UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material under |
SEMTECH CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(1) and0-11. | |||
(1) | Title of each class of securities to which transaction applies:
| |||
(2) | Aggregate number of securities to which transaction applies:
| |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
(4) | Proposed maximum aggregate value of transaction:
| |||
(5) | Total fee paid:
| |||
☐ | Fee paid previously with preliminary materials. | |||
☐ | Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid:
| |||
(2) | Form, Schedule or Registration Statement No.:
| |||
(3) | Filing Party:
| |||
(4) | Date Filed:
|
Notice of Annual Meeting and Proxy Statement |
Semtech Corporation 200 Flynn Road Camarillo, California 93012
|
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 15, 201711, 2020
To Our Stockholders:
Notice is hereby given that the 20172020 Annual Meeting of Stockholders of Semtech Corporation (the “Company”) will be held at the Courtyard Marriott, 4994 Verdugo Way,offices of Semtech Corporation, 200 Flynn Road, Camarillo, California 9301293012* on Thursday, June 15, 201711, 2020 at 11:00 a.m., Pacific Time. The purposes of the meeting are to:
1. | elect nine directors from the candidates nominated by the Company’s Board of Directors to hold office until the next annual meeting |
2. | consider and act on a proposal to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the Company for fiscal year |
3. | consider an advisory resolution to approve executive compensation; |
4. |
transact any other business which may properly come before the |
The record date for the determination of the stockholders entitled to notice of and to vote at the 20172020 Annual Meeting of Stockholders was the close of business on April 21, 2017.17, 2020. Holders of a majority of the outstanding shares of the Company’s common stock as of the record date must be present in person or by proxy in order for the meeting to be held.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 15, 2017: 11, 2020: Our Proxy Statement is attached. Our financial and other information is contained in our Annual Report to Stockholders for fiscal year 2017.2020. Pursuant to rules promulgated by the Securities and Exchange Commission, we have elected to provide access to our proxy materials by notifying you of the availability of our proxy materials on the Internet. You will not receive a printed copy of the proxy materials unless specifically requested. This Proxy Statement and our Annual Report to Stockholders for fiscal year 2017,2020, including ourForm 10-K for the fiscal year ended January 29, 2017,26, 2020, are available athttp://investors.semtech.com/ar2017ar2020 which does not have “cookies” that identify visitors to the site. Our proxy materials can be accessed without requiring the use of a control number. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials. In addition, the Notice of Internet Availability of Proxy Materials provides instructions on how stockholders may request to receive proxy materials for future annual meetings in printed or email form.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the 20172020 Annual Meeting of Stockholders, we urge you to vote and submit your proxy by the Internet, telephone or mail using the instructions on the Notice of Internet Availability of Proxy Materials, or your proxy card if you received a paper copy of the proxy materials in order to ensure the presence of a quorum.
Any proxy may be revoked by delivery of a later dated proxy card or submitting another proxy over the Internet or telephone, by delivery of a written notice of revocation to the Secretary of the Company or by attending the Annual Meeting and voting in person.
* | We intend to hold the meeting in person. However, we are actively monitoring the coronavirus(COVID-19) situation and are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. If we take this step, we will announce the decision to do so in advance by mailing a notice of the applicable change(s) to the meeting to |
stockholders and filing the notice as Definitive Additional Materials with the Securities and Exchange Commission. We will also issue a press release and post details on the change(s) to the meeting on our website at https://investors.semtech.com. In the event we hold the meeting solely by means of remote communication, you will need the control number included on your Notice of Internet Availability or your proxy card or voting instruction form (if you received a printed copy of the proxy materials) or included in the email to you if you received the proxy materials by email in order to be able to gain access to, and submit questions during, the Annual Meeting. Please note that if you hold shares through a brokerage firm, bank or other holder of record, you cannot vote your shares at the Annual Meeting unless you have obtained a legal proxy from your broker, bank or other stockholder of record. |
By Order of the Board of Directors
Charles B. Ammann
Secretary
May 5, 20171, 2020
Camarillo, California
ATTENDING THE 20172020 ANNUAL MEETING OF STOCKHOLDERS
For stockholders of record, the Notice of Internet Availability of Proxy Materials or proxy card is your ticket to the 20172020 Annual Meeting of Stockholders. Please present your ticket together with picture identification when you reach the registration area at the 20172020 Annual Meeting of Stockholders.
For stockholders who hold shares through a brokerage firm, bank or other holder of record, please use a copy of your latest account statement showing your investment in our common shares as of the record date as your admission ticket for the meeting. Please present your account statement together with picture identification to one of our representatives at the 20172020 Annual Meeting of Stockholders. Please note that you cannot vote your shares at the 20172020 Annual Meeting of Stockholders unless you have obtained a legal proxy from your broker, bank or other stockholder of record. A copy of your account statement is not sufficient for this purpose.
Semtech Corporation20172020 Proxy Statement
SEMTECH CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
June 15, 201711, 2020
The Board of Directors (“Board”) of Semtech Corporation (the “Company,” “we,” “us” or “our”), which has its principal executive offices at 200 Flynn Road, Camarillo, California, 93012, furnishes this proxy statement (this “Proxy Statement”) in connection with its solicitation of proxies to be voted at the 20172020 Annual Meeting of Stockholders to be held at the Courtyard Marriott, 4994 Verdugo Way,offices of Semtech Corporation, 200 Flynn Road, Camarillo, California 93012 on Thursday, June 15, 201711, 2020 at 11:00 a.m., Pacific Time, or at any adjournments or postponements thereof (the “Annual Meeting”).
We intend to hold the meeting in person. However, we are actively monitoring the coronavirus(COVID-19) situation and are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. If we take this step, we will announce the decision to do so in advance by mailing a notice of the applicable change(s) to the meeting to stockholders and filing the notice as Definitive Additional Materials with the Securities and Exchange Commission. We will also issue a press release and post details on the change(s) to the meeting on our website at https://investors.semtech.com.
In the event we hold the meeting solely by means of remote communication, you will need the control number included on your Notice of Internet Availability or your proxy card or voting instruction form (if you received a printed copy of the proxy materials) or included in the email to you if you received the proxy materials by email in order to be able to gain access to, and submit questions during, the Annual Meeting. Please note that if you hold shares through a brokerage firm, bank or other holder of record, you cannot vote your shares at the Annual Meeting unless you have obtained a legal proxy from your broker, bank or other stockholder of record.
We first made this Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders and proxy card available to stockholders on or about May 5, 2017.1, 2020. The Company’s Annual Report onForm 10-K for fiscal year 20172020 (“Annual Report”), including financial statements for the fiscal year ended January 29, 2017,26, 2020, is being made available to stockholders concurrently with this Proxy Statement. The Annual Report, however, is not part of the proxy solicitation material.
Semtech Corporation2020 Proxy Statement | 1
PROXY STATEMENT
What am I voting on and what are the Board’s recommendations?
Number | Proposal | Board’s Recommendation | ||
1 | To elect nine directors to hold office until the next annual meeting of stockholders | For the election of each of the nominees | ||
Mr. | ||||
| ||||
Mr. Rodolpho C. Cardenuto | ||||
Mr. Bruce C. Edwards | ||||
Mr. Saar Gillai | ||||
Mr. Rockell N. Hankin | ||||
Ms. Ye Jane Li | ||||
Mr. James T. Lindstrom | ||||
Mr. Mohan R. Maheswaran | ||||
| ||||
Ms. Sylvia Summers | ||||
2 | To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the Company for fiscal year | For ratification for fiscal year | ||
3 | To adopt an advisory resolution to approve executive compensation. | For the approval of our executive compensation | ||
We will also consider any other business that properly comes before the Annual Meeting or any adjournments or postponements thereof. See “How will voting on any other business be conducted?” below.
Semtech Corporation2017 Proxy Statement | 1
PROXY STATEMENT
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials?
We are using the Securities and Exchange Commission (“SEC”) rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to mostour stockholders (other than those who previously requested electronic delivery of our stockholdersall materials or previously elected to receive delivery of a paper copy of the proxy materials) a “Notice of Internet Availability of Proxy Materials” (“Notice”) instead of a printed copy of this Proxy Statement and our Annual Report. The Notice contains instructions on how stockholders can access those documents over the Internet and vote their shares. The Notice also contains instructions on how stockholders can receive a printed copy of our proxy materials including this Proxy Statement, our Annual Report and a proxy card or voting instruction form. In addition, the Notice provides instructions on how stockholders may request to receive proxy materials for future annual meetings in printed or email form. We believe this process will expedite stockholders’ receipt of proxy materials, lower the costs of our Annual Meeting and conserve natural resources.
Who is entitled to vote?
Stockholders as of the close of business on April 21, 201717, 2020 (the “Record Date”) are entitled to vote and are entitled to attend the Annual Meeting. Each stockholder is entitled to one vote for each share of common stock held on the Record Date. Stockholders are not entitled to cumulative voting rights in the election of directors.
2 | Semtech Corporation2020 Proxy Statement
PROXY STATEMENT
Who are the largest principal stockholders?
See “Beneficial Ownership of Securities” elsewhere in this Proxy Statement for a table setting forth each owner of greater than 5% of the Company’s common stock as of April 21, 2017.17, 2020.
What percentages of stock do the directors and officers own?
Together, theyour directors and officers own about 2.2%1.8% of the Company’s common stock as of April 21, 2017.17, 2020. For information regarding the ownership of our common stock by management,our directors and officers, see the section entitled “Beneficial Ownership of Securities” elsewhere in this Proxy Statement.
What does it mean if I get more than one Notice or set of proxy card?materials?
It means that you hold shares registered in more than one account. You must return all proxiessubmit your proxy or voting instructions for each account for which you have received a Notice or set of proxy materials to ensure that all of your shares are voted.
How do I vote?
Record holders: Stockholders may vote using the Internet, by telephone, in person at the Annual Meeting, or by proxy via the proxy card as instructed on the proxy card if you requested and received printed copies of the proxy materials by mail. If you will be returning your vote by use of the proxy card, indicate your voting preferences on the proxy card, sign and date it, and return it in the prepaid envelope provided with this Proxy Statement. If you return a signed proxy card but do not indicate your voting preferences, the proxies named in your proxy card will vote FOR the election of each of the director nominees (Proposal Number 1), the ratification of the appointment of the independent registered public accounting firm (Proposal Number 2), and the advisory resolution to approve executive compensation (Proposal Number 3), and the approval of our 2017 Long-Term Equity Incentive Plan (Proposal Number 5) on your behalf as recommended by the Board on those proposals; ONE YEAR for the advisory vote on the frequency of future advisory votes on executive compensation (Proposal Number 4); and as the proxy holders may determine in their discretion with respect to any other matters properly presented for vote at the Annual Meeting. You have the right to revoke your proxy any time before the meeting by (1) notifying the Company’s Secretary, or (2) returning alater-dated proxy. proxy card or submitting another proxy using the Internet or by telephone (your latest Internet or telephone voting instructions will be followed). You may also revoke your proxy by voting in person at the Annual Meeting although the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy. Instructions for voting by using the Internet or by telephone are set forth in the Notice and/or on the proxy card.
2 | Semtech Corporation2017 Proxy Statement
PROXY STATEMENT
If you hold Semtech shares in“street name” “street name”: Your broker, bank or other nominee will ask for your instructions, generally by means of a voting instruction form. If you do not provide voting instructions to your broker or other nominee, your shares will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. Please note that brokers donot have discretionary authority to vote on the election of directors (Proposal Number 1), or the advisory resolution to approve executive compensation (Proposal Number 3), the advisory vote on the frequency of future advisory votes on executive compensation (Proposal Number 4), or the approval of our 2017 Long-Term Equity Incentive Plan (Proposal Number 5). Consequently, without your voting instructions, your brokerage firm cannot vote your shares with respect to Proposals Number 1 3, 4 or 5.3. However, brokers do have discretionary authority to vote on the ratification of the appointment of the independent registered public accounting firm (Proposal Number 2). Therefore, your broker will be able to vote your shares with respect to Proposal Number 2 even if it does not receive instructions from you, so long as it holds your shares in its name. If you wish to vote in person at the Annual Meeting, please use a copy of your latest account statement showing your investment in our common shares as of the Record Date as your admission ticket for the meeting. Please present your account statement together with picture identification to one of our representatives at the Annual Meeting. Please note that you cannot vote your shares at the Annual Meeting unless you have obtained a legal proxy from your broker, bank or other stockholder of record. A copy of your account statement is not sufficient for this purpose.
How are If you wish to revoke your proxy any time before the votes counted?
A “brokernon-vote” occurs when a bank, broker or other record holder of the Company’s shares does not vote on a proposal because it does not have discretionary voting authority and it has not received instructions from the beneficial owner on how to vote on the proposal. Abstentions and brokernon-votes will not be counted in determining the outcome of the election of directors (Proposal Number 1) since the election of directors is based on the votes actually cast. Withheld votes will be considered for purposes of the Company’s “Majority Withheld Vote” policy discussed below. Abstentions will have the same effect as negative votes on the ratification of the appointment of the independent registered public accounting firm (Proposal Number 2), the advisory resolution to approve executive compensation (Proposal Number 3), and the approval of our 2017 Long-Term Equity Incentive Plan (Proposal Number 5) because they represent votes that are present, but not cast. Under the advisory vote on the frequency of future advisory votes on executive compensation (Proposal Number 4), stockholders may vote to have future advisory votes on executive compensation every year, every two years, every three years, or abstain from voting. Abstentions will not be counted in determining the frequency option receiving the highest number of votes. Proposal Number 2 is considered to be a routine matter and, accordingly, ifmeeting you do not instructshould contact your broker, bank or other nominee onto find out how to vote the shares inchange or revoke your account for Proposal Number 2, brokers will be permitted to exercise their discretionary authority to vote for the ratification of the appointment of the independent registered public accounting firm and, therefore, there will be no brokervoting instructions.
non-votesSemtech Corporation for Proposal Number 2. Although brokernon-votes are considered present for quorum purposes, they are not considered entitled to vote, and so will not be counted in determining the outcome of Proposals Number2020 Proxy Statement | 3 4 and 5.
PROXY STATEMENT
What constitutes a quorum?
