at least 75% of the Board
meetings of which they were members.
The full Board considers all major decisions of the Company. However, the
Board has established the following two standing committees, each of which is
chaired by an outside director:
. Compensation Committee
The Compensation Committee reviews and approves officers' salaries and
employee compensation programs. During fiscal 2001, the Committee, which
currently consists of Vincent Chan, Alex Daly and Pierre R. Lamond, met
five times during fiscal 2001 and all members attended at least 75% of
the meetings.
. The Audit Committee
The Audit Committee reviews and evaluates the Company's accounting
principles and its system of internal accounting controls. It also
recommends the appointment of the Company's independent auditors and
approves the services performed by the auditors. The Committee, which
currently consists of James A. Cole, Pierre R. Lamond and John C. Lewis,
met four times during fiscal 2001 and all members attended at least 75%
of the meetings.
The Board currently has no nominating committee or committee performing a
similar function.
DIRECTOR COMPENSATION
Non-employee directors receive $2,000 for each Board meeting attended in
person and $1,000 for each meeting attended by telephone. Directors are also
reimbursed for customary and usual travel expenses.
All non-employee directors participate in the 1991 Directors' Stock Option
Plan (the "Directors' Plan"). Under the Directors' Plan, upon first becoming a
director, each non-employee director receives non-statutory options to purchase
40,000 shares (except for the Chairman, who receives options to purchase 60,000
shares). Additionally, every year on January 1 each director receives options
to purchase 40,000 shares (except for the Chairman who receives options to
purchase 60,000 shares). The size of the foregoing option grants are adjusted
to reflect the effects of stock splits, stock dividends, stock combinations and
the like. These options are for a ten-year term and become available for
purchase in installments of two percent of the total number of shares granted
at the end of each month beginning January 31 after the date of grant. The
exercise price of the options must be at least 100% of the fair market value of
the common stock on the Nasdaq National Market on the date of grant of the
option. The options may be exercised only (1) while the individual is serving
as a director on the Board, (2) within six months after termination by death or
disability, or (3) within three months after the individual's term as director
ends.
During fiscal 2001, Mr. Lamond was granted an option to purchase 60,000
shares of common stock and Messrs. Chan, Cole, Daly and Lewis each were granted
an option to purchase 40,000 shares of common stock at an exercise price of
$55.3125.
The Directors' Plan will expire on January 1, 2002. Under the 2001 Stock
Incentive Plan approved by our stockholders on January 23, 2001, each year
beginning in 2002, each non-employee director shall receive nonstatutory
options to purchase 40,000 shares (except for the Chairman, who shall receive
options to purchase 60,000 shares). These options are for a ten-year term and
become available for purchase in installments of two percent of the total
number of shares granted at the end of each month beginning January 31 after
the date of grant. The exercise price of the options must be at least 100% of
the fair market value of the common stock on the Nasdaq National Market on the
date of grant of the option. The options may be exercised only (1) while the
individual is serving as a director on the Board, (2) within six months after
termination by death or disability, or (3) within three months after the
individual's term as director ends.
Employee directors receive no other compensation for serving on the Board.
8
STOCK PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Company's common stock with the NASDAQ Stock Market-U.S. Index
and the NASDAQ Electronics Components Index from market close on the last
trading day in September 1996 through September 30, 2001. The graph is based on
the assumption that $100 was invested in each of the Company's common stock,
the NASDAQ Stock Market-U.S. Index and the NASDAQ Electronic Components Index
on September 30, 1996.
The stock price performance graph depicted below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934. The stock price performance on the graph
is not necessarily an indicator of future price performance.
Comparison of Five-Year Cumulative Total Return*
among Vitesse Semiconductor Corporation,
the NASDAQ Stock Market (U.S.) Index
and the NASDAQ Electronics Components Index
VITESSE SEMICONDUCTOR CORP
Cumulative Total Return
----------------------------------------------------
9/96 9/97 9/98 9/99 9/00 9/01
VITESSE SEMICONDUCTOR 100.00 192.48 183.50 663.11 1381.56 120.39
CORPORATION
NASDAQ STOCK MARKET 100.00 137.27 139.44 227.82 302.47 123.64
(U.S.)
NASDAQ ELECTRONIC COMPONENTS 100.00 175.88 140.02 284.57 500.48 140.88
9
PRINCIPAL OWNERSHIP
OF VITESSE SEMICONDUCTOR CORPORATION
COMMON STOCK
The following table shows the number of shares of Company common stock owned
as of September 30, 2001 by the directors, the Named Executive Officers listed
on page 11, all directors and officers as a group, and each holder known to the
Company to be the beneficial owner of at least 5% of the Company's common
stock.
