Exhibit 10.1
SEMTECH CORPORATION
CASH BONUS INCENTIVE PLAN
Amended and Restated as of January 30, 2006
ARTICLE I
PURPOSE OF THE PLAN
This Plan is established to provide a further incentive to selected employees to
promote the success of Semtech Corporation by providing an opportunity to
receive additional compensation for beyond normal expected performance measured
against individual and business unit goals. The Plan is intended to achieve the
following:
1. Stimulate employees to work individually and as teams to meet objectives
consistent with enhancing shareholder value.
2. Facilitate the Company's ability to attract, retain, and motivate top
technical, managerial, and executive talent.
3. Ensure that employees are held accountable, and appropriately rewarded,
for both organizational and individual performance.
ARTICLE II
DEFINITIONS
1. ANNUAL SALARY -- The regular base salary of a Participant at the time of
calculation of the incentive award payment, but excluding any incentive
compensation, commissions, over-time payments, retroactive payments not
affecting the base salary or applicable to the current year, and any other
payments of compensation of any kind.
2. BOARD -- The Board of Directors of the Company.
3. BUSINESS PLAN -- The Company's Annual Business Plan.
4. BUSINESS UNIT - The business units defined by the Company from time to time
to reflect its major product lines.
5. COMMITTEE -- The Compensation Committee of the Board of Directors as from
time to time appointed or constituted by the Board of Directors.
6. COMPANY -- Semtech Corporation and those subsidiaries of which it owns
directly or indirectly 50% or more of the voting stock or other equity
interests.
7. EBIT - earnings before interest and taxes.
8. EMPLOYEE -- Any person who is employed by the Company and who is paid a
salary as distinguished from an hourly wage. The term shall be deemed to
include any person who was employed by the Company during all or any part
of the year with respect to which a bonus pool has been established by the
Committee but shall not include any employee who, during any part of a Plan
Year, was represented by a collective bargaining agent or whose salary is
paid by a third party.
9. MANAGER - the manager of a Business Unit or, with respect to a Participant
who is not a member of a Business Unit, the relevant corporate function
head. Managers generally hold the position of Vice President.
10. PARTICIPANT -- Any Employee selected to participate in the Plan in
accordance with its terms.
11. PLAN -- This Semtech Corporation Cash Bonus Incentive Program.
12. PLAN YEAR -- The Company's fiscal year.
13. SECTION 16 GROUP - The Chief Executive Officer and other officers and
employees who have been determined by the Board to be statutory insiders
subject to the requirements of Section 16 of the Securities Exchange Act of
1934, as amended.
14. SUPERVISOR - A Participant's immediate supervisor.
ARTICLE III
ELIGIBILITY FOR PARTICIPATION
Participants are those salaried employees of the Company selected based on
recommendations by the Supervisors, with the endorsement of the applicable
Managers. The Committee may authorize the Company's Vice President of Human
Resources to determine who shall participate in the Plan, except for members of
the Section 16 Group. Participation of members of the Section 16 Group shall
require Committee approval. The selection of an employee as a Participant for a
Plan Year may be shown by the Committee's establishment of a bonus pool for such
Plan Year that includes a target award for such employee. No member of the
Committee shall be eligible to participate in the Plan.
ARTICLE IV
BONUS POOL
1. As early as feasible at the beginning of each Plan Year, the Chief
Executive Officer shall recommend to the Committee for its review and
approval an amount to be established as a bonus pool for the Plan Year. The
proposed pool amount shall be calculated as the sum of (a) the target bonus
awards (calculated in accordance with Exhibit A hereto) for employees
recommended to be Participants for the Plan Year and (b) an estimate of
target awards for positions that may be filled during the Plan Year (new
hires who may become Participants on a pro rata basis).
2. To assist the Committee in making a determination with respect to the Chief
Executive Officer's recommendation, the proposed bonus pool shall also be
expressed as a percentage of EBIT, as set forth in the Business Plan.
However, for this purpose such EBIT shall be computed prior to the
deduction of incentive compensation payments to be paid under the Plan and
may exclude anticipated extraordinary items.