As of the Record Date, 65,683,07265,132,030 shares of the Company’s common stock were issued and outstanding. The presence, either in person or by proxy, of the holders of a majority of these outstanding shares is necessary to constitute a quorum for the Annual Meeting. Abstentions and brokernon-votes are counted as present and entitled to vote for purposes of determining a quorum.
How many votes are needed for approval of each item?
Proposal Number 1. Under the Company’s Bylaws, director nominees will be elected by a plurality of the votes cast in person or by proxy. Thus, for Proposal Number 1, the nine nominees who receive the most votes cast, even if less than a majority, will be elected as directors. Stockholders are not entitled to cumulative voting with respect to the election of directors.
Semtech Corporation2017 Proxy Statement | 3
PROXY STATEMENT
However, as described below, and as set forth in the Company’s Corporate Governance Guidelines, available under the “Investors” section at the Company’s websitewww.semtech.com, the Company has adopted a majority voting policy (“Majority Withheld Vote”) for uncontested elections of the Board of Directors (elections where the only nominees are those recommended by the Board of Directors). Withheld votes will be considered for purposes of the Majority Withheld Vote.
Under this policy, in an uncontested election of directors, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election by stockholders present in person or by proxy at an annual or special meeting of the stockholders and entitled to vote will tender a written offer to resign from the Board. Such offer to resign will be tendered within five business days following the certification of the stockholder vote by the inspector of elections.
The Company’s Nominating and Governance Committee will promptly consider the resignation offer and recommend to the full Board whether to accept it.
To the extent that a director’s resignation is accepted by the Board, the Nominating and Governance Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
The Board will act on the Nominating and Governance Committee’s recommendation within 90 days following the certification of the stockholder vote by the inspector of elections, which action may include, without limitation, acceptance of the offer of resignation, adoption of measures intended to address the perceived issues underlying the Majority Withheld Vote, or rejection of the resignation offer. Thereafter, the Board will disclose its decision whether to accept the director’s resignation offer and the reasons for rejecting the offer, if applicable, in a Current Report onForm 8-K to be filed with the SEC within four business days of the Board’s determination.
The Board believes that this process enhances accountability to stockholders and responsiveness to stockholders’ votes, while allowing the Board appropriate discretion in considering whether a particular director’s resignation would be in the best interests of the Company and its stockholders.
Proposals Number 2 3, 4 and 53. Our Bylaws require that each of the other items to be submitted for a vote of stockholders at the Annual Meeting receive the affirmative vote of a majority of the shares of our common stock present or represented by proxy and entitled to vote at the Annual Meeting. Under the advisory vote on the frequency of future advisory votes on executive compensation (Proposal Number 4), stockholders may vote to have future advisory votes on executive compensation every year, every two years, every three years, or abstain from voting. If no option receives the affirmative vote of at least a majority of the shares present in person or represented by proxy and entitled to vote on the proposal at the Annual Meeting, then the Board will consider the option receiving the highest number of votes as the preferred option of the stockholders.
Notwithstanding the vote required by our Bylaws, please be advised that the ratification of the appointment of the independent registered public accounting firm (Proposal Number 2), and the advisory resolution to approve executive compensation (Proposal Number 3), and the advisory vote on the frequency of future advisory votes on executive compensation (Proposal Number 4) are advisory only and are not binding on us. Our Board will consider the outcome of the vote on each of these proposals in considering what action, if any, should be taken in response to the advisory vote by stockholders.
The 2017 Long-Term Equity Incentive Plan will be approved if a majority of the shares of our common stock present or represented by proxy and entitled to vote at the Annual Meeting are voted in favor of the proposal.
4 | Semtech Corporation20172020 Proxy Statement
PROXY STATEMENT
How are the votes counted?
A “brokernon-vote” occurs when a bank, broker or other record holder of the Company’s shares does not vote on a proposal because it does not have discretionary voting authority and it has not received instructions from the beneficial owner on how to vote on the proposal. Abstentions and brokernon-votes will not be counted in determining the outcome of the election of directors (Proposal Number 1) since the election of directors is based on the votes actually cast. Withheld votes will be considered for purposes of the Company’s “Majority Withheld Vote” policy discussed below. Abstentions will have the same effect as negative votes on the ratification of the appointment of the independent registered public accounting firm (Proposal Number 2), and the advisory resolution to approve executive compensation (Proposal Number 3) because they represent votes that are present, but not cast. Proposal Number 2 is considered to be a routine matter and, accordingly, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal Number 2, brokers will be permitted to exercise their discretionary authority to vote for the ratification of the appointment of the independent registered public accounting firm and, therefore, there will be no brokernon-votes for Proposal Number 2. Although brokernon-votes are considered present for quorum purposes, they are not considered entitled to vote, and so will not be counted in determining the outcome of Proposal Number 3.
How will voting on any other business be conducted?
Although the Board does not know of any business to be considered at the Annual Meeting other than the items described in this Proxy Statement, if any other business properly comes before the Annual Meeting, a stockholder’s properly submitted proxy gives authority to the proxy holder to vote on those matters in his or her discretion.
What happens if the Annual Meeting is postponed or adjourned?
Your proxy may be voted at the postponed or adjourned Annual Meeting. You will still be able to change your proxy until it is voted.
Who will count the vote?
We have appointed Computershare Trust Company, N.A. willto tabulate the votes and act as inspector of election at the Annual Meeting. In the event that Computershare Trust Company, N.A. is unable to act as independent inspector of election, our Corporate Secretary will act in such role.
Who pays for the cost of this proxy solicitation?
The Company pays for the cost of soliciting proxies on behalf of the Board. The Company also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding proxy material to beneficial owners. Proxies may be solicited by mail, telephone, other electronic means, or in person. Proxies may be solicited by directors, officers and regular,full-time employees of the Company, none of whom will receive any additional compensation for their services.
How can I obtain a copy of the Company’s Annual Report?
We will promptly provide, on written or oral request and without charge, a copy of the Company’s Annual Report, including financial statements and financial statement schedules, to any person whose proxy is solicited or any beneficial owner of our common stock. Requests should be directed to Semtech Corporation, Attn: Secretary, 200 Flynn Road, Camarillo, California 93012, telephone(805) 498-2111.
Copies of the Company’s SEC filings are also available under the “Investors” section of the Company’s website at www.semtech.com. Any stockholder desiring additional proxy materials or a copy of the Company’s Bylaws should similarly contact the Company’s Secretary.
Semtech Corporation2020 Proxy Statement | 5
PROXY STATEMENT
How many copies of the Notice, this Proxy Statement and the Annual Report will I receive if I share my mailing address with another security holder?
Unless we have been instructed otherwise, we are delivering only one Notice, and for stockholders of record who have requested and received printed copies of the proxy materials by mail, we are delivering only one Proxy Statement and Annual Report, to multiple security holders sharing the same address. This is commonly referred to as “householding.” We will, however, deliver promptly a separate copy of the Notice, or this Proxy Statement and the Annual Report, as applicable, to a security holder at a shared address to which a single copy of the Notice, or this Proxy Statement and the Annual Report, as applicable, was delivered, on written or oral request. Requests for copies of the Notice, or this Proxy Statement and the Annual Report, as applicable, or requests to cease householding in the future should be directed to Semtech Corporation, Attn: Secretary, 200 Flynn Road, Camarillo, California 93012, telephone(805) 498-2111. If you share an address with another stockholder and wish to receive a single copy of the Notice, or this Proxy Statement and the Annual Report, as applicable, instead of multiple copies, you may direct this request to us at the address or telephone number listed above. Stockholders who hold shares in “street name” may contact their brokerage firm, bank,broker-dealer or other similar organization to request information about householding.
Semtech Corporation2017 Proxy Statement | 5
PROXY STATEMENT
Where can I find the voting results of the Annual Meeting?
Our intention is to announce the preliminary voting results at the Annual Meeting and to publish the final results within four business days after the Annual Meeting in a Current Report onForm 8-K to be filed with the SEC and which we will make available on our website at www.semtech.com under “Investors.”
Where can I find general information about the Company?
General information about us can be found on our website atwww.semtech.com. The information on our website is for informational purposes only and should not be relied on for investment purposes. The information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this or any other report that we file with the SEC. We make available free of charge, either by direct access on our website or a link to the SEC’s website, our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our reports filed with, or furnished to, the SEC are also available directly at the SEC’s website at www.sec.gov.
6 | Semtech Corporation2020 Proxy Statement
PROXY STATEMENT
Special Note
Regarding Forward-Looking and Cautionary Statements
This Notice of Annual Meeting of Stockholders and Proxy Statement contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, operating results, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance, future operational performance, the anticipated impact of specific items on future earnings, and our plans, objectives and expectations. Statements containing words such as “may,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “estimate,” “should,” “will,” “designed to,” “projections,” or “business outlook,” or other similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: fluctuationthe uncertainty surrounding the impact and duration of the novel coronavirus(COVID-19) outbreak on global economic conditions and on the Company’s business and results of operations; export restrictions and laws affecting the Company’s trade and investments including with respect to Huawei, and tariffs or the occurrence of trade wars; competitive changes in the Company’s future results;marketplace including, but not limited to, the pace of growth or adoption rates of applicable products or technologies; downturns in the business cycle; reduced demand fordecreased average selling prices of the Company’s products due to global economic conditions; business interruptions;products; the Company’s reliance on a limited number of suppliers and subcontractors for componentcomponents and materials; potentially insufficient liability insurance ifchanges in projected or anticipatedend-user markets; and the Company’s products are foundability to be defective; obsolete inventories as a result of changes in demand and change in life cycles for the Company’s products; the Company may be unsuccessful in developing and selling new products; the Company’s products having to undergo a lengthy and expensive qualification process without any assurance of product sales; the Company’s products failing to meet industry standards; the Company’s inability to protect intellectual property rights; the Company suffering losses ifforecast its products infringe the intellectual property rights of others; the Company’s need to commit resources to product production prior to receipt of purchase commitments; increased business risk from foreign customers; the Company’s foreign currency exposures; potential increased tax liabilities and effective tax rate if the Company needs to repatriate funds held by foreign subsidiaries; export restrictions and laws affecting the Company’s trade and investments; competition against larger, more established entities; increased competitionrates due to industry consolidation; the loss of any one of the Company’s significant customers; volatility of customer demand; termination of a contract by a distributor; government regulationschanging income in higher or lower tax jurisdictions and other standardsfactors that impose operational and reporting requirements;contribute to the Company’s failure to comply with applicable environmental regulations; compliance with conflict minerals regulations; increase in the Company’s cost of doing business
6 | Semtech Corporation2017 Proxy Statement
PROXY STATEMENT
as a result of having to comply with the codes of conduct of certain of the Company’s customers and suppliers; volatility of the Company’s effective tax rate; changesrates and impact anticipated tax benefits. Additionally, forward-looking statements should be considered in tax laws and review by taxing authorities; taxation ofconjunction with the Company in other jurisdictions; the Company’s failure to maintain effective internal control over financial reporting and disclosure controls and procedures; the Company’s limited experience with government contracting; potential government investigations and inquiries; loss of the Company’s key personnel; risks associated with companies the Company has acquired in the past and may acquire in the future and the Company’s ability to successfully integrate acquired businesses and benefit from expected synergies; the Company may be required to recognize additional impairment charges; the Company may be adversely affected by new accounting pronouncements; the Company’s ability to generate cash to service its debt obligations; restrictive covenantscautionary statements contained in the Company’s credit agreement which may restrict its ability to pursue its business strategies;Annual Report on Form10-K, including, without limitation, information under the Company’s reliancecaptions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” and additional factors that accompany the related forward-looking statements in the Annual Report on certain critical information systems for the operation of its business; costs associated with the Company’s indemnification of certain customers, distributors and other parties; the Company’s share price could be subject to extreme price fluctuations; the impact on the Company’s common stock price if securities or industry analysts do not publish reports about the Company’s business or adversely change their recommendations regarding the Company’s common stock; anti-takeover provisionsForm10-K, in the Company’s organizational documents could make an acquisition ofother filings with the Company more difficult; the Company is subject to litigation risks which may be costly to defend.Securities and Exchange Commission (“SEC”), and in material incorporated therein and herein by reference. In light of the significant risks and uncertainties inherent in the forward-looking information included therein and herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved, or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof.
Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statement that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.
In addition to regarding forward-looking statements with caution, you should consider that the preparation of the consolidated financial statements requires us to draw conclusions and make interpretations, judgments, assumptions and estimates with respect to certain factual, legal, and accounting matters. Our consolidated financial statements might have been materially impacted if we had reached different conclusions or made different interpretations, judgments, assumptions or estimates.
Semtech Corporation20172020 Proxy Statement | 7
(Proposal Number 1)
NineOur Board, upon the recommendation of the Nominating and Governance Committee, is proposing nine directors are to be elected at the Annual Meeting, each to serve until the following annual meeting of stockholders and until his or until aher respective successor is elected and qualified. All of the nominees were elected to their present terms of office by the stockholders. There are no arrangements or understandings between any nominee and any other person for selection as a nominee. All of the nominees have consented to be named as nominees, and have indicated their intent to serve if elected. As previously announced, Carmelo J. Santoro had notified the Board on March 11, 2020 that he will not stand forre-election at the Annual Meeting. The Board has voted to reduce its size from ten to nine directors effective immediately before the Annual Meeting. Unless a stockholder directs otherwise in its proxy, card, it is intended that the proxies solicited by management will be voted for the election of the nominees listed in the following table. If any nominee should refuse or be unable to serve, the proxies named in the proxy cardholders will vote the shares for such other person, if any, as shall be designated by the Board or the Board may reduce the number of directors constituting the Board. Our Board currently has no knowledge that any of the nominees will be unable or unwilling to serve.
✓ | The Board recommends a vote FOR the election of each of the nominees listed below
|
Rockell N. Hankin
Age 7073
Director since 1988
Chairman of the Board since 2006
Nominating & Governance Committee Chair
Private investor from January 2006 to date. Chief Executive Officer and Principal, Hankin & Co., a diversified business advisory and investment banking firm from June 1986 through December 2005. Chairman of the Board of the Kavli Foundation.