Principal Stock Ownership(/1/)
Total Shares
Shares Beneficially Owned
Exercisable Plus Exercisable
Name of Individuals or Shares Owned Within 60 Days of Within 60 Days of Percent
Identity of Group Beneficially Sept. 30, 2001 Sept. 30, 2001 of Total
- ---------------------- ------------ ----------------- ------------------ --------
Fidelity Management and
Research Corporation... 19,780,244 -- 19,780,244 9.9%
82 Devonshire Street
Boston, MA 02109-3614
Louis R.
Tomasetta(/2/)......... 510,983 1,166,312 1,677,295 *
Ira Deyhimy............. 359,864 161,501 521,365 *
Christopher Gardner..... 64,355 374,100 438,455 *
Pierre R. Lamond........ 220,400 127,200 347,600 *
Eugene F. Hovanec....... 52,767 185,008 237,775 *
James A. Cole........... 33,700 190,400 224,100 *
Michael Millhollan...... 32,269 112,120 144,389 *
John C. Lewis........... 40,000 89,600 129,600 *
Alex Daly............... 0 87,200 87,200 *
Vincent Chan............ 0 30,800 30,800 *
All executive officers
and directors as a
group (12 persons)..... 1,357,230 2,592,241 3,949,471 2.0%
- --------
* Less than 1%
(/1/All)share information has been adjusted to reflect a 3 for 2 stock split on
February 12, 1997, a 2 for 1 stock split on May 26, 1998, and a 2 for 1
stock split on October 20, 1999.
(/2/Includes)an aggregate of 126,000 shares held for his children, pursuant to
the Transfer to Minors Act and as to which Dr. Tomasetta has voting and
investment power.
10
COMPENSATION OF EXECUTIVE OFFICERS
The following is a summary of information regarding compensation paid to the
Chief Executive Officer and the four most highly compensated executive officers
other than the Chief Executive Officer who were serving as executive officers
as of September 30, 2001. These five individuals are the "Named Executive
Officers."
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Number of
Securities
Name and Principal Other Annual Underlying
Position Year Salary Bonus(/1/) Compensation(/2/) Options
------------------ ---- -------- ---------- ----------------- ------------
LOUIS R. TOMASETTA...... 2001 $316,827 $638,663 -- 1,200,000
President & Chief
Executive Officer 2000 275,000 406,655 -- 600,000
1999 269,231 210,830 -- 760,000
EUGENE F. HOVANEC....... 2001 203,798 439,020 -- 300,000
Vice President, Finance
& Chief Financial 2000 180,000 296,937 -- 200,000
Officer 1999 180,000 189,747 -- 160,000
CHRISTOPHER GARDNER..... 2001 180,769 229,137 -- 200,000
Vice President & Chief
Operating 2000 150,000 167,246 -- 120,000
Officer 1999 148,846 114,647 -- 100,000
MICHAEL MILLHOLLAN...... 2001 180,769 214,604 -- 50,000
Vice President &
General Manager, 2000 150,000 189,456 -- 140,000
Datacommunications 1999 150,000 130,373 -- 120,000
IRA DEYHIMY............. 2001 157,548 162,374 -- 50,000
Vice President,
Business Development 2000 150,577 116,394 -- 90,000
1999 135,000 84,297 -- 80,000
- --------
(/1/)No bonuses were earned for fiscal 2001. Amounts paid in each year are for
bonuses earned in previous years.
(/2/)Excludes certain expenses which, for any Named Executive Officer, did not
exceed the lesser of $50,000 or 10% of the compensation reported in the
above table, and which, for all Named Executive Officers as a group, did
not exceed the lesser of $50,000 times the number of Named Executive
Officers or 10% of all Named Executive Officers' annual salaries and
bonuses reported in the above table.
11
The following table presents additional information concerning the option
awards shown in the Summary Compensation Table for fiscal year 2001. These
options to purchase common stock were granted to the Named Executive Officers
under the Company's 1991 Employee Stock Option Plan.