3. Incentive compensation payments will be made in accordance with Article V.
In accordance with Exhibit A hereto, the aggregate incentive compensation
payments made under the Plan for the Plan Year may exceed the bonus pool in
certain circumstances, but in no event will the aggregate incentive
compensation payments under the Plan for a Plan Year exceed 205% of the
bonus pool established for that Plan Year.
4. The bonus pool does not represent a segregated fund of assets. Participants
have no claim on any particular group of Company assets, either before or
after incentive compensation payments are determined or authorized for the
Plan Year. Any incentive compensation awarded under the Plan will be paid
from the general assets of the Company.
ARTICLE V
INCENTIVE COMPENSATION PAYMENTS
1. CALCULATION AND AUTHORIZATION OF PAYMENTS -- Incentive compensation
payments to Participants shall be calculated, under the supervision of the
Chief Financial Officer, in accordance with the formula and procedures set
forth in Exhibit A hereto and the aggregate of all Participant's incentive
awards determined under Exhibit A will be recommended to the Committee for
its consideration. Information regarding the proposed incentive award for
each Particpant who is a member of the Section 16 Group will be presented
separately. The individual calculations for other Participants will also be
available for the Committee's review. No award is payable under the Plan
for any Plan Year unless and until the Committee authorizes the awards for
Participants generally and for Participants who are members of the Section
16 Group in particular.
2. INDIVIDUAL PERFORMANCE FACTORS - A Participant's Individual Performance
Factor that is factored into the incentive payment calculation shall be
based on achievement of performance goals, as provided in Exhibit A. A
Participant's Individual Performance Factor shall be determined by the
Participant's Supervisor. The Individual Performance Factor of the Chief
Executive Officer shall be determined by the Committee and the Committee
shall review the Individual Performance Factors of other Participants who
are members of the Section 16 Group. The Committee may, at the request of
any member of the Committee, review the Individual Performance Factors of
any other Participant or groups of Participants. The Committee may make
adjustments in any such performance factors as it considers appropriate.
3. ORGANIZATIONAL PERFORMANCE FACTORS - After the end of the Plan Year, the
performance of the Company and each Business Unit shall be rated against
the Business Plan to determine the Organizational Performance Factors that
are factored into the incentive payment calculation, all as provided in
Exhibit A hereto.
4. METHOD OF PAYMENT -
A. The incentive compensation payment authorized for each Participant
with respect to each Plan Year shall be paid to such Participant in
cash within two and one-half months after the close of the Plan Year,
provided however, that payments will not be made until the Company's
registered independent public accountant has completed its audit of
the Company's financial statements for the Plan Year. Notwithstanding
any awards authorized by the Committee for the Plan Year, the
Committee may, in its sole discretion, cancel or adjust downward the
unpaid awards for any or all Participants based on the results of the
audit.
B. All Incentive compensation payments shall be made in cash and paid net
of any taxes or other amounts required to be withheld.
5. RIGHTS OF PARTICIPANTS
A. Selection of an individual as a Participant for one Plan Year does not
mean that the individual will be selected to participate in future
Plan Years.
B. The establishment of a bonus pool is subject to the discretion of the
Committee. No Participant shall have any right to require the
Committee to establish a bonus pool for any Plan Year. No Participant
shall have any vested interest or property right or any share in any
amounts that may be established as a bonus pool.
C. All payments are subject to the discretion of the Committee. No
Participant shall have any right to require the Committee to authorize
any incentive compensation payments under the Plan. Even though
Participant performance may be rated periodically during the Plan Year
and progress against Organizational Performance Factors may be
tracked, all incentive compensation payments are subject to
calculation as set forth in Exhibit A and the discretion of the
Committee. The mere existence of periodic performance assessments or
organizational performance tracking does not give
the Participant any basis for claiming any incentive compensation
under this Plan on a pro rata basis during the Plan Year or otherwise.
D. Payments properly made under the Plan and distributed to Participants
shall not be recoverable from the Participant by the Company.
E. Nothing in this Plan gives a Participant the right to remain in the
employ of the Company. Except to the extent explicitly provided
otherwise in a then effective written employment contract executed by
Participant and the Company, Participant is an at will employee whose
employment may be terminated without liability at any time for any
reason.