Mr. Hankin has spoken on corporate governance issues including at the Duke Capital Markets Director’s Education Institute, UCLA’s Director Certification Program, the University of Maryland Directors’ Institute and various other corporate governance programs.
Qualifications: Mr. Hankin’s qualifications to serve as a member of the Board include his 2831 years of experience as Director of the Company which we believe provides our Board with specific expertise and insight into our business, his experience as a former chairman or a former director of other public and private companies and his advisory and corporate governance expertise.
8 | Semtech Corporation20172020 Proxy Statement
ELECTION OF DIRECTORS (Proposal Number 1)
James P. Burra
Age 7477
Director since 1991
Vice Chairman of the Board since 2007
Audit Committee
Nominating and Governance Committee
Chief Executive Officer and majority owner of Endural, LLC, a private company and manufacturer of a proprietary line of vacuum formed, high density polyethylene containers, since October 2006 and Chief Executive Officer of predecessors since 1989. Mr. Burra previously served as Chief Financial Officer of Intercole, Inc., a publicmulti-industry industrial products company and as a senior audit manager with Arthur Andersen & Co.
Former director of Earl Scheib, Inc. from 2007 to 2010, a former public company and operator of retail automobile paint and body shops. Former director of Hoover Group, Inc., former parent company of Endural LLC, from 1998 to 2006.
Qualifications: Mr. Burra’s qualifications to serve as a member of the Board include his 2528 years of experience as Director of the Company, his senior executive management experience as a Chief Financial Officer as well as Chief Executive Officer, his experience in public company finance and accounting, and his experience as a director of other public companies.
Glen M. AntleRodolpho C. Cardenuto
Age 7860
Director since 2002September 2018
Compensation Committee
Retired executive. Acting Chief Executive OfficerPresident, Applications Group of Trident Microsystems,Vonage, a global business cloud communications company, since December 2019. Senior Vice President, Sales of Magic Leap, a private company focused on augmented reality products, from January 2019 until November 2019. President of SAP Americas, Inc., a former public company, Global Partner Operations organization from November 20062014 to October 2007. Trident Microsystems is a semiconductorDecember 2018. Joined SAP in 2008 as President of SAP Latin America and related electronic components manufacturer. Chairman of the Board of Directors of Quickturn Design Systems, Inc., an electronic design automation company, from June 1993 to June 1999.Co-founded ECAD, Inc., now Cadence Design Systems, Inc.,Caribbean and also served as Chief Executive OfficerPresident of SAP Americas in 2013. Held executive positions at Hewlett-Packard Company from 2001 to 2007, and Chairman of its Board of Directors from 1982prior to 1988.
Director of Trident Microsystems, Inc. from 1992 to February 20102001, executive positions at Vesper, Nextel, and Chairman of the Board of Directors of Trident Microsystems, Inc. from November 2006 to November 2009.Hewlett-Packard Brasil Ltda.
Qualifications: Mr. Antle’sCardenuto’s qualifications to serve as a member of the Board include his managementmore than 25 years of extensive and high level experience within the technology companies and his executive experience as a Chief Executive Officer,industry as well as his experience as a director and a Chairman of a formerpublicly-traded semiconductor company which we believe provides our Board with a valuable perspective and understanding of our business.global operations.
Semtech Corporation20172020 Proxy Statement | 9
ELECTION OF DIRECTORS (Proposal Number 1)
Bruce C. Edwards
Age 6366
Director since 2006
Compensation Committee Chair
Chief Executive Officer of Palagon Partners, LLC, a business advisory group, since November 2007. Executive Chairman of Powerwave Technologies, Inc. (“Powerwave”), a leading supplier of antenna systems, base station subsystems and coverage solutions to the wireless communications industry, from February 2005 through November 2007. Chief Executive Officer of Powerwave from February 1996 through February 2005. Previously held executive and financial positions at AST Research, Inc., a personal computer company, AMDAX Corporation, a manufacturer of radio frequency modems, and public accounting firm Arthur Andersen and Co.
Director of Lantronix, Inc., a public company and global supplier of smart M2M connectivity solutions since November 2012. Chairman of the Board of Emulex Corporation, a public company and global provider of advanced storage networking infrastructure solutions from February 2014 until May 2015 and director since May 2000. In May 2015 Emulex was acquired by Avago Technologies.
Qualifications: Mr. Edward’s qualifications to serve as a member of the Board include senior executive management, accounting and financial experience atpublicly-traded technology companies which we believe provides our Board with valuableexecutive-level insights and his experience as a director of other public companies.
Saar Gillai
Age 53
Director since September 2018
Audit Committee
Independent board director and CEO advisor to multiple startups since January 2020. Chief Executive Officer and Director of Teridion, a Cloud-based networking company, from October 2017 to December 2019. Senior Vice President and General Manager of Hewlett Packard Enterprise’s Communications Solutions Business from October 2014 to October 2016. Senior Vice President, General Manager and Chief Operating Officer of HP Cloud from November 2012 to October 2014. Previously held executive positions at 3Com, Enfora, Tropos Networks, and Cisco Systems.
Director of Xilinx, a public company and the leading provider of All Programmable FPGAs, SoCs, MPSoCs and 3D ICs since May 2016. Director of SpaceIQ, a private company and provider of smart IWMS/CAFM facility management software from July 2017 to August 2019 (acquired by WeWork).
Qualifications:Mr. Gillai’s qualifications to serve as a member of the Board include his senior executive and board experience in both startups and public companies and his over 25 years of experience in the technology industry.
10 | Semtech Corporation2020 Proxy Statement
ELECTION OF DIRECTORS (Proposal Number 1)
Ye Jane Li
Age 4952
Director since 2016
Compensation Committee
Strategic Advisor, Diversis Capital, LLC, a private equity firm that invests in middle-market companies, since 2013. Chief Operating Officer, Huawei Enterprise USA, Inc., a company that markets IT products and solutions to datacenters and enterprises from 2012 to 2015. Previously, General Manager at Huawei Symantec USA, Inc. from 2010 to 2012. Consultant in 2009 to The Gores Group, a private equity firm focusing on the technology sector. Executive Vice President and General Manager at Fujitsu Compound Semiconductor Inc. and its Joint Venture with Sumitomo Electric Industries, Ltd., Eudyna Devices Inc., from 2004 to 2009. Prior to 2004, held executive and management positions with NeoPhotonics Corporation, Novalux Inc. and Corning Incorporated.
Director of Knowles Corporation since February 2018, a public company and leading supplier of advanced micro-acoustic, audio processing, and precision device solutions. Director of ServicePower since July 2017, a private company that provides mobile workforce management software solutions. Director of Women in Cable TV and Telecommunications from 1998 to 2001, anon-profit organization promoting women’s leadership in Cable TV and Telecommunications industries.
Qualifications: Ms. Li’s qualifications to serve as a member of the Board include her senior executive level experience in a wide range of technology companies from telecommunication components and systems, to semiconductor to IT and datacenters representing a variety of market segments Semtech serves.serves, as well as her experience as a director of private and public companies. Her background and experience also provides the board with invaluable insights into Asian markets, which are important strategic markets for us.
10 | Semtech Corporation2017 Proxy Statement
ELECTION OF DIRECTORS (Proposal Number 1)
James T. Lindstrom
Age 7174
Director since 2002
Audit Committee Chair
Chief Financial Officer of Adaptive Spectrum and Signal Alignment, Inc., an IP and software company, since June 2019. Former Chief Operating Officer of Kilopass Technology, Inc., a semiconductor intellectual property company, from April 2015 through November 2016. Former Chief Financial Officer of Kilopass from January 2012 through November 2013. Chief Financial Officer of eSilicon Corporation from March 2005 to February 2011. eSilicon Corporation provides ASIC design, productization and manufacturing services to the semiconductor industry. Previously held executive financial positions at Trident Microsystems, Inc., ECAD, Inc., now Cadence Design Systems,C-Cube Microsystems, Inc., FormFactor, Inc., Silicon Perspective Corporation and Fairchild Camera and Instrument Corporation.
Qualifications: Mr. Lindstrom’s qualifications to serve as a member of the Board include his senior financial executive experience at public and private companies in the semiconductor industry and his experience as a director of a company in the semiconductor industry, which we believe provides our Board with a deep understanding of our industry and business.
Semtech Corporation2020 Proxy Statement | 11
ELECTION OF DIRECTORS (Proposal Number 1)
Mohan R. Maheswaran
Age 5356
Director since 2006
President and Chief Executive Officer of the Company since April 2006. He was Executive Vice President and General Manager of Intersil Corporation (“Intersil”), a company that designs and manufactures analog semiconductors, from June 2002 until March 2006, responsible for managing and overseeing the design, development, applications and marketing functions for Intersil’s Analog Signal Processing Business unit. From June 2001 to May 2002, he was Vice President of Marketing, Business Development and Corporate Strategy for Elantec Semiconductor, Inc., a company that designed and manufactured analog integrated circuits before its acquisition by Intersil in May 2002. He was previously employed by Elantec Semiconductor as Vice President of Business Development and Corporate Strategy from January 2001 to June 2001; by Allayer Communications, a communications integrated circuit startup acquired by Broadcom Corporation; and by IBM Microelectronics, Texas Instruments Incorporated,Hewlett-Packard Company and Nortel Communications.
Qualifications: Mr. Maheswaran’s qualifications to serve as a member of the Board include his years of senior executive, management, and development experience at analog semiconductor companies. Mr. Maheswaran’s current position as our President and Chief Executive Officer also brings to the Board knowledge of theday-to-day operations of the Company, which provides invaluable insight to our Board as it reviews the Company’s strategic and financial plans.
Semtech Corporation2017 Proxy Statement | 11
ELECTION OF DIRECTORS (Proposal Number 1)
Carmelo J. Santoro
Age 75
Director since 2013
Compensation Committee
Retired, independent business consultant with Santoro Technology Associates, which provides general management, strategic planning, marketing and operations services for the computer hardware and software, semiconductor, disk drive, networking, technology services, biotechnology and financial services industries since 2003. Retired from Attensity Inc. in 2003 where he served as President and Chief Executive Officer since 2000. Previously held Chief Executive Officer and Chairman positions with Platinum Software Corporation and Silicon Systems, Inc. Dr. Santoro held other senior positions at RCA Corporation, American Microsystems Incorporated, and Motorola, Inc.
Director of NextTalk Inc., a private company that provides online communications solutions for the deaf since 2005. Has been a director of more than 28 public and private companies over the past 30 years including Ashton-Tate Corporation, AST Research, Inc., Seagate Technology PLC and Dallas Semiconductor Corp.
Qualifications: Dr. Santoro’s qualifications to serve as a member of the Board include his senior executive management experience intechnology-related industries, and his experience as a director of private companies and multiple public companies, which we believe provides our Board with valuableboard-level experience.
Sylvia Summers
Age 6467
Director since 2013
Audit Committee
Nominating and Governance Committee
Chief Executive Officer, President and Director of Trident Microsystems, Inc., a company that delivers integrated circuits to the digital TV and set top box markets, from 2007 through 2011. Previously Executive Vice President and General Manager at Spansion Ltd. from 2003 to 2007 and Group Vice President at Cisco Systems, Inc. from 2001 to 2002.
Director of Headwaters, Inc. since January 2013, a public company providing products, technology and services to the heavy construction materials, light buildup product and energy industry. Director of Aristocrat Leisure Limited, a company listed on the Australian Stock Exchange and a leading provider of gaming solutions, since September 2016. Previously served as a director of public companies, including Headwaters, Inc. from 2013 to 2017, Alcatel-Lucent from 2015 to 2016, JNI Corporation from 2001 to 2003, Riverstone Networks Inc. from 2002 to 2006 and Gadzoox Networks, Inc. from 2001 to 2003 where she served on the audit and compensation committees.
Qualifications: Ms. Summers’ qualifications to serve as a member of the Board include her senior executive level experience intechnology-related industries and experience as a director of several public companies, which we believe provides our Board with valuableexecutive-level insights andboard-level experience.
12 | Semtech Corporation20172020 Proxy Statement
Code of Conduct
The Board has adopted a written Core Values and Code of Conduct (“Code of Conduct”) that applies to our directors and employees of the Company, including our Chief Executive Officer and our Chief Financial Officer. The Code of Conduct, which is the Company’s written “code of conduct” within the meaning of the Nasdaq MarketplaceListing Rules applicable to companies whose stock is listed for trading on the NASDAQNasdaq Stock Market LLC (“NASDAQ”Nasdaq”) and which constitutes the Company’s “code of ethics” within the meaning of Section 406 of theSarbanes-Oxley Act of 2002, expresses the Company’s commitment to the highest standards of ethical business conduct.
Corporate Governance Guidelines
The Board has adopted written Corporate Governance Guidelines that set forth key principles that guide its actions. Some of these principles are discussed below.
Independence
Our Board has determined that all current directors, other than Mr. Maheswaran, are independent under applicable NASDAQNasdaq rules and the Board is comprised of a majority of independent directors. The Board determined that Mr. Maheswaran does not meet the independence standards due to his employment by the Company.
Board Leadership Structure
The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board. The Chief Executive Officer and Chairman of the Board are separate positions under the Board’s current leadership structure. The Chief Executive Officer establishes the corporate direction and strategy, and is responsible for theday-to-day leadership of the Company. The Chief Executive Officer is subject to certainBoard-established grants of authority and a Board Review Policy, under which the Board reserves for its action certain material, key strategic, or related matters, and notes matters of Company action on which the Board is to be kept informed. The Chairman of the Board provides guidance to the Chief Executive Officer, presides over the meetings of the stockholders and directors, and guides the Board in fulfilling its obligations. The Chairman of the Board and the Chief Executive Officer hold meetings on a regular basis to discuss both near term and longer range strategic matters. The Chairman of the Board and the Chief Executive Officer collaborate on the preparation of the agenda for each regular Board meeting to set matters to be presented to the Board for its information, attention and action as necessary. Following each meeting of the Board after the independent directors have met in executive session per the Board’s standard practice, the Chairman of the Board meets with the Chief Executive Officer to provide feedback on matters raised during the meeting of the Board, and on matters considered for further action orfollow-up. On behalf of the Board, the Chairman of the Board also providesone-on-one performance feedback to the Chief Executive Officer. The Board feels this structure facilitates efficient management oversight and enables the Board to effectively meet its governance duties.