Option Grants in Last Fiscal Year
Individual Grants
----------------------------------------------
Potential Realizable
% of Total Value at Assumed Annual
Securities Exercise Rate of Stock Price
Number of Underlying or Base Appreciation for Option
Securities Options Granted Price Term(/1/)
Underlying to Employees Per Expiration -----------------------
Name Options in Fiscal Year Share Date 5% 10%
---- ---------- --------------- -------- ---------- ----------- -----------
Louis R. Tomasetta...... 1,200,000 14.26% $17.4375 4/6/11 $13,159,620 $33,349,061
Eugene F. Hovanec....... 300,000 3.57% 17.4375 4/6/11 3,289,905 8,337,265
Christopher Gardner..... 200,000 2.38% 17.4375 4/6/11 2,193,270 5,558,177
Michael Millhollan...... 50,000 0.59% 17.4375 4/6/11 548,318 1,389,544
Ira Deyhimy............. 50,000 0.59% 17.4375 4/6/11 548,318 1,389,544
- --------
(/1/These)dollar amounts are not intended to forecast future appreciation of
the common stock price. Named Executive Officers will not benefit unless
the common stock price increases above the stock option exercise price. Any
gain to the Named Executive Officers resulting from common stock price
appreciation would benefit all stockholders.
The following table shows information for the Named Executive Officers
concerning stock options exercised during fiscal 2001 and stock options
unexercised at the end of fiscal year 2001.
Aggregated Option Exercises in Last Fiscal Year
And Fiscal Year-end Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at Fiscal Year In-the-Money Options at
Shares End Fiscal Year End
Acquired Value(/1/) ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
Louis R. Tomasetta...... 270,000 $14,976,817 894,312 2,556,000 $364,333 --
Eugene F. Hovanec....... 125,000 6,774,500 113,008 661,000 29,422 --
Christopher Gardner..... 28,200 1,311,089 330,100 521,000 771,346 $446,865
Michael Millhollan...... 110,000 7,194,764 60,120 324,000 -- --
Ira Deyhimy............. 40,000 2,909,062 127,501 219,999 262,813 --
- --------
(/1/Value)realized is the difference between the option exercise price and the
fair market value of the Company's common stock at the date of exercise
multiplied by the number of options exercised.
12
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors consists of three non-
employee directors. The Committee reviews and approves salaries, bonuses and
other benefits payable to the Company's executive officers. It also administers
the Company's employee stock option and employee stock purchase plans.
Compensation Goals
The Compensation Committee establishes compensation for executive officers
to align with business objectives and performance and to attract, retain and
reward executive officers who contribute to the long-term success of the
Company. The Company's compensation programs, including those for executive
officers, share these characteristics:
. The Company pays competitively. The Company offers a compensation
program, including competitive base salaries and, where appropriate,
relocation benefits, to attract and retain the best people in the
industry. To ensure that pay is competitive, the Company reviews the
compensation practices of other leading companies in the industry.
. The Company pays for relative sustained performance. Executive officers
are rewarded based upon corporate, departmental, and individual
performance. Corporate and departmental performance are evaluated by
reviewing whether strategic and business plan goals are met. Individual
performance is evaluated by measuring organizational progress against set
objectives.
. The Company strives for fairness to achieve a balance in compensation
paid to the executives within the Company and in comparable companies. It
believes that the contributions of each member of the executive staff are
vital to the success of the Company.
. The Company believes that employees should understand the performance
evaluation and compensation programs. At the beginning of the performance
cycle, key quarterly and annual objectives are set for each officer. The
chief executive officer gives ongoing feedback on performance to each
officer. At the end of the performance cycle, the Compensation Committee
evaluates the accomplishments of the key objectives in making its
decisions on merit increases and stock option grants.
Compensation Components
The Company's compensation program, which consists of cash- and equity-based
compensation, allows the Company to attract and retain highly skilled officers,
provide useful products and services to customers, enhance stockholder value,
motivate technological innovation, and reward executive officers and other
employees. The components are:
Cash-Based Compensation:
. Salary The Committee sets base salary for officers by reviewing the
compensation levels for similar positions in comparable companies in the
industry.
. Bonus Under the Company's bonus plan, bonuses for eligible executive
officers are generally paid as a percentage of their base salary and on
the basis of the achievement of certain individual and corporate
financial goals. The bonuses actually earned by each individual during
any fiscal year are to be paid in successive years. In fiscal 2001, no
bonuses were earned under the officers' bonus plan.
13
Equity-Based Compensation:
Stock options provide additional incentives to officers to work to maximize
stockholder value. The options become available for purchase over a defined
period to encourage officers to continue their employment with the Company. In
line with its compensation philosophy, the Company grants stock options to
employees at all levels of the organization based on each individual's
contribution to the Company.
Chief Executive Officer Compensation
Louis R. Tomasetta has been President and Chief Executive Officer of the
Company since its incorporation in 1987. His total compensation consists of
base salary, bonus and employee stock options. In determining Mr. Tomasetta's
compensation, the Committee evaluates:
. Corporate performance, principally revenue and operating profit goals.