ARTICLE VI
ADMINISTRATION
The Plan shall be administered under the direction of the Committee. The
Committee shall have the right to construe the Plan, to interpret any provision
of the Plan, to make rules and regulations relating to the Plan, and to
determine any factual question arising in connection with the Plan's operation
after such investigation or hearing as the Committee may deem appropriate. Any
decision made by the Committee under the provisions of this Article shall be
conclusive and binding on all parties concerned. The Committee may delegate to
the officers or employees of the Company the authority to execute and deliver
those instruments and documents, to do all acts and things, and to take all
other steps deemed necessary, advisable or convenient for the effective
administration of this Plan in accordance with its terms and purpose. For the
avoidance of doubt, the Committee may not delegate the duty to approve the bonus
pool under Article IV or to authorize awards under Article V.
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
The Board shall have the unilateral right to terminate or amend this Plan at any
time with respect to all or some Participants with respect to any unpaid bonus
amounts, and to discontinue the establishment of bonus pools.
ARTICLE VIII
EFFECTIVE DATE
This Amended and Restated Plan shall be effective beginning with the Company's
2007 fiscal year.
EXHIBIT A
CALCULATION OF CASH BONUS INCENTIVE PROGRAM PAYMENTS
A. AWARD FORMULA
1. It is expected that the business and individual objectives established
for this Plan will be accomplished in accordance with the Company's
Code of Conduct. A Participant's commitment and adherence to the
Company's ethical standards will be considered in determining awards
under this Plan.
2. Incentive compensation payments will be calculated by multiplying the
Participant's Annual Salary by the applicable "Target Level" for the
Participant (as defined in B) to establish the Participant's "Target
Award"
3. Subject to any discretionary adjustments made pursuant to the Plan and
to any limitations contained in the Plan, awards for Participants who
are members of a Business Unit will be determined by mutliplying the
Participant's Target Award by the sum of -
a. 30% of the Individual Performance Factor (as defined in C);
b. 50% of the relevant Business Unit Performance Factor (as
defined in D); and
c. 20% of the Corporate Performance Factor (as defined in D).
4. Subject to any discretionary adjustments made pursuant to the Plan and
to any limitations contained in Plan, awards for Participants other
than the Chief Executive Officer who are members of a corporate
functional group rather than a Business Unit will determined by
multiplying the Participant's Target Award by the sum of
a. 30% of the Individual Performance Factor (as defined in C);
and
b. 70% of the Corporate Performance Factor (as defined in D).
5. Subject to any discretionary adjustments made pursuant to the Plan and
to any limitations contained in Plan, awards for the Chief Executive
Officer will determined by multiplying the Participant's Target Award
by the sum of
a. 30% of the Individual Performance Factor (as defined in C);
and
b. 70% of the CEO Corporate Performance Factor (as defined in
D).
6. Awards generally shall be made only to
a. Participants who are in the employ of the Company on the
date of payment, and
b. the estates of, or beneficiaries designated by, Participants
who shall have died while employed during the Plan Year.
However, pro-rated awards for Participants who terminate employment
during a Plan Year may at the discretion of the Manager and with the
endorsement of the Chief Executive Officer, be recommended to the
Committee for consideration based on the conditions of the case.
7. At the discretion of the Manager and the Vice President of Human
Resources and with the endorsement of the Chief Executive Officer,
pro-rated awards may be recommended for individuals who become
Participants subsequent to the beginning of a Plan Year.
8. Recommended awards for Participants whose target levels change during
the Plan Year will be based on the target level in effect when the
calculation is made.
9. The aggregate of all Participant's incentive awards determined under
this Exhibit A will be recommended to the Committee for its
consideration. Incentive awards determined for
Participants who are members of the Section 16 Group will be
separately set forth for the Committee's consideration.
10. Before the calculated awards are presented to the Committee, the award
for any Participant or group of Participants may be adjusted, upward
or downward, at the discretion of the Chief Executive Officer. The
recommended award for any Participant, or group of Participants, may
be adjusted, upward or downward, at the discretion of the Committee.
Examples of factors that could lead to an adjustment are the
subjective criteria such as the Participant's initiative, leadership,
teamwork, judgment, and creativity.