Majority Voting and Director Resignation
The Company has adopted a majority voting policy for uncontested elections of the Board (elections where the only nominees are those recommended by the Board). In an uncontested election of directors, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election by stockholders present in person or by proxy at the annual or special meeting of the stockholders and entitled to vote in the election of directors, will tender a written offer to resign from the Board within five business days following the certification of the stockholder vote by the inspector of elections.
Semtech Corporation2020 Proxy Statement | 13
CORPORATE GOVERNANCE
The Company’s Nominating and Governance Committee will promptly consider the resignation offer and recommend to the Board whether to accept it.
Semtech Corporation2017 Proxy Statement | 13
CORPORATE GOVERNANCE
To the extent that a director’s resignation is accepted by the Board, the Nominating and Governance Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
The Board will act on the Nominating and Governance Committee’s recommendation within 90 days following the certification of the stockholder vote by the inspector of elections, which action may include, without limitation, acceptance of the offer of resignation, adoption of measures intended to address the perceived issues underlying the Majority Withheld Vote, or rejection of the resignation offer. Thereafter, the Board will disclose its decision whether to accept the director’s resignation offer and the reasons for rejecting the offer, if applicable, in a Current Report onForm 8-K to be filed with the SEC within four business days of the Board’s determination.
Corporate Social Responsibility and Sustainability
The Company and the Board are focused on corporate social responsibility and sustainability. The Company’s Environmental, Social and Governance Committee, consisting of members of management representing various functional groups, works to identify additional ways that the Company can foster a diverse and inclusive work environment, improve employee health and safety, engage our surrounding communities and minimize our environmental impact. The committee periodically reports its findings to the Board.
Human Capital and Culture
The Board oversees the development of executive-level talent to execute the Company’s strategy. The Board considers Chief Executive Officer succession and development, and considers and discusses with the Chief Executive Officer succession and development planning for other executive positions, diversity initiatives, and employee engagement. The Board also oversees our culture. We expect all directors and employees of the Company (including our executive officers) to uphold our Code of Conduct.
The Board’s Role in Risk Oversight and Management
The Board actively oversees risk management of the Company.Company, including having oversight over the Company’s information technology and cybersecurity policies and procedures. The Audit Committee serves as the focal point at the Board level for overseeing the Company’s overall risk management process. Among its duties, the Audit Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks that may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements. The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact the Company’s contingent liabilities and risks.
During our fiscal year 2017, theThe Company continued withperiodically conducts enterprise risk assessment evaluations conducted with Audit Committee oversight and participation. The results of the fiscal year 2017most recent enterprise risk assessment update(conducted in fiscal year 2020) were reported first to the Audit Committee Chair and subsequentlywill be presented to the Board for evaluation, identification of matters for additional attention, and overall risk management. The Audit Committee continues to oversee and ensure fulfillment of management initiatives instituted to address risks identified in the enterprise risk assessment process.
14 | Semtech Corporation2020 Proxy Statement
CORPORATE GOVERNANCE
Our other Board committees also consider and address risk as they perform their respective committee responsibilities. All committees report to the Board as appropriate, including when a matter rises to the level of a material or enterprise level risk. After receiving a report from a committee, the Board provides guidance as it deems necessary.
Specific Company management functions are responsible forday-to-day risk management. Our accounting, finance, legal, operations, and internal audit areas serve as the primary monitoring and testing functions forcompany-wide policies and procedures, and manage theday-to-day oversight of the risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, international, and compliance and reporting levels.
The Board believes that its grants of authority to the Chief Executive Officer and under the Board Review Policy for the Chief Executive Officer as noted above in “Board Leadership Structure” serve to oversee and manage risks by ensuring that the Board is kept well informed on material matters, and is the ultimate approving authority for selected matters. The Board also receives regular reports from the Chief Executive Officer reporting on areas involving operational, human resources, legal, compliance, financial and strategic risks, as well as reports from senior officers of the Company on selected matters as requested from time to time by the Board as part of its recurring meeting process. The Board receives such reports from the Chief Executive Officer and senior executives to enable the Board to understand the identification, management and mitigation strategies for the reported risks.
We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the Company and that our Board leadership structure supports this approach.
14 | Semtech Corporation2017 Proxy Statement
CORPORATE GOVERNANCE
Policy on Hedging and Pledging
The Company recognizes that hedging against losses in Company stock is not appropriate or acceptable trading activity for individuals employed by or serving the Company. The Company has adopted stock ownership guidelines (as described below in the section titled “Compensation Discussion and Analysis”) that, among other things, are intended to align the interests of stockholders, and the Company’s directors and officers. In keeping with the intent of the stock ownership guidelines, as well as for the purpose of clearly outlining the Company’s position on acceptable trading activity, the Company has incorporated prohibitions on various hedging activities within its stock trading guidelines, which guidelines apply to directors, officers and employees. The stock trading guidelines prohibit directors, officers and employees or their designees from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the securities of the Company. The guidelines prohibit all short sales of Company stock and any trading in derivatives (such as put and call options) that relate to Company securities. The guidelines also prohibit pledging any Company stock or equity awards as collateral for any margin account, or other form of credit arrangement.
Risk Assessment of Compensation Programs
In compliance with SEC disclosure requirements, we have evaluated our compensation policies and practices to determine if any of our programs create risks that are reasonably likely to have a material adverse effect on the Company. We have concluded that our compensation policies and practices do not create such risks. We evaluated our executive program, as well as ourbroad-based compensation and benefits programs on a worldwide basis. We focused on looking at whether any program’s elements, criteria, purposes or objectives create undesired or unintended risk of a material nature. While all programs were evaluated, primary review and attention was placed on programs having potential for variable payouts where an individual participant or small groups of participants might have the ability to directly affect, control or
Semtech Corporation2020 Proxy Statement | 15
CORPORATE GOVERNANCE
impact payout results. We are satisfiedbelieve that all compensation programs are structured with appropriate controls, objective measurement variables, review authorities and payment methodologies that, in the aggregate, are designed and administered so that there is not any reasonable likelihood of material adverse risks to the Company arising from or caused by any of our compensation programs. In addition,“claw-back” “claw-back” rights and provisions in applicable executive compensation plans as discussed below in our “Compensation Discussion and Analysis” are additional safeguards that encourage executives to refrain from making risky decisions or taking actions that could harm the Company.
In particular, base salaries are fixed in amount and are, therefore, not susceptible to encouraging unnecessary or excessive risk taking. Although theperformance-based,short-term annual cash incentives focus on achievement ofshort-term individual performance andbusiness-related goals, which could encourage taking ofshort-term risks at the expense oflong-term goals, this element of compensation is offset and balanced by the Company’s use oflong-term,multi-year incentive programs that are designed to align our executives’ interests with those of the Company’s stockholders. We believe thatlong-term,multi-year incentive programs do not encourage unnecessary or excessive risk taking because the ultimate value of these programs is tied to the value of the Company’s stock and the grant dates and vesting dates are staggered over multiple years to ensure that executives have a significant stake in thelong-term performance of the Company’s stock.
Evaluation of Chief Executive Officer Performance
In concert with our Compensation Committee in accordance with that Committee’s charter, the Board of Directors oversees and evaluates the performance of the Chief Executive Officer on an ongoing basis, including a formal annual performance review. Such evaluation includes regular assessment of his performance against goals and objectives established in connection with his compensation programs, as well as his overall performance in leading and managing the Company.
Annual Board Evaluation
Pursuant to our Corporate Governance Guidelines and the charter of the Nominating and Governance Committee, the Nominating and Governance Committee at least annually reviews, discusses and assesses
Semtech Corporation2017 Proxy Statement | 15
CORPORATE GOVERNANCE
the performance and effectiveness of the Board and the individual directors and makes relevant recommendations to the Board. The Nominating and Governance Committee also considers theself-evaluations of each standing committee and evaluates the need for any restructuring of the committees. The evaluation process is designed to facilitate ongoing, systematic examination of the Board’s effectiveness and accountability, and to identify opportunities for improving its operations and procedures.
In fiscal 2017,year 2020, the Board completed an evaluation process focusing on the effectiveness of the performance of the Board as a whole and the background and skills of each director. Each standing committee conducted a separate evaluation of its own performance and of the adequacy of its charter and reported to the Board on the results of its evaluation.
Transactions with Related Parties
We have adopted a writtenRelated-Person Transaction Policy, approved by the Audit Committee and the Board, which provides guidelines for the disclosure, review, ratification and approval of transactions with our directors, executive officers, 5% stockholders and their immediate family members in which the amount involved exceeds or reasonably can be expected to exceed $120,000. The policy supplements our other policies or procedures that may be applicable to a transaction, including our Code of Conduct. Under the Code of Conduct, all directors and employees are expected to avoid actual or apparent conflicts between personal interests and interests of the Company. The policy is administered by the Audit Committee andrelated-person transactions must be terminated unless approved or ratified by the Audit Committee in accordance with the terms of the policy. In making its determination, the Audit Committee is to take into account all relevant factors and material facts it deems significant including:
Since February 1, 2016, there has not been nor is there currently proposed any transaction or series of similar transactions to which we were or are to be a party in which the amount involved exceeds $120,000 and in which any of our directors, executive officers, persons who we know hold more than 5% of our common stock, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than compensation agreements and other arrangements, which are described elsewhere in this Proxy Statement.Director Attendance at Meetings
Directors are expected to devote sufficient time to the Board and its committees and to carry out their duties and responsibilities effectively. It is expected that each director will be available to attend all meetings of the Board and any committees on which the director serves, as well as the Company’s annual meeting of stockholders. During the Company’s last fiscal year, the Board held seveneight regularly scheduled meetings and 2419 committee meetings. Each of the then incumbent directors attended 75% or more of the aggregate of the meetings of the Board and the meetings of the committees of the Board on which such director served except for Glen Antle who attended 69% of such meetings. Mr. Antle would have attended more than 75% ofduring the meetings, but illness caused him to miss three meetings.last fiscal year. As is our practice, the independent directors met in an executive session without management present at several of these meetings. It is the policy of the Company that all of the directors
16 | Semtech Corporation2020 Proxy Statement
CORPORATE GOVERNANCE
attend the annual meetings of stockholders unless important personal reasons prohibit it. AllEach of ourthe then incumbent directors except for Glen M. Antle, attended last year’s Annual Meeting, held in June 2016.
16 | Semtech Corporation2017 Proxy Statement
CORPORATE GOVERNANCE
2019.
Continuing Education
Each director is expected to take steps reasonably necessary to enable the director to function effectively on the Board and Board committees on which the director serves, including becoming and remaining well informed about the Company, the industry, and business and economic trends affecting the Company. Each director is also expected to take steps reasonably necessary to keep informed on principles and practices of sound corporate governance. The Company provides each director with membership in the National Association of Corporate Directors. Each director is required to participate, at the Company’s expense, in a minimum amount of director education during a giventwo-year period. A“two-year” period ends each even numbered fiscal year of the Company.
Committees
The Board has an Audit Committee, Compensation Committee, and Nominating and Governance Committee. Committee assignments and designations of committee chairs are made annually by a vote of the Board at the annual organizational meeting of directors held in conjunction with the annual meeting of stockholders. All committees are authorized to engage advisors as deemed necessary to carry out their duties and each committee is charged with conducting an annualself-evaluation and assessment of its charter. Current committee assignments are set forth in the following table:
Director | Audit | Compensation | Nominating and Governance | Audit | Compensation | Nominating and Governance | ||||||
Rockell N. Hankin,Chairman of the Board | Chair | Chair | ||||||||||
James P. Burra,Vice Chairman of the Board | ✓ | ✓ | ✓ | ✓ | ||||||||
Glen M. Antle | ✓ | |||||||||||
Rodolpho C. Cardenuto | ✓ | |||||||||||
Bruce C. Edwards | Chair | Chair | ||||||||||
Ye Jane Li(1) | ✓ | |||||||||||
Saar Gillai | ✓ | |||||||||||
Ye Jane Li | ✓ | |||||||||||
James T. Lindstrom | Chair | Chair | ||||||||||
Carmelo J. Santoro | ✓ | |||||||||||
Carmelo J. Santoro (1) | ✓ | |||||||||||
Sylvia Summers | ✓ | ✓ | ✓ | ✓ | ||||||||
Number of meetings during fiscal year 2017 | 10 | 8 | 6 | |||||||||
Number of meetings during fiscal year 2020 | 8 | 6 | 5 |
(1) | As disclosed in a Current Report onForm 8-K filed on March 17, 2020, Dr. Santoro notified the Board |
Audit Committee
We have aseparately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board has determined that each member of the Audit Committee is independent as defined by NASDAQNasdaq and SEC rules applicable to audit committee members, is financially sophisticated as defined by NASDAQNasdaq rules, and is an audit committee financial expert as defined by SEC rules.
Semtech Corporation2020 Proxy Statement | 17
CORPORATE GOVERNANCE
The Audit Committee’s responsibilities are set forth in a written charter and include assisting the Board in overseeing the:
accounting and financial reporting processes of the Company;
Company’s internal audit function;
integrity of the Company’s financial statements and systems of internal controls and disclosure controls;
audits of the Company’s financial statements;
Semtech Corporation2017 Proxy Statement | 17
CORPORATE GOVERNANCE
Company’s financial risk; and
Company’s compliance with legal and regulatory requirements and the Company’s Code of Conduct.
The Audit Committee meets periodically with the Company’s independent registered public accounting firm outside the presence of Company management. The Audit Committee has also been designated by the Board to serve as the Company’s Qualified Legal Compliance Committee, within the meaning of Section 205 of the SEC’s Standards of Professional Conduct for Attorneys Appearing and Practicing before the Commission in the Representation of an Issuer. The Audit Committee has the authority and resources appropriate to discharge its duties and responsibilities, including the authority to select, engage and terminate independent counsel and other advisors as it deems necessary to carry out its duties without seeking approval of the Board or management.