. His individual performance
. Compensation paid to other executive officers of the Company
. Compensation paid to chief executive officers of comparable companies
For fiscal year 2001, Mr. Tomasetta's salary was $316,827. For his
performance in the prior year, he received non-statutory options to purchase
1,200,000 shares of common stock under the Company's 1991 Stock Option Plan at
an exercise price of $17.4375. These options are for a ten-year term and become
available to purchase in annual installments of 20% of the total number of
shares granted beginning on January 1, 2002. Mr. Tomasetta's equity ownership
in the Company includes 510,983 shares of common stock and stock options to
purchase an additional 3,450,312 shares. He shares significantly in the success
of the Company's business with the other stockholders.
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
Pierre R. Lamond
Vincent Chan
Alex Daly
OTHER MATTERS
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of non-employee directors only. Pierre
R. Lamond, Chairman of the Board of the Company, is a general partner of a
venture capital firm that invested in the Company prior to its initial public
offering in 1991.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of forms filed or written notice that no annual forms were
required, the Company believes that from October 1, 2000 to September 30, 2001,
all SEC filings of its officers, directors and ten percent stockholders
complied with the requirements of Section 16 of the Securities Exchange Act.
Audit Committee Report
In accordance with the written charter (attached as Appendix A hereto)
adopted by the Board of Directors, the Audit Committee of the Board (the
"Committee") reviews and evaluates the Company's accounting principles and its
system of internal accounting controls. It also recommends the appointment of
the Company's independent auditors and approves the services performed by the
auditors. The members of the Committee have been determined to be independent
pursuant to Rule 4200(a)(15) of the National Association of Securities Dealers
("NASD") listing standards.
14
The Committee has received from the independent auditors a formal written
statement describing all relationships between the auditors and the Company
that might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and has discussed with the auditors any relationships that may
impact their objectivity and independence, and satisfied itself as to the
auditors' independence. The Committee also discussed with management, the
internal auditors and the independent auditors the quality and adequacy of the
Company's internal controls and the internal audit function's organization,
responsibilities, budget and staffing. The Committee also reviewed with both
the independent and the internal auditors their audit plans, audit scope, and
identification of audit risks.
The Committee has discussed and reviewed with the independent auditors all
communications required by generally accepted accounting standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee has reviewed and discussed the audited financial statements of
the Company as of and for the fiscal year ended September 30, 2001, with
management and the independent auditors. Management has the responsibility for
the preparation of the Company's financial statements and the independent
auditors have the responsibility for the examination of those statements.
Based on the above review and discussions with management and the
independent auditors, the Committee recommended to the Board of Directors that
the Company's audited financial statements be included in its Annual Report on
Form 10-K for the last fiscal year for filing with the Securities and Exchange
Commission. The Committee also recommended the reappointment, subject to
stockholder approval, of the independent auditors, and the Board concurred in
such recommendation.
Submitted by the Audit Committee of the Company's Board of Directors:
James A. Cole
Pierre R. Lamond
John C. Lewis
Other
The Company knows of no other matters to be presented for consideration at
the meeting. If any other matters properly come before the meeting, the persons
named in the enclosed proxy card intend to vote the shares they represent as
the Company may recommend.
THE BOARD OF DIRECTORS
Camarillo, California
December 19, 2001
15
Appendix A
Charter of the Audit Committee of the Board of Directors
of
Vitesse Semiconductor Corporation
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee
reviews and evaluates the Company's accounting principles and its system of
internal accounting controls. It also recommends the appointment of the
Company's independent auditors and approves the services performed by the
auditors.
II. Audit Committee Composition and Meetings
The Audit Committee and its members shall meet the requirement of the
National Association of Securities Dealers as follows:
. The Audit Committee shall be comprised of a minimum of three directors
elected annually by the Board of Directors.
. Each member shall be an independent non-executive director, free from
any relationship that would interfere with the exercise of his or her
judgment. The following persons shall not be considered independent:
. A director that has been employed by the Company or any of its
affiliates for the current year or any of the past three years.
. A director that has accepted any compensation from the Company or
any of its affiliates in excess of $60,000 during the previous
fiscal year, other than compensation for board service, benefits
under a tax-qualified retirement plan, or non-discretionary
compensation.
. A director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the
Company or any of its affiliates as an executive officer.
. A director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which
the Company made, or from which the Company received, payments
(other than those arising solely from investments in the Company's
securities) that exceed 5% of the Company's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of
the past three years.
. A director who is employed as an executive of another entity where
any of the Company executives serve on that entity's compensation
committee.