11. Notwithstanding any other provision of this Plan, in no event will an
incentive compensation payment under this Plan to any Participant for
a Plan Year exceed 205% of the Participant's Target Award for that
Plan Year.
12. Notwithstanding any awards authorized by the Committee for a Plan
Year, the Committee may, in its sole discretion, cancel or adjust
downward the unpaid awards for any or all Participants based on the
results of the audit of the Company's financial statements for the
Plan Year by the Company's independent registered public accountant.
B. TARGET LEVELS
Target levels are based on the level of importance and responsibility of the
position in the organization. Where a range has been established, the actual
target level is determined by the Manager and Vice President of Human Resources,
subject to approval by the Chief Executive Officer. The Committee determines the
actual target level for the Chief Executive Officer and each of the other
members of the Section 16 Group.
Position Target Level
President and Chief Executive 70-150%
Officer
Chief Financial Officer 70-125%
Chief Operating Officer 70-125%
Business Unit and Functional 50-125%
Unit Heads
Other Eligible Positions 10-100%
C. INDIVIDUAL PERFORMANCE FACTORS
1. At or near the beginning of each fiscal quarter, performance goals for
each Participant shall be set by the Participant and the Participant's
Supervisor. These quarterly individual performance goals are weighted
by the Participant and Supervisor to reflect the importance of each
objective and are generally referred to as "Most Important Tasks
(MITs)". MITs for the Chief Executive Officer shall be set by the
Chief Executive Officer and the Committee. From time to time the
Chairman of the Board may assist the Committee with respect to the
MITs of the Chief Executive Officer.
2. Establishment of MITs
a. Each quarter the Chief Executive Officer will disseminate
general financial goals and strategic objectives to the
Managers. The Mangers will, in turn, disseminate their
tactical plans and objectives to the Supervisors to assist
in the development of Participants' MITs.
b. MITs are generally to be established in a manner so as to be
specific, measurable, and time specific. MITs should be
attainable and realistic but also provide some challenge to
achieve results above the norm.
c. Each Participant's quarterly MITs will include individual
performance goals related to technical, operational,
financial, and/or managerial matters such as
o research and development
o product development cycle time
o patent activity
o design wins, in terms of customer programs or
reference designs
o operations performance
o systems improvements
o supplier contracts or issues
o production contracts or issues
o customer contracts or issues
o foundry management
o supply chain management
o inventory control
o manufacturing efficiencies, including improvement of
variances
o quality and reliability
o order fulfillment and delivery performance
o sales support
o marketing to key customers
o obtaining new customers
o customer support, including application matters
o bookings
o billings
o achievement of cost savings
o budget achievement
o free cash flow
o working capital
o return on equity
o return on sales
o return on assets
o margin improvements
o investor relations
o corporate governance
o filling key positions
o legal matters
o strategic initiatives
The cumulative weighting of such individual performance
goals shall total to 100% for each Participant. The actual
weighting of a Participant's individual performance goals
shall be determined by the Participant's Supervisor. The
actual weighting of the Chief Executive Officer's individual
performance goals shall be determined by the Committee.
d. Changes or substitutions in objectives and/or weighting must
have the endorsement of both the Participant's Supervisor
and Manager. Such changes with respect to the Chief
Executive Officer shall require the approval of the
Committee.
3. Scoring of MITS
After the end of each fiscal quarter, each Participant's performance
against the MITs established for the quarter shall be assessed by the
Participant's Supervisor. Quarterly MITs scoring for the Chief
Executive Officer shall be performed the Committee. From time to time
other Board members may assist the Committee in review of the Chief
Executive Officer's performance.
a. Objectives may be evaluated on a partial credit basis.
b. A Participant may receive a quarterly MITs score in excess
of 100% based upon exceptional performance, but only with
the review and approval of (a) the Participant's Manager and
endorsement of either (i) the Chief Executive Officer or
Chief Operating Officer (with respect to Participants in
Business Units) or (ii) the Chief Executive Officer (with
respect to Participants in corporate functional groups and
members of the Section 16 Group) or (b) the Committee, with
respect to the Chief Executive Officer.