The Audit Committee has adopted a policy regardingpre-approval of services to be provided by the Company’s independent registered public accounting firm, which is described below under the heading “Policy On Audit CommitteePre-Approval Of Audit And PermissibleNon-Audit Services,” and procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, which are described below under the heading “Contacting The Board Of Directors.”
Compensation Committee
The Compensation Committee’s written charter requires that its members satisfy the independence requirements of NASDAQNasdaq and applicable law. From February 1, 2016through January 29, 2017, theThe Compensation Committee consistedconsists of four Board Members, each of whom the Board has affirmatively determined satisfies these independence requirements. The Compensation Committee charter sets forth the purpose and responsibilities of the Compensation Committee, which include the following:
reviewing and approving goals and objectives for our Chief Executive Officer, and evaluating his performance against those goals and objectives;
determining (or recommending to the Board for determination) all elements of the Chief Executive Officer’s compensation and that of our other executive officers;
reviewing the Company’s management development programs and succession plans;
overseeing and periodically reviewing the operation of the Company’s incentive programs and benefit plans;
carrying out all responsibilities and functions assigned to it by the documents governing the Company’s incentive programs and benefit plans;
making and approving equity awards; and
reviewing and making recommendations to the Board with respect to the compensation of our directors who are not also employed by the Company or one of our subsidiaries(“Non-Employee Directors”).
18 | Semtech Corporation2020 Proxy Statement
CORPORATE GOVERNANCE
The Compensation Committee has the authority and resources appropriate to discharge its duties and responsibilities, including the authority to select, engage and terminate independent counsel, consultants and other advisors as it deems necessary to carry out its duties without seeking approval of the Board or management. The Compensation Committee may also delegate to subcommittees such authority as it deems appropriate. The Compensation Committee has no current intention to delegate any of its authority to any other committee or subcommittee. Our executive officers, including the Named Executive Officers (as defined in the “Compensation Discussion and Analysis” below), do not have any role in determining the form or amount of compensation paid to our executives. However, our Chief Executive Officer does make recommendations to the Compensation Committee with respect to compensation paid to the other executive officers.
18 | Semtech Corporation2017 Proxy Statement
CORPORATE GOVERNANCE
Nominating and Governance Committee
The Nominating and Governance Committee’s written charter charges it with assisting the Board by:
identifying and evaluating individuals qualified to become members of the Board;
recommending to the Board director nominees for election at each annual meeting and to fill vacancies on the Board;
making recommendations to the Board regarding the Board offices of Chair and Vice Chair, assignments to Board committees and committee chairs;
developing, overseeing the effectiveness of and recommending changes to the Company’s Corporate Governance Guidelines;
making other recommendations to the Board regarding corporate governance matters and nomination and evaluation matters relating to the directors;
overseeing the evaluation of the Board; and
taking such other actions within the scope of its charter as the Committee deems necessary or appropriate.
The Board has determined that each member of the Nominating and Governance Committee is independent as defined by NASDAQNasdaq rules. The Nominating and Governance Committee has the authority and resources appropriate to discharge its duties and responsibilities, including the authority to select, engage and terminate independent counsel, consultants and other advisors as it deems necessary to carry out its duties without seeking approval of the Board or management.
Corporate Governance Materials
The following materials are available free of charge under the “Investors” page of the Company’s website at www.semtech.com or by sending a request for a paper copy to the Company’s Secretary at the Company’s headquarters at 200 Flynn Road, Camarillo, California, 93012:
Bylaws
Code of Conduct
Corporate Governance Guidelines
Audit Committee Charter
Compensation Committee Charter
Nominating and Governance Committee Charter
Director Nominations Policy
Semtech Corporation20172020 Proxy Statement | 19
CORPORATE GOVERNANCE
Director Compensation Policy
Director Stock Ownership Guidelines
Executive Stock Ownership Guidelines
Related-Persons Transaction Policy
Board Committee Assignments
Stock Trading Guidelines
20 | Semtech Corporation2020 Proxy Statement
TRANSACTIONS WITH RELATED PARTIES
We have adopted a written Related-Person Transaction Policy, approved by the Audit Committee and the Board, which provides guidelines for the disclosure, review, ratification and approval of transactions with our directors, executive officers, 5% stockholders and their immediate family members in which the amount involved exceeds or reasonably can be expected to exceed $120,000. The policy supplements our other policies or procedures that may be applicable to a transaction, including our Code of Conduct. Under the Code of Conduct, all directors and employees are expected to avoid actual or apparent conflicts between personal interests and interests of the Company. The policy is administered by the Audit Committee and related-person transactions must be terminated unless approved or ratified by the Audit Committee in accordance with the terms of the policy. In making its determination, the Audit Committee is to take into account all relevant factors and material facts it deems significant including:
the size and materiality of the transaction and the amount of consideration payable to the related-person;
the nature of the interest of the related-person;
whether the transaction may involve a conflict of interest;
whether the transaction involves the provision of goods or services to the Company that are readily available from unaffiliated third parties on better terms;
whether there are business reasons to enter into the transaction; and
whether the transaction is fair to the Company.
Since January 28, 2019, there has not been nor is there currently proposed any transaction or series of similar transactions to which we were or are to be a party in which the amount involved exceeds $120,000 and in which any of our directors, executive officers, persons who we know hold more than 5% of our common stock, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than compensation agreements and other arrangements, which are described elsewhere in this Proxy Statement.
Semtech Corporation2020 Proxy Statement | 21
CONTACTING THE BOARD OF DIRECTORS
General Business Matters
Our Annual Meeting provides an opportunity for stockholders to speak directly with the Board regarding appropriate matters. Stockholders also may communicate with the Board, or any committee or director, about Company business by writing to such party in care of the Company’s Secretary at the Company’s headquarters at 200 Flynn Road, Camarillo, California, 93012. Stockholders are encouraged to include evidence of their holdings with their communications. The Company’s Secretary will forward communications as applicable to the Chairman of the Board, the applicable committee chair, or individual named director if a communication is directed to an individual director. Any communication deemed to involve an accounting matter will be sent to the Chair of the Audit Committee. The foregoing process is in accordance with the process adopted by a majority of the independent members of the Board, which includes procedures for collecting, organizing and otherwise handling such communications. Advertisements, solicitations or hostile communications will not be presented.
Accounting Matters
The Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters (“Accounting Matters”). Employees with concerns regarding Accounting Matters may report their concerns in writing to our Chief Financial Officer, Chief Executive Officer or General Counsel. Employees may also report concerns regarding Accounting Matters anonymously directed to the Audit Committee via theon-line confidential reporting system maintained by the Company.Non-employee complaints regarding Accounting Matters may be reported by writing to the Audit Committee in care of the Company’s Secretary at the Company’s headquarters at 200 Flynn Road, Camarillo, California 93012.
2022 | Semtech Corporation20172020 Proxy Statement
Criteria and Diversity for Board Membership
All persons nominated to serve as a director of the Company should possess the minimum qualifications, skills and attributes as determined by our Board. The qualifications, attributes and skills noted below are illustrative but not exhaustive. The Nominating and Governance Committee will also consider the contributions that a candidate can be expected to make to the Board based on the totality of the candidate’s background, credentials, experience and expertise, the diversity and composition of the Board at the time, and other relevant circumstances.
Key qualifications include:
• | Business Understanding.Candidates must have a general appreciation regarding major issues facing public companies of a size and operational scope similar to the Company, including regulatory obligations and governance concerns of a public issuer; strategic business planning; competition in a global economy; and basic concepts of corporate finance. |
Experience or Achievement. Candidates must have demonstrated achievement in one or more fields of business, professional, governmental, community, scientific or educational endeavor.
Integrity. All candidates must be individuals of personal integrity and ethical character.
Absence of Conflicts of Interest. Candidates should not have any interests that would materially impair their ability to (i) exercise independent judgment, or (ii) otherwise discharge the fiduciary duties owed as a director to the Company and its stockholders.
Fair and Equal Representation. Candidates must be able to represent fairly and equally all stockholders of the Company without favoring or advancing any particular stockholder or other constituency of the Company.
Oversight. Candidates are expected to have sound judgment, based on management orpolicy-making experience that demonstrates an ability to function effectively in an oversight role.
Available Time. Candidates must be prepared to devote adequate time to the Board and its committees. It is expected that each candidate will be available to attend all meetings of the Board and any committees on which the candidate will serve, as well as the Company’s annual meeting of stockholders.
Diversity. Although we do not have a formal diversity policy, when considering diversity in evaluating candidates, the Nominating and Governance Committee focuses on whether candidates can contribute varied perspectives, skills, experiences and expertise to the Board. The Nominating and Governance Committee will seek to promote an appropriate diversity on the Board of professional background, experience, expertise, perspective, age, gender and ethnicity.
Evaluation of Nominees
The Nominating and Governance Committee will identify potential candidates for Board membership, when applicable, through professional search firms and personal referrals. Candidacy for Board membership requires the final approval of the full Board. Each year, the Board proposes a slate of nominees to the stockholders, who elect the members of the Board at the annual meeting of stockholders. Stockholders may also propose nominees for consideration by the Nominating and Governance Committee by submitting the names and supporting information regarding proposed candidates to the Company’s Secretary in accordance with the procedure for submitting stockholder nominations set forth under “Recommendation of a Director Candidate for Consideration by the Nominating and Governance Committee” and “Direct Nomination of a Director Candidate” below. Candidates (including those proposed by our stockholders) are evaluated by the Nominating and Governance Committee through recommendations, resumes, personal interviews, reference checks and other information deemed appropriate by the Nominating and Governance Committee. The Nominating and Governance Committee will evaluate director candidates proposed by our stockholders in the same manner and using the same criteria as used for any other director candidate.
Semtech Corporation20172020 Proxy Statement | 2123
DIRECTOR NOMINATIONS
Recommendation of a Director Candidate for Consideration by the Nominating and Governance Committee
The Nominating and Governance Committee will consider recommendations for director nominations submitted by stockholders. Submissions for the 20182021 Annual Meeting of Stockholders (the “2018“2021 Annual Meeting”) must be received no later than March 17, 2018;13, 2021; must otherwise be made in accordance with our Director Nominations Policy;Policy, and must include allcontain the following information as specified in that Policy. the policy:
(a) | as to each person whom the stockholder proposes to nominate for election as a director: |
(i) | the information required by Item 401 of SEC RegulationS-K (generally providing for disclosure of the name, address, any arrangements or understanding regarding nomination and five year business experience of the proposed nominee, any directorships held during the past five years, as well as information regarding certain types of legal proceedings within the past ten years involving the nominee); |
(ii) | the information required by Item 403 of SEC RegulationS-K (generally providing for disclosure regarding the proposed nominee’s ownership of securities of the Company); and |
(iii) | the information required by Item 404 of SEC RegulationS-K (generally providing for disclosure of transactions between the Company and the proposed nominee valued in excess of a specified limit and certain other types of business relationships with the Company). |
(b) | as to such stockholder giving notice: |
(i) | the name and address, including telephone number, of the recommending stockholder; |
(ii) | the number of the Company’s shares owned by the recommending stockholder and the time period for which such shares have been held; |
(iii) | if the recommending stockholder is not a stockholder of record, a statement from the record holder of the shares verifying the holdings of the stockholder and a statement from the recommending stockholder of the length of time that the shares have been held; and |
(iv) | a statement from the stockholder as to whether the stockholder has a good faith intention to continue to hold the reported shares through the date of the Company’s next annual meeting of stockholders. |
(c) | additional items: |
(i) | describe all relationships between the proposed nominee and the recommending stockholder and any agreements or understandings between the recommending stockholder and the nominee regarding the nomination; |
(ii) | describe all relationships between the proposed nominee and any of the Company’s competitors, customers, suppliers, or other persons with special interests regarding the Company; |
(iii) | a statement supporting the stockholder’s view that the proposed nominee possesses the minimum qualifications prescribed by the Company for nominees, and briefly describing the contributions that the nominee would be expected to make to the board and to the governance of the Company; |
(iv) | state whether, in the view of the stockholder, the nominee, if elected, would represent all stockholders and not serve for the purpose of advancing or favoring any particular stockholder or other constituency of the Company; and |
(v) | the consent of the proposed nominee to be interviewed by the Committee, if the Committee chooses to do so in its discretion (and the recommending stockholder must furnish the proposed nominee’s contact information for this purpose), and, if nominated and elected, to serve as a director of the Company. |
24 | Semtech Corporation2020 Proxy Statement
DIRECTOR NOMINATIONS
The Nominating and Governance Committee will only consider candidates who satisfy the Company’s minimum qualifications for director, as set forth above and in our Director Nominations Policy, including that directors represent the interests of all stockholders. One of the factors that will be taken into account in considering a stockholder recommendation is the size and duration of the recommending stockholder’s ownership interest in the Company and whether the stockholder intends to continue holding that interest through the applicable annual meeting date. Stockholders should be aware that it is the general policy of the Company tore-nominate qualified incumbent directors.
Direct Nomination of a Director Candidate
Under the Company’s Bylaws, director nominations will be considered untimely and ineligible to come properly before the Company’s 20182021 Annual Meeting if notice of such nomination is not received by the Company by March 17, 2018.13, 2021. A stockholder making a director nomination must be a stockholder of record on the date the required notice is given to the Company and on the record date for the meeting. The required notice must be submitted in writing to the Company’s Secretary at the Company’s headquarters at 200 Flynn Road, Camarillo, California 93012 and must contain the following information:
(a) | as to each person whom the stockholder proposes to nominate for election as a director: |
(i) | the name, age, business address, residence address and principal occupation or employment of the person, |
(ii) | the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the person, |
(iii) | a description of all arrangements or understandings between the stockholder and each nominee and any other person(s) (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and |
(iv) | any other information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and |
(b) | as to such stockholder giving notice: |
(i) | the name and record address of the stockholder who intends to make the proposal and the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by such stockholder, |
(ii) | a representation that the stockholder is a holder of record of common stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to introduce the business specified in the notice, |
(iii) | a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, |
(iv) | any material interest of the stockholder in such business, and |
(v) | any other information that is required to be provided pursuant to Regulation 14A under the Exchange Act. |
22 | Semtech Corporation20172020 Proxy Statement | 25
Stockholder Proposals to be included in Next Year’s Proxy Statement
The Company must receive stockholder proposals for the 20182021 Annual Meeting no later than January 5, 20181, 2021 in order to be considered for inclusion in the Company’s proxy materials. Stockholder proposals must be submitted in writing to the Company’s Secretary at the Company’s headquarters at 200 Flynn Road, Camarillo, California 93012. Any proposal must comply with the requirements of Rule14a-8 under the Exchange Act as to form and substance established by the SEC for such proposal to be included in the Company’s proxy statement. If we change the date of the 20182021 Annual Meeting by more than 30 days from the anniversary of this year’s meeting, stockholder proposals must be received a reasonable time before we begin to print and mail our proxy materials for the 20182021 Annual Meeting.