. All members of the Committee shall have a basic understanding of finance
and accounting and be able to read and understand fundamental financial
statements.
. At least one member shall have accounting or related financial
management expertise. This member must have past employment experience
in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which
results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer, or other
senior officer with financial oversight responsibilities.
. The Audit Committee shall meet on a quarterly basis, or more frequently
as circumstances dictate. In addition, the Committee should communicate
with management quarterly to review the Company's financial statements
and any significant findings based upon the auditors limited review
procedures.
16
III.Audit Committee Responsibilities and Duties
Review Procedures
. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.
. Review the Company's annual audited financial statements prior to filing
or distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting
principles, practices, and judgments.
. Review with financial management the Company's quarterly financial
results prior to the filing of the Company's quarterly financial
statements. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent
auditors in accordance with Statement of Auditing Standards (SAS) No.61.
Independent Auditors
. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors as representatives of the Company's
stockholders. The Audit Committee shall review the independence and
performance of the auditors and annually recommend to the Board of
Directors the appointment of the independent auditors or approve any
discharge of auditors when circumstances warrant.
. Approve the fees and other significant compensation to be paid to the
independent auditors.
. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have the Company
that could impair the auditor's independence.
. Prior to filing the year-end financial statements, discuss the results
of the audit with the independent auditors. Discuss certain matters
required to be communicated to audit committees in accordance with
Statement of Auditing Standards (SAS) No. 61.
. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
Other Audit Committee Responsibilities
. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission (SEC). This report will state whether the Audit
Committee has performed the following:
. Reviewed and discussed the audited financial statements with
management;
. Discussed with the independent auditors the matters required to be
discussed by SAS 61; and
. Received certain disclosures from the auditors regarding their
independence as required by the Independence Standards Board (ISB)
Statement No. 1. The Audit Committee must also include a statement
if based on this review, the Audit Committee recommended to the
Board to include the audited financial statements in the annual
report filed the SEC.
The report should be included in the Company's annual proxy statement.
. Maintain minutes of meetings.
17
AMENDED AND RESTATED
VITESSE SEMICONDUCTOR CORPORATION
1991 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1991 Employee Stock Purchase
Plan of Vitesse Semiconductor Corporation.
1. Purpose The purpose of the Plan is to provide employees of the Company
-------
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock, $0.01 par value per
------------
share, of the Company.
(d) "Company" shall mean Vitesse Semiconductor Corporation, a Delaware
-------
corporation.
(e) "Compensation" shall mean all base straight time gross earnings
------------
including payments for shift premium and commissions and excluding overtime,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of the
--------
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
---------------
(i) "Exercise Date" shall mean the last day of each Purchase Period
-------------
within each Offering Period.
1
(j) "Fair Market Value" shall mean, as of any date, the value of Common
-----------------
Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported), as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock on the last market Trading Day prior
to the day of such determination) as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(2) If the Common Stock is quoted on the NASDAQ system (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high and low asked prices
for the Common Stock on the last market Trading Day prior to the date of such
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(k) "Offering Period" shall mean a 24-month period with respect to which
---------------
the right to purchase Common Stock may be granted under the Plan, as determined
pursuant to paragraph 4(a).
(l) "Participant" means an Employee who is eligible under paragraph 3
-----------
and who elects to participate in the Plan, as provided in paragraph 5.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
----
(n) "Purchase Period" means a six-month period during which
---------------
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to paragraph 4.
(o) "Purchase Price" shall mean the price at which Participants may
--------------
purchase Common Stock under the Plan, as determined pursuant to paragraph 7(b).
(p) "Reserves" shall mean the number of shares of Common Stock covered
--------
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(q) "Subsidiary" shall mean a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(r) "Trading Day" shall mean a day on which national stock exchanges and
-----------
the National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.
2
3. Eligibility
-----------
(a) Any Employee who has been continuously employed by the Company for
at least one (1) month and who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) which permits his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. Offering and Purchase Periods
-----------------------------
(a) While the Plan is in effect, two overlapping Offering Periods shall
commence in each calendar year. The Offering Periods shall consist of the 24-
month periods commencing on February 1 and August 1 of each year and terminating
twenty-four months later on January 31 and July 31, respectively, before the
next Offering Period commences, until the Plan terminates in accordance with
paragraph 19 hereof. The Board shall have the power to change the duration and
timing of Offering Periods with respect to future offerings without stockholder
approval.
(b) While the Plan is in effect, two Purchase Periods shall commence in
each calendar year. The Purchase Periods shall consist of the six-month periods
commencing on February 1 and August 1 of each year and terminating on July 31
and January 31, respectively.