4. After the end of the Plan Year, each Participant's quarterly MITs
scores shall be averaged to arrive at the Participant's Individual
Performance Factor.
5. The Individual Performance Factor for any Participant, or group of
Participants may be adjusted, upward or downward, at the discretion of
the Chief Executive Officer or the Committee.
D. ORGANIZATIONAL PERFORMANCE FACTORS
1. Establishment of Formulas
a. At the time the bonus pool is established by the Committee,
the Committee will also determine the percentage of the
Business Plan that must be achieved (in terms of EBIT) in
order to use 100% as the Corporate Performance Factor in the
award calculation. In doing so, the Committee will establish
a formula for generating the Corporate Performance Factor
for lesser and superior performance against the Business
Plan. In most circumstances, 100% achievement of the
Business Plan will equate to a 100% Corporate Performance
Factor, but the Committee may establish a different
correlation. The Committee may adjust the formula to
establish a higher performance threshold that must be
attained before any value is assigned to the Corporate
Performance Factor. In no event will the formula result in a
Corporate Performance Factor of more than 250%.
For example, a formula established by the Committee may
correlate attainment of 100% of the Business Plan with a
100% Corporate Performance Factor, attainment of 120% of the
Business Plan with a 150% Corporate Performance Factor, and
attainment of 60% or less of the Business Plan with a
Corporate Performance Factor of zero. Even though the
formula results in a Corporate Performance Factor of zero at
a 60% performance level, the Committee may adjust the
formula to require better performance, say 70% attainment of
the Business Plan, before any value is assigned to the
Corporate Performance Factor.
b. Taking into account the Chief Executive Officer's leadership
role in attaining the Business Plan, the Committee will
likewise establish a formula for the CEO Corporate
Perfomance Factor. This formula may be the same as the
Corporate Performance Factor formula or may vary from it.
For example, the Committee may establish a formula that
results in a higher CEO Corporate Performance Factor than
Corporate Performance Factor for the same level of
acheivement over and above the Business Plan and/or which
results in a lower CEO Corporate Performance Factor than
Corporate Performance Factor for the same level of
achievement if the Business Plan is not met. In no event
will the formula result in a CEO Corporate Performance
Factor of more than 250%.
c. The Committee will likewise establish formulas with respect
to the Business Plan of each Business Unit. In no event will
any formula result in a Business Unit Performance Factor for
any Business Unit of more than 250%.
d. The formulas with respect to Corporate Performance Factor
and CEO Corporate Performance Factor may be adjusted by the
Committee at any time during the Plan Year to reflect
changes in the Company's structure, such as the acquisiton
or disposition of a line of business. Similarly, the
formulas with respect to Business Unit Performance may be
adjusted by the Committee at any time during the Plan Year
to reflect changes in Business Unit structure such as the
combining of Business Units.
2. Calculation of Organizational Factors
a. After the end of each Plan Year, the actual EBIT performance
of the Company will be compared to the Business Plan. The
percentage of the Business Plan achieved will be used in the
formulas previously established by the Committee to
determine the Corporate Performance Factor carried into the
award computation and the CEO Corporate Performance Factor
carried into the CEOs award computation. The Corporate
Performance Factor may be adjusted upward or downward at the
discretion of the Chief Executive Officer, for example to
address an extraordinary item, but in no event will such
adjustment result in a Corporate Performance Factor of more
than 250%.
b. Likewise, after the end of each Plan Year, the actual EBIT
performance of each Business Unit will be compared to the
Business Plan for the Business Unit. The percentage of the
Business Unit Business Plan achieved used in the formula
previously established by the Committee to determine the
Business Unit Performance Factor carried into the award
computation. The Business Unit Performance Factor for any
Business Unit may be adjusted upward or downward at the
discretion of the Chief Executive Officer, but in no event
will such adjustment result in a Business Unit Performance
Factor of more than 250%.
c. The CEO Corporate Performance Factor, the Corporate
Performance Factor and the Business Unit Performance Factors
may be adjusted, upward or downward, at the discretion of
the Committee, but in no event will such adjustment result
in a CEO Corporate Performance Factor, Corporate Performance
Factor or Business Unit Performance Factor of more than
250%.