Other Stockholder Proposals for Presentation at Next Year’s Annual Meeting
Under the Company’s Bylaws, proposals by stockholders submitted outside the process ofRule 14a-8 under the Exchange Act which are not intended to be included in next year’s Proxy Statement, will be considered untimely and ineligible to come properly before the Company’s 20182021 Annual Meeting if notice of such proposal is not received by the Company by March 17, 2018.13, 2021. However, in the event that the annual meeting is called for a date that is more than thirty (30) days before or after the anniversary of the prior year’s annual meeting, notice by a stockholder to be timely must be received not later than the close of business on the tenth (10th) day following the earlier of (1) the day on which notice of the meeting was mailed or (2) the day on which the Company publicly announces the date of such meeting. The proposal must be a proper matter for stockholder action under Delaware law and the stockholder bringing the proposal must be a stockholder of record on the date the required notice of the proposal is given to the Company and on the record date for the meeting. The required notice must be submitted in writing to the Company’s Secretary at the Company’s headquarters at 200 Flynn Road, Camarillo, California 93012 and must contain the information set forth in section (b) of “Direct Nomination of a Director Candidate” above.
26 | Semtech Corporation20172020 Proxy Statement | 23
Non-Employee Directors receive a cash retainer and equity-based compensation for their services on the Board, their committee service, and their role as Chair of the Board or any committee. OurNon-Employee Directors also receiveequity-based compensation.
Cash Retainer Fees
During fiscal year 2017,2020, the cash retainer fees payable toNon-Employee Directors were as follows:
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
Description | Annual Retainer | |||
Annual Retainer | $ | 45,000 | ||
Additional Retainer for Chairman of the Board | $ | 50,000 | ||
Committee Chair Retainer | ||||
Audit Committee | $ | 20,000 | ||
Compensation Committee | $ | 20,000 | ||
Nominating and Governance Committee | $ | 10,000 | ||
Committee Retainer | ||||
Audit Committee | $ | 10,000 | ||
Compensation Committee | $ | 10,000 | ||
Nominating and Governance Committee | $ | 5,000 |
The committee retainer is payable to each member of a committee who is not also the chair of that committee. The Chair of a committee is entitled to receive only the committee chair retainer for that particular committee. Fees are paid quarterly in advance. Directors are also reimbursed for their reasonable expenses incurred in connection with their services.
Equity Award Grants
The equity awards made toNon-Employee Directors in fiscal year 20172020 were made from the 20132017 Long-Term Equity Incentive Plan (the “2013“2017 Plan”).Non-Employee Directors receive equity awards on the following terms:
Annual Stock Unit Awards. On each July 1, eachnon-employee director then in office will automatically be granted two awards of restricted stock units. The first award (the “AnnualNon-Deferred RSU Award”) will be for a number of restricted stock units determined by dividing $60,000$70,000 by theper-share closing price (in regular trading) of the Company’s common stock on the Nasdaq Stock Market on the grant date (or as of the last trading day preceding such date if the date of grant is not a trading day), rounded down to the nearest whole unit. Each AnnualNon-Deferred RSU Award will vest in full on the earlier of (1) theone-year anniversary of the date of grant and (2) the date immediately preceding the date of the annual meeting of the Company’s stockholders for the year following the year of grant of the award, subject to thenon-employee director’s continued service to the Company through such vesting date. To the extent then vested, restricted stock units subject to an AnnualNon-Deferred RSU Award will be paid in an equal number of shares of the Company’s common stock as soon as practicable following (and in all events within two andone-half months after) the earlier to occur of (1) theone-year anniversary of the date of grant, or (2) thenon-employee director’s separation from service on the Board.
The second award of restricted stock units (the “Annual Deferred RSU Award”) will be for a number of restricted stock units determined by dividing $70,000$80,000 by theper-share closing price (in regular trading) of the Company’s common stock on the Nasdaq Stock Market on the grant date (or as of the last trading day preceding such date if the date of the grant is not a trading day), rounded down to the nearest whole unit. Each
24 | Semtech Corporation2017 Proxy Statement
DIRECTOR COMPENSATION
Annual Deferred RSU Award will vest in full on the earlier of (1) theone-year anniversary of the date of grant and (2) the date immediately preceding the date of the annual meeting of the Company’s stockholders for the year following the year of grant of the award, subject to thenon-employee director’s continued service to the Company through such vesting date. To the extent then vested, restricted stock units subject to an Annual Deferred RSU Award will be paid in cash as soon as practicable following (and in all events within two andone-half months after) thenon-employee director’s separation from service on the Board.
Outstanding and unvested AnnualNon-Deferred RSU Awards and Annual Deferred RSU Awards will accelerate and vest (1) in full upon a change in control of the Company or should thenon-employee director’s service with the Company terminate due to the director’s death or disability, or (2) as to apro-rata portion of the AnnualNon-Deferred RSU Award or the Annual Deferred RSU Award, as applicable, should thenon-employee director’s service with the Company terminate due to any reason other than the director’s death or disability, with suchpro-rata portion determined by multiplying (a) the total number of restricted stock units subject to the AnnualNon-Deferred RSU Award or the Annual Deferred RSU Award, as applicable, by (b) a fraction (not greater than one), the numerator of which is the number of calendar days in the period beginning with the applicable grant date of the award through and including the date of the director’s termination of services, and the denominator of which is the number of calendar days in the period beginning with the applicable grant date of the award through and including the first July 1 that occurs after the applicable grant date of the award. Any restricted stock units subject to the AnnualNon-Deferred RSU Award or the Annual Deferred RSU Award, as applicable, that are not vested on the date of thenon-employee director’s termination of service with the Company (after giving effect to any accelerated vesting as described above) will be forfeited upon thenon-employee director’s termination of service as a director for any reason.
Non-employee directors are entitled to receive dividend equivalents with respect to outstanding and unpaid restricted stock units subject to AnnualNon-Deferred RSU Awards and Annual Deferred RSU Awards. Dividend equivalents, if any, are paid in the form of a credit of additional restricted stock units that are subject to the same vesting, payment and other provisions as the underlying restricted stock units.
Initial Equity Awards. For eachnon-employee director who is initially elected or appointed to the Board (and who was not an employee of the Company or one of its subsidiaries immediately prior to joining the Board), the Board will approve the grant to suchnon-employee director of a stock option (“Initial Stock Option Award”), an initialnon-deferred restricted stock unit award (“InitialNon-Deferred RSU Award”), and an initial deferred restricted stock unit award (“Initial Deferred RSU Award”). However, if such anon-employee director is initially elected or appointed to the Board on a July 1, the Board will grant thenon-employee director an Initial Stock Option Award, but thenon-employee director will not receive an InitialNon-Deferred RSU Award or an Initial Deferred RSU Award (as thenon-employee director would be entitled to an AnnualNon-Deferred RSU Award and an Annual Deferred RSU Award by virtue of being in office on such July 1).
An Initial Stock Option Award will be an option to purchase a number of shares of the Company’s common stock such that the grant date fair value of such option (determined by using a Black-Scholes or similar valuation method based on the assumptions generally then used by the Company in valuing its options in its financial reporting) will be approximately $100,000. Theper-share exercise price of an Initial Stock Option Award will equal the closing price (in regular trading) of a share of the Company’s common stock on the Nasdaq Stock Market on the date of grant (or as of the last trading day preceding such date if the date of grant is not a trading day). Each Initial Stock Option Award will be scheduled to vest in four (4) substantially equal annual installments, subject to thenon-employee director’s continued service as a director through each vesting date, with the first installment vesting on the first anniversary of the applicable grant date. Each Initial Stock Option Award will, however, accelerate and vest (1) in full upon a change in control of the Company or should thenon-employee director’s service with the Company terminate due to the director’s death or disability, or (2) as to apro-rata portion of the option grant should thenon-employee director’s service with the Company terminate due to any reason other than the director’s death or disability, with such
Semtech Corporation20172020 Proxy Statement | 2527
DIRECTOR COMPENSATION
Each Annual Deferred RSU Award will vest in full on the earlier of (1) theone-year anniversary of the date of grant and (2) the date immediately preceding the date of the annual meeting of the Company’s stockholders for the year following the year of grant of the award, subject to thenon-employee director’s continued service to the Company through such vesting date. To the extent then vested, restricted stock units subject to an Annual Deferred RSU Award will be paid in cash as soon as practicable following (and in all events within two andone-half months after) thenon-employee director’s separation from service on the Board.
Outstanding and unvested AnnualNon-Deferred RSU Awards and Annual Deferred RSU Awards will accelerate and vest (1) in full upon a change in control of the Company or should thenon-employee director’s service with the Company terminate due to the director’s death or disability, or (2) as to apro-rata portion of the AnnualNon-Deferred RSU Award or the Annual Deferred RSU Award, as applicable, should thenon-employee director’s service with the Company terminate due to any reason other than the director’s death or disability, with suchpro-rata portion determined by multiplying (a) the total number of sharesrestricted stock units subject to the option grantAnnualNon-Deferred RSU Award or the Annual Deferred RSU Award, as applicable, by (b) a fraction (not greater than one), the numerator of which is the number of whole weeks betweencalendar days in the period beginning with the applicable grant date of the award through and including the date of the director’s termination of services, and the applicable grant of the award, and the denominator of which is two hundred eight (208), and subtracting the number of sharescalendar days in the period beginning with the applicable grant date of the award through and including the first July 1 that occurs after the applicable grant date of the award. Any restricted stock units subject to the optionsAnnualNon-Deferred RSU Award or the Annual Deferred RSU Award, as applicable, that were theretofore vested. The foregoing provisions are not vested on the date of thenon-employee director’s termination of service with the Company (after giving effect to any accelerated vesting as described above) will be forfeited upon thenon-employee director’s termination of service as a director for any reason.
Non-employee directors are entitled to receive dividend equivalents with respect to outstanding and unpaid restricted stock units subject to AnnualNon-Deferred RSU Awards and Annual Deferred RSU Awards. Dividend equivalents, if any, are paid in the caseform of an Initial Stock Option Award,a credit of additional restricted stock units that are subject to the termssame vesting, payment and conditionsother provisions as the underlying restricted stock units.
Initial Equity Awards. Eachnon-employee director who is initially elected or appointed to the Board (and who was not an employee of the applicableCompany or one of its subsidiaries immediately prior to joining the Board) will receive an initialnon-deferred restricted stock unit award (“InitialNon-Deferred RSU Award”) and an initial deferred restricted stock unit award (“Initial Deferred RSU Award”). However, if such anon-employee director is initially elected or appointed to the Board on a July 1, thenon-employee director will not receive an InitialNon-Deferred RSU Award Agreement.or an Initial Deferred RSU Award as thenon-employee director would be entitled to an AnnualNon-Deferred RSU Award and an Annual Deferred RSU Award by virtue of being in office on such July 1.
InitialNon-Deferred RSU Awards and Initial Deferred RSU Awards will have the same terms and conditions as the AnnualNon-Deferred RSU Awards and Annual Deferred RSU Awards, respectively, last granted by the Company prior to the date that the newnon-employee director is elected or appointed to the Board, except that the number of restricted stock units subject to each such initial award will be determined by dividing the applicable dollar amount set forth above for the applicable annual award by theper-share closing price (in regular trading) of the Company’s common stock on the Nasdaq Stock Market on the grant date (or as of the last trading day preceding such date if the date of grant is not a trading day) of such initial award, multiplying that number of units by the Initial Fraction (as defined below), and rounding the number of units so produced down to the nearest whole unit. For clarity, the vesting dates of each such InitialNon-Deferred RSU Award and Initial Deferred RSU Award will also correspond with the vesting dates applicable to the AnnualNon-Deferred RSU Awards and Annual Deferred RSU Awards last granted by the Company prior to the date that the newnon-employee director is elected or appointed to the Board. The Initial Fraction is the fraction (not greater than one) determined by dividing (1) the number of days in the period beginning with the date that thenon-employee director is elected or appointed to the Board through
28 | Semtech Corporation2020 Proxy Statement
DIRECTOR COMPENSATION
and including the June 30 that coincides with or next follows that date, by (2) the number of calendar days in the calendar year that includes such June 30 (either 365 or 366).
DIRECTOR COMPENSATION – FISCAL YEAR 20172020
The following table presents information regarding the compensation of individuals who wereNon-Employee Directors during fiscal year 20172020 for their services during that year. The compensation paid to Mr. Maheswaran, who is our current Chief Executive Officer, is presented below under “Executive Compensation,” including in the Summary Compensation Table and the related explanatory tables. Mr. Maheswaran is our only employee director and does not receive any additional compensation for his services as a director.