(c) For purposes of calculating the Purchase Price under paragraph 7(b),
the applicable Offering Period shall be determined as follows:
(i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until
the earliest of (A) the end of such Offering Period, (B) the end of his
or her participation in the Plan or (C) re-enrollment in a subsequent
Offering Period under paragraph (ii) below.
(ii) In the event that the Fair Market Value of Stock on the last
Trading Day before the commencement of the Offering Period in which the
Participant is enrolled is higher than on the last Trading Day before the
commencement of any subsequent Offering Period, the Participant shall
automatically be re-enrolled for such subsequent Offering Period.
(iii) When a Participant reaches the end of an Offering Period but
his or her participation is to continue, then such Participant shall
automatically be re-enrolled for the Offering Period that commences
immediately after the end of the prior Offering Period.
3
5. Participation
-------------
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least ten (10) business days prior to the applicable Enrollment Date, unless a
later time for filing the subscription agreement is set by the Board for all
eligible Employees with respect to a given Offering Period.
(b) Once enrolled in the Plan, a Participant shall continue to
participate in the Plan until he or she ceases to be an eligible Employee,
withdraws from the Plan under paragraph 10(a) or reaches the end of the Purchase
Period in which his or her employee contributions were discontinued under
paragraph 6(d). A Participant who withdrew from the Plan under paragraph 10(a)
may again become a Participant, if he or she then is an eligible employee, by
following the procedure described in paragraph 5(a) above. A Participant whose
employee contributions were discontinued automatically under paragraph 6(d)
shall automatically resume participation at the beginning of the earliest
Purchase Period ending in the next calendar year, if he or she then is an
eligible employee.
6. Payroll Deductions
------------------
(a) At the time a Participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding twenty percent (20%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed twenty percent (20%) of the Participant's Compensation during
said Offering Period.
(b) All payroll deductions made for a Participant shall be credited to
his or her account under the Plan and will be withheld in whole percentages
only. A Participant may not make any additional payments into such account.
(c) A Participant may discontinue his or her participation in the Plan
as provided in paragraph 10. A Participant's subscription agreement shall remain
in effect for successive Offering Periods unless terminated as provided in
paragraph 10.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and paragraph 3(b) herein, a Participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year (the "Current
Offering Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Offering Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Offering Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement at the beginning of the first Offering Period which is scheduled to
end in the following calendar year, unless terminated by the Participant as
provided in paragraph 10.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the Participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the Option or the disposition of the Common Stock. At any time,
4
the Company may, but will not be obligated to, withhold from the Participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefit attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option and Purchase Price
----------------------------------
(a) On the Enrollment Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Exercise Date during such Offering Period (at the applicable
Purchase Price) up to a number of shares of the Company's Common Stock
determined by dividing such Employee's payroll deductions accumulated prior to
such Exercise Date and retained in the Participant's account as of the Exercise
Date by the applicable Purchase Price; provided that in no event shall an
Employee be permitted to purchase during any Purchase Period more than a number
of shares determined by dividing $12,500 by the fair market value of a share of
the Company's Common Stock on the Enrollment Date, and provided further that
such purchase shall be subject to the limitations set forth in paragraphs 3(b)
and 12 hereof. To the extent that the payroll deductions on behalf of an
Employee exceed the aggregate Purchase Price, the payroll deductions credited to
such Participant's account during the Offering Period may be returned to the
Employee or credited to a following Purchase Period. Exercise of the option
shall occur as provided in paragraph 8, unless the Participant has withdrawn
pursuant to paragraph 10, and such option shall expire on the last day of the
Offering Period.
(b) The Purchase Price for each share of Stock purchased at the close
of a Purchase Period shall be the lower of:
(i) 85% of the Fair Market Value of such share on the last
Trading Day in such Purchase Period; or
(ii) 85% of the Fair Market Value of such share on the last
Trading Day before the commencement of the applicable Offering Period
(as determined under Section 4(c)).
8. Exercise of Option Unless a Participant withdraws from the Plan as
------------------
provided in paragraph 10 below, his or her option for the purchase of shares
will be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such Participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be retained in the Participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the Participant as provided in
paragraph 10. Any other monies left over in a Participant's account after the
Exercise Date shall be returned to the Participant. During a Participant's
lifetime, a Participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery As promptly as practicable after each Exercise Date on which
--------
a purchase of shares occurs, the Company shall arrange the delivery to each
Participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
5
10. Withdrawal; Termination of Employment
-------------------------------------
(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the Participant's payroll deductions
credited to his or her account will be paid to such Participant promptly after
receipt of notice of withdrawal and such Participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a
Participant withdraws from an Offering Period, payroll deductions will not
resume at the beginning of the succeeding Offering Period unless the Participant
delivers to the Company a new subscription agreement.