NON-EMPLOYEE DIRECTOR COMPENSATION – FISCAL YEAR 2017 (1) | ||||||||||||||||||||||||||||||||||||
NON-EMPLOYEE DIRECTOR COMPENSATION – FISCAL YEAR 2020 (1) | NON-EMPLOYEE DIRECTOR COMPENSATION – FISCAL YEAR 2020 (1) | |||||||||||||||||||||||||||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards (2) ($) | Option Awards (2) ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards (1) ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
Chairman Hankin | 105,000 | 129,972 | – | – | 234,972 | 105,000 | 149,931 | – | 254,931 | |||||||||||||||||||||||||||
Vice Chairman Burra | 60,000 | 129,972 | – | – | 189,972 | 60,000 | 149,931 | – | 209,931 | |||||||||||||||||||||||||||
Mr. Antle | 55,000 | 129,972 | – | – | 184,972 | |||||||||||||||||||||||||||||||
Mr. Cardenuto | 55,000 | 149,931 | – | 204,931 | ||||||||||||||||||||||||||||||||
Mr. Edwards | 65,000 | 129,972 | – | – | 194,972 | 65,000 | 149,931 | – | 214,931 | |||||||||||||||||||||||||||
Ms. Li (3) | 60,388 | 174,705 | 99,992 | – | 335,085 | |||||||||||||||||||||||||||||||
Mr. Gillai | 55,000 | 149,931 | – | 204,931 | ||||||||||||||||||||||||||||||||
Ms. Li | 55,000 | 149,931 | – | 204,931 | ||||||||||||||||||||||||||||||||
Mr. Lindstrom | 65,000 | 129,972 | – | – | 194,972 | 65,000 | 149,931 | – | 214,931 | |||||||||||||||||||||||||||
Mr. Piotrowski (1) | 13,750 | – | – | – | 13,750 | |||||||||||||||||||||||||||||||
Dr. Santoro | 55,000 | 129,972 | – | – | 184,972 | 55,000 | 149,931 | – | 204,931 | |||||||||||||||||||||||||||
Ms. Summers | 60,000 | 129,972 | – | – | 189,972 | 60,000 | 149,931 | – | 209,931 |
(1) |
The amounts and values noted do not necessarily correspond to any actual value that will be realized by a recipient. The stock award |
26 | Semtech Corporation2017 Proxy Statement
DIRECTOR COMPENSATION
service-based vesting conditions. None of ourNon-Employee Directors forfeited any Company equity awards in fiscal year |
The following table presents the number of outstanding and unexercised option awards and number of outstanding stock units held by each of ourNon-Employee Directors as of January 29, 2017:26, 2020:
Outstanding Awards at End of Fiscal Year 2017 | ||||||||||||||||||||||||||||||||||||||||
Director | Number of Shares Subject to Outstanding Option Awards at Fiscal Year End | Number of Outstanding Restricted Stock Units-Cash Settled At Fiscal Year End | Number of Outstanding Restricted Stock Units-Share Settled At Fiscal Year End | |||||||||||||||||||||||||||||||||||||
Name | Since | Vested | Unvested | Total | Vested | Unvested | Total | Vested | Unvested | Total | ||||||||||||||||||||||||||||||
Chairman Hankin | 1988 | 7,500 | 7,500 | 15,000 | 31,201 | 2,957 | 34,158 | 3,045 | 2,534 | 5,579 | ||||||||||||||||||||||||||||||
Vice Chairman Burra | 1991 | 32,500 | 7,500 | 40,000 | 31,201 | 2,957 | 34,158 | 3,045 | 2,534 | 5,579 | ||||||||||||||||||||||||||||||
Director Antle | 2002 | 32,500 | 7,500 | 40,000 | 31,201 | 2,957 | 34,158 | 3,045 | 2,534 | 5,579 | ||||||||||||||||||||||||||||||
Director Edwards | 2006 | 32,500 | 7,500 | 40,000 | 31,201 | 2,957 | 34,158 | 3,045 | 2,534 | 5,579 | ||||||||||||||||||||||||||||||
Director Li | 2016 | – | 19,349 | 19,349 | 1,302 | 2,957 | 4,259 | 1,116 | 2,534 | 3,650 | ||||||||||||||||||||||||||||||
Director Lindstrom | 2002 | 32,500 | 7,500 | 40,000 | 31,201 | 2,957 | 34,158 | 3,045 | 2,534 | 5,579 | ||||||||||||||||||||||||||||||
Director Piotrowski (1) | 2002 | 40,000 | – | 40,000 | – | 31,201 | 31,201 | 3,045 | – | 3,045 | ||||||||||||||||||||||||||||||
Director Santoro | 2013 | 27,500 | 12,500 | 40,000 | 8,175 | 2,957 | 11,132 | 3,045 | 2,534 | 5,579 | ||||||||||||||||||||||||||||||
Director Summers | 2013 | 27,500 | 12,500 | 40,000 | 8,175 | 2,957 | 11,132 | 3,045 | 2,534 | 5,579 |
Outstanding Awards at End of Fiscal Year 2020 | ||||||||||||||||||||||||||||||||||||||||
Director Since | Number of Shares Subject to Outstanding Option Awards at Fiscal Year End | Number of Outstanding Restricted Stock Units- Cash Settled At Fiscal Year End | Number of Outstanding Restricted Stock Units-Share Settled At Fiscal Year End | |||||||||||||||||||||||||||||||||||||
Name | Vested | Unvested | Total | Vested | Unvested | Total | Vested | Unvested | Total | |||||||||||||||||||||||||||||||
Chairman Hankin | 1988 | 1,250 | – | 1,250 | 37,816 | 1,582 | 39,398 | 8,744 | 1,384 | 10,128 | ||||||||||||||||||||||||||||||
Vice Chairman Burra | 1991 | 5,000 | – | 5,000 | 37,816 | 1,582 | 39,398 | 8,744 | 1,384 | 10,128 | ||||||||||||||||||||||||||||||
Mr. Cardenuto | 2018 | – | – | – | 1,056 | 1,582 | 2,638 | 924 | 1,384 | 2,308 | ||||||||||||||||||||||||||||||
Mr. Edwards | 2006 | 10,000 | – | 10,000 | 37,816 | 1,582 | 39,398 | 8,744 | 1,384 | 10,128 | ||||||||||||||||||||||||||||||
Mr. Gillai | 2018 | – | – | – | 1,056 | 1,582 | 2,638 | 924 | 1,384 | 2,308 | ||||||||||||||||||||||||||||||
Ms. Li | 2016 | 9,511 | 4,838 | 14,349 | 7,917 | 1,582 | 9,499 | 6,815 | 1,384 | 8,199 | ||||||||||||||||||||||||||||||
Mr. Lindstrom | 2002 | 10,000 | – | 10,000 | 37,816 | 1,582 | 39,398 | 8,744 | 1,384 | 10,128 | ||||||||||||||||||||||||||||||
Dr. Santoro | 2013 | 10,000 | – | 10,000 | 14,790 | 1,582 | 16,372 | 8,744 | 1,384 | 10,128 | ||||||||||||||||||||||||||||||
Ms. Summers | 2013 | 10,000 | – | 10,000 | 14,790 | 1,582 | 16,372 | 8,744 | 1,384 | 10,128 |
Semtech Corporation20172020 Proxy Statement | 2729
BENEFICIAL OWNERSHIP OF SECURITIES
The table below indicates the number of shares of the Company’s common stock beneficially owned as of April 21, 2017,17, 2020, the record date for the Annual Meeting, by each person known to the Company to be the beneficial owner of more than 5% of the outstanding shares of our common stock, each of our directors, each of our NEOs (as defined herein) and all directors and executive officers as a group. Unless otherwise noted, all information regarding stockholders who are not directors or officers of the Company is based on the Company’s review of information filed with the SEC on Schedule 13D or 13G, which information is as of December 31, 2016,2019, unless otherwise noted below. The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated below, to the Company’s knowledge, all persons listed have sole voting and investment power with respect to their shares.
Unless otherwise noted below, the address of each beneficial owner listed in the table is in care of Semtech Corporation, 200 Flynn Road, Camarillo, California 93012.
Beneficial Ownership of Common Stock | ||||||||
Name and Address of Beneficial Owner | Number of Shares | % (6) | ||||||
BlackRock Inc. (1) | 7,853,608 | 12.0 | ||||||
FMR LLC (2) | 6,587,634 | 10.0 | ||||||
The Vanguard Group, Inc. (3) | 5,684,448 | 8.7 | ||||||
Waddell & Reed Financial, Inc. (4) | 5,456,247 | 8.3 | ||||||
Rockell N. Hankin, Chairman of the Board | 167,440 | * | ||||||
James P. Burra, Vice Chairman of the Board (5) | 73,545 | * | ||||||
Glen M. Antle, Director | 35,545 | * | ||||||
Bruce C. Edwards, Director (5) | 47,545 | * | ||||||
Ye Jane Li, Director | 5,953 | * | ||||||
James T. Lindstrom, Director | 52,500 | * | ||||||
Carmelo J. Santoro, Director | 35,545 | * | ||||||
Sylvia Summers, Director | 35,545 | * | ||||||
Mohan R. Maheswaran, Director, President and Chief Executive Officer | 414,457 | * | ||||||
Emeka N. Chukwu, Executive Vice President and Chief Financial Officer | 135,776 | * | ||||||
Charles B. Ammann, Executive Vice President, General Counsel and Secretary | 45,154 | * | ||||||
Gary M. Beauchamp, Executive Vice President and General Manager, Signal Integrity Products Group, | 52,565 | * | ||||||
James J. Kim, Senior Vice President, Worldwide Sales | 87,100 | * | ||||||
All Current Directors and Executive Officers as a group (19 persons including those named above) (7) | 1,472,048 | 2.2 |
Beneficial Ownership of Common Stock | ||||||||
Name and Address of Beneficial Owner | Number of Shares | % (5) | ||||||
BlackRock Inc. (1) | 8,228,848 | 12.6 | ||||||
The Vanguard Group, Inc. (2) | 6,360,218 | 9.8 | ||||||
Invesco Ltd. (3) | 4,400,425 | 6.8 | ||||||
Rockell N. Hankin, Chairman of the Board | 137,574 | * | ||||||
James P. Burra, Vice Chairman of the Board (4) | 58,128 | * | ||||||
Rodolpho C. Cardenuto, Director | 2,308 | * | ||||||
Bruce C. Edwards, Director (4) | 62,128 | * | ||||||
Saar Gillai, Director | 2,308 | * | ||||||
Ye Jane Li, Director | 19,548 | * | ||||||
James T. Lindstrom, Director | 32,871 | * | ||||||
Carmelo J. Santoro, Director | 27,398 | * | ||||||
Sylvia Summers, Director | 36,384 | * | ||||||
Mohan R. Maheswaran, Director, President and Chief Executive Officer | 324,135 | * | ||||||
Emeka N. Chukwu, Executive Vice President and Chief Financial Officer | 145,005 | * | ||||||
Charles B. Ammann, Executive Vice President and General Counsel | 25,070 | * | ||||||
Gary M. Beauchamp, Executive Vice President and General Manager, Signal Integrity Products Group | 9,633 | * | ||||||
Asaf Silberstein, Executive Vice President, Worldwide Operations and Information Technology | 67,995 | * | ||||||
All Current Directors and Executive Officers as a group (20 persons including those named above) (6) | 1,165,820 |
* | Less than 1% |
(1) | As reported in Amendment No. |
2830 | Semtech Corporation20172020 Proxy Statement
BENEFICIAL OWNERSHIP OF SECURITIES
(2) | As reported in Amendment |
(3) | As reported in Schedule 13G filed on February 13, 2020 by Invesco Ltd. Invesco Ltd. reported sole voting power over 4,320,927 shares and sole dispositive power over 4,400,425 shares, as the parent company of the following subsidiaries which hold the shares: Invesco Advisers, Inc., Invesco Asset Management Ltd., Invesco Investment Advisers, LLC and Invesco Capital Management LLC. |
(4) |
The reported shares include shares held in family trusts under which voting and/or dispositive power is shared: Mr. Burra |
The ownership percentage is based on |
No shares of common stock held by a director, director nominee or officer have been pledged as security. The Company is not aware of any arrangements or pledge of common stock that could result in a change of control of the Company. |
Semtech Corporation20172020 Proxy Statement | 2931
Name | Age as of April | Position | ||
Mohan R. Maheswaran |
| President and Chief Executive Officer | ||
Emeka N. Chukwu |
| Executive Vice President and Chief Financial Officer | ||
Charles B. Ammann |
| Executive Vice President, General Counsel and Secretary | ||
Gary M. Beauchamp |
| Executive Vice President and General Manager, Signal Integrity Products Group | ||
|
| Senior Vice President, Corporate Marketing and | ||
Mark C. Costello |
| Vice President and General Manager, Protection Products Group | ||
Sharon K. Faltemier |
| Senior Vice President, Human Resources | ||
|
| |||
|
| Vice President and General Manager, Wireless and Sensing Products Group | ||
Michael W. Rodensky | 59 | Vice President, Sales – Americas and EMEA | ||
Asaf Silberstein |
| |||
J. Michael Wilson |
| Executive Vice President and Chief Quality |
Mr. Maheswaran joined the Company in April 2006 as President and Chief Executive Officer. He was Executive Vice President and General Manager of Intersil Corporation (“Intersil”), a company that designs and manufactures analog semiconductors, from June 2002 until March 2006, responsible for managing and overseeing the design, development, applications and marketing functions for Intersil’s Analog Signal Processing Business unit. From June 2001 to May 2002, he was Vice President of Marketing, Business Development and Corporate Strategy for Elantec Semiconductor, Inc., a company that designed and manufactured analog integrated circuits before its acquisition by Intersil in May 2002. He was Vice President of Business Development and Corporate Strategy of Elantec Semiconductor from January 2001 to June 2001. Mr. Maheswaran has also been employed by Allayer Communications, a communications integrated circuit startup company acquired by Broadcom Corporation; IBM Microelectronics; Texas Instruments Incorporated;Hewlett-Packard Company and Nortel Communications.
Mr. Chukwu has been our Executive Vice President and Chief Financial Officer since February 2014. Prior to his promotion, he was Senior Vice President and Chief Financial Officer since August 2011. He previously served as the Company’s Vice President and Chief Financial Officer from November 2006. He previously had been employed in various financial positions at Intersil Corporation, a company that designs and manufactures analog semiconductors, since 2002. His most recent position at Intersil was Vice President, Finance, in which capacity he served since February 2006 with responsibility for all financial management affairs of the corporation’s business units and worldwide operations. He served as the Controller of Intersil’s Analog Signal Processing Group and Worldwide Operations from May 2002 through January 2006, responsible for financial planning, budget management, and related financial oversight functions. From July 1997 through April 2002, he was the Corporate Controller of Elantec Semiconductor, Inc., a manufacturer of analog integrated circuits that was acquired by Intersil in 2002.