(b) Upon a Participant's ceasing to be an Employee for any reason or
upon termination of a Participant's employment relationship (as described in
paragraph 2(h)), the payroll deductions credited to such Participant's account
during the Offering Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his or her death, to the person
or persons entitled thereto under paragraph 14, and such Participant's option
will be automatically terminated.
(c) In the event an Employee fails to remain an Employee of the Company
for at least twenty (20) hours per week during an Offering Period in which the
Employee is a Participant, he or she will be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to his or her account will be
returned to such Participant and such Participant's option terminated.
(d) A Participant's withdrawal from an Offering Period will not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the Participant
withdraws.
11. Interest No interest shall accrue on the payroll deductions of a
--------
Participant in the Plan.
12. Stock
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 13,000,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in paragraph 18. If on a given Exercise Date the number of shares with respect
to which options are to be exercised exceeds the number of shares then available
under the Plan, the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) The Participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse.
6
13. Administration The Plan shall be administered by the Board of the
--------------
Company or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties. Members of the
Board who are eligible Employees are permitted to participate in the Plan,
provided that:
(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the grant
of any option pursuant to the Plan.
(b) If a Committee is established to administer the Plan, no member of
the Board who is eligible to participate in the Plan may be a member of the
Committee.
14. Designation of Beneficiary
--------------------------
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such Participant of
such shares and cash. In addition, a Participant may file a written designation
of a beneficiary who is to receive any cash from the Participant's account under
the Plan in the event of such Participant's death prior to exercise of the
option.
(b) Such designation of beneficiary may be changed by the Participant
at any time by written notice. In the event of the death of a Participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such Participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative known to the Company, then
to such other person as the Company may designate.
15. Transferability Neither payroll deductions credited to a
---------------
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with paragraph 10.
16. Use of Funds All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports Individual accounts will be maintained for each Participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
7
18. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
----------------------------------------------------------------------
Sale or Change of Control
- -------------------------
(a) Changes in Capitalization Subject to any required action by the
-------------------------
stockholders of the Company, the Reserves, as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation In the event of the proposed
---------------------------
dissolution or liquidation of the Company, the Offering Period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such progress by setting a
new Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the Exercise Date for
his option has been changed to the New Exercise Date and that his option will be
exercised automatically on the New Exercise Date, unless prior to such date he
has withdrawn from the Offering Period as provided in paragraph 10. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration (whether
stock, cash or other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the Participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
8
19. Amendment or Termination
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in paragraph 18, no such
termination can affect options previously granted, provided that an Offering
Period may be terminated by the Board of Directors on any Exercise Date if the
Board determines that the termination of the Plan is in the best interests of
the Company and its stockholders. Except as provided in paragraph 18, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant. To the extent necessary to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or under
Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain stockholder approval in
such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a Participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld from the
Participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices All notices or other communications by a Participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of twenty
(20) years unless sooner terminated under paragraph 19.
Revised 1/99, 9/01, 12/01
9
(Sample Form)
Exhibit A
VITESSE SEMICONDUCTOR CORPORATION
1991 EMPLOYEE STOCK PURCHASE PLAN
Subscription Agreement
1. I, , hereby elect to participate in the Vitesse
----------------------------
Semiconductor Corporation (the "Company") 1991 Employee Stock Purchase Plan
(the "Purchase Plan") and subscribe to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the Purchase
Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
% of my Compensation on each payday (not to exceed 20%) during the
--------
Offering Period in accordance with the Purchase Plan (no fractional
percentages are permitted).
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will
be used to automatically exercise my option.
4. I understand that my participation is in all respects subject to the terms of
the Purchase Plan.
5. I understand that under the Purchase Plan shares are issued in the name of
the Participant or in the name of the Participant and his or her spouse.
6. I understand that if I dispose of any shares received by me pursuant to the
Purchase Plan within two (2) years after the Enrollment Date (the first day
of the Offering Period during which I purchased such shares), I will be
treated for Federal income tax purposes as having received ordinary income in
the year of sale equal to the difference between the purchase price of the
shares and the fair market value of the shares on the date of exercise
(purchase). Any additional gain (or loss) (measured using the fair market
value of the shares on the date of exercise (purchase)) is a capital gain (or
loss). I agree to notify the Company in writing within 30 days after the
date of any such disposition and I will make adequate provision for Federal,
State or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock.
If I dispose of such shares after the expiration of the two-year holding
period, I understand that I will be treated for Federal income tax purposes
as having received ordinary income equal to the lesser of (i) the excess of
the fair market value of the shares at the time of disposition over the
amount paid for the shares or (ii) the excess of the fair market value of the
shares on the date of grant (enrollment) over the exercise (purchase) price
(determined as if the option were exercised on the date of grant). Any
additional gain (or loss) is capital gain (or loss). The applicable capital
gain rate will depend on the actual length of my holding period.
10
Subscription Agreement Page 2
7. I hereby agree to be bound by the terms of the Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility
to participate in the Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Purchase
Plan:
Name:
---------------------------------------------------------
Relationship:
---------------------------------------------------------
Address:
---------------------------------------------------------
---------------------------------------------------------
Name:
---------------------------------------------------------
Relationship:
---------------------------------------------------------
Address:
---------------------------------------------------------
* * * * * * * * * * * * * * * * * * * * * * * *
I understand that this Subscription Agreement shall remain in effect throughout
successive Offering Periods unless I terminate it by forwarding a completed
Notice of Withdrawal to the Finance Department.
* * * * * * * * * * * * * * * * * * * * * * * *
- ----------------------------------- ------------------------
Signature of Employee Date
- ----------------------------------- ------------------------
Print Name Social Security Number
- -----------------------------------
Address
- -----------------------------------
Subscription Agreement
11
(Sample Form)
Exhibit B
VITESSE SEMICONDUCTOR CORPORATION
1991 EMPLOYEE STOCK PURCHASE PLAN
Notice of Withdrawal
The undersigned Participant in the Vitesse Semiconductor Corporation 1991
Employee Stock Purchase Plan hereby notifies the Company that he/she hereby
withdraws from Offering Period ___, which began on __________________. If
applicable, Participant hereby directs the Company to pay the undersigned as
promptly as practicable all payroll deductions credited to his/her account with
respect to such Offering Period. The undersigned understands and agrees that
his/her option for such Offering Period will be automatically terminated. The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
shall be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement.
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Date
Notice of Withdrawal
12
DETACH HERE
PROXY
VITESSE SEMICONDUCTOR CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 2002
The undersigned stockholder of Vitesse Semiconductor Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, first mailed to stockholders on or about
December 19, 2001, and hereby appoints Louis R. Tomasetta and Pierre R. Lamond,
and each of them, with full power of substitution, as Proxy or Proxies, to vote
all shares of the Common Stock of the undersigned at the Annual Meeting of
Stockholders of Vitesse Semiconductor Corporation to be held on January 29,
2002, and at any adjournments thereof, upon the proposals set forth on this form
of proxy and described in the Proxy Statement, and in their discretion with
respect to such other matters as may be properly brought before the meeting or
any adjournments thereof.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
VITESSE SEMICONDUCTOR
CORPORATION
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
-------------------
Vote by Telephone
-------------------
It's fast, convenient, and immediate! Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
- --------------------------------------------------------------------------------
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 1-877-PRX-VOTE (1-877-779-8683).
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the recorded instructions.
- --------------------------------------------------------------------------------
Your vote is important!
Call 1-877-PRX-VOTE anytime!
---------------------
Vote by Internet
---------------------
It's fast, convenient, and your vote is immediately confirmed and posted.
- --------------------------------------------------------------------------------
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website http://www.eproxyvote.com/vtss
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the instructions provided.
- --------------------------------------------------------------------------------
Your vote is important!
Go to http://www.eproxyvote.com/vtss anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
DETACH HERE
[X] Please mark votes as in this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR NAMED BELOW AND A
VOTE FOR PROPOSALS 2 AND 3.
1. To elect six directors of the Company to serve for the ensuing one year until
the Company's 2003 Annual Meeting of Stockholders and until their successors
are elected.
Nominees: (01) Pierre R. Lamond, (02) Vincent Chan, (03) James A.
Cole, (04) Alex Daly, (05) John C. Lewis, (06) Louis R. Tomasetta
FOR [_] [_] WITHHELD
[_]______________________________________
For all nominees except as noted above
2. To approve an amendment to the Company's 1991 Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To ratify the selection of KPMG LLP as the Company's independent auditors for
the fiscal year ending September 30, 2002.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If the signer
is a corporation, please give full corporate name and have a duly authorized
officer sign stating title. If the signer is a partnership, please sign in
partnership name by authorized person.
Signature:_____________ Date:___________ Signature:_________ Date:________