Mr. Ammann joined the Company in January 2014 as Executive Vice President, General Counsel and Secretary. Prior to joining the Company, Mr. Ammann served as the Executive Vice President, General Counsel and Secretary ofpublicly-traded United Online, Inc. where he had been since August 2006. Before working for United Online, Mr. Ammann served as the Senior Vice President, General Counsel and Secretary ofpublicly-traded TV Guide, Inc. from 1999 until its acquisition by Gemstar International Group Limited, at which time Mr. Ammann’s responsibilities expanded as Senior Vice President and Deputy General Counsel of the combinedGemstar-TV Guide International entity. From 1996 to 1999, Mr. Ammann served as the Senior Vice President, General Counsel and Secretary, and oversaw the administrative operations, ofpublicly-traded United Video Satellite Group, Inc. From 1990 to 1996, Mr. Ammann held the position of Vice President of Administration and General Counsel of Flint Industries, Inc., aprivately-owned conglomerate based in Tulsa, Oklahoma. Upon graduating from law school, Mr. Ammann was an attorney at the law firm Gable & Gotwals, from 1980 to 1990, and was a partner for his last five years with that firm.
3032 | Semtech Corporation20172020 Proxy Statement
EXECUTIVE OFFICERS
Mr. Beauchamp has been our Executive Vice President and General Manager, Signal Integrity Products Group since February 2014. Prior to his promotion, he was Senior Vice President and General Manager, Signal Integrity Products Group. Mr. Beauchamp was appointed Senior Vice President and General Manager of the Gennum Products Group in March 2012, following Semtech’s acquisition of Gennum Corporation and held that title until December 2013. Mr. Beauchamp’s group provideshigh-performance analog solutions to the video broadcast, video surveillance,data communications and data communicationsvideo markets. Prior to his role at Semtech, Mr. Beauchamp was Senior Vice President and General Manager, Mixed Signal and Optical Products, for Gennum Corporation, which he joined in 2000. Between 1990 and 2000, Mr. Beauchamp held several management positions at COM DEV International.
Mr. Brown was promoted toChang joined the Company in December 2017 as Senior Vice President, Corporate Marketing and General Manager ofBusiness Development and became Senior Vice President, Corporate Marketing and Sales, Asia Pacific effective March 3, 2020. He oversees strategic growth initiatives for the Power and High-Reliability Products Group in September 2015.Company, including China operations. Prior to his promotion,joining Semtech, Mr. Chang was Chief Executive Officer at Alien Technology LLC, a global leader in RFID Technology, a position he washeld since 2014. Prior to Alien Technology, Mr. Chang served as Corporate Vice President at Marvell Semiconductor between 2011 and General Manager of the High-Reliability Products Group since July 2014. Mr. Brown was Vice President, Test & Product Engineering from November 2009 to July 2014,Chang has also held key executive positions in sales and prior to that, held variousfinance functions at other management positions within the Power Managementprominent high technology companies including AMD, Silicon Graphics, and Communications Products Groups. Mr. Brown joined Semtech in 2000 and was part of the Communications Products Group located in the United Kingdom. After four years, he joined the Power Products Group and relocated to Semtech’s headquarters office in Camarillo, California. Prior to Semtech, Mr. Brown worked for Credence Corporation and Philips Semiconductors.Eastman Kodak.
Mr. Costello has been our Vice President and General Manager of the Protection Products Group since March 2015. He held the position of Vice President of Engineering for Protection Products from June 2013. Prior to this appointment, he held the position of Director of Product Development. He joined the Company in 1996 and held several engineering and operations positions including Plant Manager for the Semtech Corpus Christi wafer fabrication plant and Operations Manager during the transition to fabless manufacturing. Prior to joining the Company, he developed advanced materials for optical and electronic applications atGEC-Marconi’s research laboratories in Caswell, England.
Ms. Faltemier has been our Senior Vice President, Human Resources since February 2014. Ms. Faltemier joined the Company in January 2013 and was appointed Vice President, Human Resources. Prior to Semtech, she served as Senior Vice President, Human Resources for DTS, Inc., a consumer electronics licensing company from 2006 to 2012. Prior to DTS she was Sr. Vice President, Human Resources for Capstone Turbine Corporation from 2003 to 2006. Her more than 30 years of experience in the human resources field and business operations includes positions with Tyco International Ltd., Proctor & Gamble Corporation, Northrop Grumman Corporation and Boeing Company.
Mr. Kim became Senior Vice President of Worldwide Sales in November 2009. Mr. Kim was appointed Vice President of Worldwide Sales and Marketing in February 2007, after serving as Vice President of Global Handset Sales since March 2004. He was Director of Sales and Marketing for Korea and Japan from April 2000 to March 2004. He was Marketing Manager from May 1997 to April 2000. He has also held various engineering positions since beginning his employment with the Company in 1986.
Mr. Pegulu has been ourFulton is Vice President and General Manager of theour Wireless and Sensing Products Group since June 2015. He held the position of Vice President of Wireless and Sensing Products from June 2014. Prior to this appointment, he held the position of Director of Marketing and Applications.Group. Mr. PeguluFulton joined the Company in March 2006January 2018 as Vice President, IoT Product Management and Marketing and was involvedpromoted to his current position in several key technology initiatives, including LoRa Wireless and Software Defined Modem technologies.December 2018. Prior to joining the Company, he was employed from 2016 to 2018 at Hitachi as Head of IoT Product Management and Technology. Prior to Hitachi, he held a variety of leadership positions at Microsoft Corporation since 2009. He has also previously served in chipsvarious positions at Deloitte Consulting and systems developmentO2PLC.
Mr. Rodensky was promoted to Vice President, Sales – Americas and EMEA effective March 3, 2020. He was previously Vice President of Sales – Americas since joining the Company in 2006. Mr. Rodensky brings over 25 years of experience in executive-level semiconductor sales and marketing management to his role at Thomson CSF, Thales, ATMEL,Semtech. Before joining Semtech, he was Vice President of Worldwide Sales at Vitesse Semiconductor. Mr. Rodensky has held executive-level global sales roles at several public and DibCom in Franceprivate semiconductor companies, including Maker Communications, SolarFlare Communications, and China.Telephotonics, as well as senior sales management positions at Philips, Advanced Micro Devices, and Conexant Systems.
Mr. Silberstein isbecame Executive Vice President, Worldwide Operations and Information Technology in March 2019. Mr. Silberstein was Senior Vice President, Worldwide Operations and Information Technology.Technology
Semtech Corporation2020 Proxy Statement | 33
EXECUTIVE OFFICERS
from November 2016 to March 2019. His role was expanded in November 2016 to include the area of Information Technology. Mr. Silberstein was promoted to Senior Vice President, Worldwide Operations in February 2013. He became Vice President, Worldwide Operations in March 2011. Prior to that, Mr. Silberstein was Vice President, Operations, a position he held
Semtech Corporation2017 Proxy Statement | 31
EXECUTIVE OFFICERS
since he joined the Company in December 2010. Prior to joining the Company, he was employed from 2007 to 2010 at Microsemi Corporation (“Microsemi”) as Vice President Global Operations in its Analog Mixed Signal Division. Prior to Microsemi, he was Vice President Operations from 2000 to 2005 and Chief Operating Officer from 2005 to 2007 at Powerdsine, Israel, when Powerdsine was acquired by Microsemi. He has also previously served in various positions at 3Com and ECI Telecom.
Mr. Wilson hasbecame Executive Vice President and Chief Quality Officer in March 2019. Mr. Wilson had previously been our Executive Vice President, Quality and Reliability since February 2013. Prior to his promotion, Mr. Wilson was Senior Vice President, Quality and Reliability, a position he held since November 2011. Mr. Wilson was appointed Senior Vice President and Chief Technology Officer in May 2008 after serving as Senior Vice President of Power Management Products since June 2007 and serving as Vice President of that unit since 2001. He joined us as the result of the 1995 acquisition of ECI Semiconductor where he was Vice President and Chief Operating Officer. He has more than 20 years of experience in the semiconductor industry in a broad range of technical and management positions.
There are no family relationships between or among any of our executive officers or directors.
3234 | Semtech Corporation20172020 Proxy Statement
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on our review of the SEC Forms 3, 4 and 5 and amendments thereto received by the Company, or written representations from reporting persons that they were not required to file such forms, the Company believes that, with respect to transactions during the fiscal year ended January 29, 2017, our officers, directors and beneficial holders of more than 10% of our common stock complied with all filing requirements under Section 16(a) of the Exchange Act.
Semtech Corporation2017 Proxy Statement | 33
COMPENSATION DISCUSSION AND ANALYSIS
This section contains a discussion of the material elements of compensation awarded to, earned by or paid to our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensatedhighly-compensated executive officers for services rendered during fiscal year 2017.2020. These individuals are listed in the table below and are referred to as our “Named Executive Officers,” or “NEOs,” in this Proxy Statement.
Name | Title | |
Mohan R. Maheswaran | President and Chief Executive Officer (“CEO”) | |
Emeka N. Chukwu | Executive Vice President and Chief Financial Officer (“CFO”) | |
Charles B. Ammann | Executive Vice President, General Counsel and Secretary | |
Gary M. Beauchamp | Executive Vice President and General Manager, Signal Integrity Products Group | |
|
FISCAL YEAR 2017 PERFORMANCE2020 BUSINESS HIGHLIGHTS
The Company’s board of directors and the management team enteredOur fiscal year 2017 with high expectations that several favorable trends in existing2020 was significantly impacted by an unexpectedly challenging macro environment led by geopolitical actions by the U.S. government, including China tariffs and new growth markets along with a modest recovery by one ofban on certain product sales to Huawei, a material customer for us. As a result, our larger customers would contribute to fiscal year 2017 returning to strong financial performance and increased total shareholder return (“TSR”). Consequently,during the Company’s annualyear fell short of the challenging goals we set in our operating plan for fiscal year 2017, which formedat the basis forbeginning of the Company’s fiscal year 2017 annual incentive plan as described below, reflected a significant increase in bothyear. Specifically, net revenues andnon-GAAP operating income (as defined below) over fiscal year 2016 levels. Actual net revenuesales andnon-GAAP operating income performance however, exceeded that aggressive plan. In addition, the Company saw a significant increase in its stock price and TSR duringfor fiscal year 2017.2020 were 21.8% and 43.2% below our operating plan, respectively.
InWe do not believe our fiscal year 2017, favorable infrastructure spending trends led by hyper-scale datacenter build outs and2020 financial performance is indicative of any underlying changes in our leadership position in our key markets, including the emergence of the fast growing Internet of Things (“IoT”) market delivered strong demand momentum throughout(IoT), 100 Gbps and emerging 200/400 Gbps Optical connectivity in the year. In addition, the smartphone segment in Asia, including Chinadatacenter, and Korea, contributed to a stronger year for the Company’shigh-end consumer business. All four of our product groups – Signal Integrity, Wireless and Sensing, Protection, and Power and High-Reliability — saw increases in net sales inmobile devices. During fiscal year 2017. During the fiscal year,2020, the Company remained focused on expanding its role as a leading provider of disruptive solutions that enable our core businesses while divesting nonstrategic assets including our former Snowbush IP business and our timing synchronization business. At the same time, the Company continuedcustomers to invest in disruptive analog/mixed signal platforms in selected target markets. Focused investments included ongoing investment in; a) signal integritydeliver platforms that support upwill contribute to 100 Gbpsa more sustainable future. As a result, we expect these products and emerging 400 Gbps applications targeted atmarkets to grow strongly over the next several years led by the global adoption of the Company’s LoRa® devices and wireless radio frequency (“RF”) technology as the de facto standard for low power wide-area networks (“LPWAN”) used to build a smarter planet. The Company’s portfolio of high speed optical connectivity solutions deliver greater bandwidth and higher performance using less power to our cloud and hyper-scale datacenter customers, as well as those infrastructure customers building out the higher speed 5G and 10Gbps passive optical networking (“PON”) applications, b) wireless and sensing platforms targeted at IoT andPON networks. In addition, the Company’s proximity sensing applications, c) wireless charging platforms targeted at industrialsolutions protect mobile device users from dangerous RF signals and wearable applications, and d)high-end protection platforms enable the greater adoption of OLED by smartphone makers.
During our fiscal year 2020, we also continued our strategy of making smaller, targeted athigh-end consumer applications and a broad range of industrial and communications applications. The Company also executedinvestments focused mainly on a number of strategic minority investments which we believe will help position the Company for future growth in its target market segments. Specifically, several strategic minority investments werepositions made in support of the Company’s LoRa® wireless RF technology which saw net revenue nearly double ecosystem as well as on broad-based applications targeting key industrial and communications applications. In addition to these strategic business investments, we continued taking actions to secure the consistent and long-term supply of products and resources from our vendors and suppliers. These investments included both capital equipment purchases and wafer supply agreements intended to support our expectations of future growth.
Despite the challenges the Company faced in fiscal year 2016. Membership in2020, many of which were beyond the LoRa Alliance™ more than doubled from the end of fiscal year 2016 and now exceeds 450 members worldwide, and LoRaWAN network trials were announced or in the process of deployment during fiscal year 2017 in more than 50 countries.
With continuing momentum coming off fiscal year 2017 from our product groups in several of the industry’s faster growing markets including IoT, hyper-scale datacenters and mobile devices,Company’s control, the Board believesof Directors and management team believe that the Company isCompany’s strategy and the secular growth engines expected to drive long-term growth remain solidly intact.
FISCAL YEAR 2020 CHIEF EXECUTIVE OFFICER COMPENSATION
In March 2019, our Compensation Committee approved a unique equity compensation program for our Chief Executive Officer in recognition of his exceptional contributions to our success as well positioned for a successful fiscal year 2018 and increased shareholder value.as the critical
34Semtech Corporation2020 Proxy Statement | 35
COMPENSATION DISCUSSION AND ANALYSIS
role he will play in executing the next phase of our strategic plan. As described in more detail below, the program is heavily weighted to performance-based equity and represents Mr. Maheswaran’s long-term incentive opportunity for fiscal years 2020-2023. The grant is comprised of a mix of time-vesting restricted stock units (“RSUs”) as well as shares that are eligible to vest based upon stock price appreciation (“Absolute Stock Price PSUs”) and our total shareholder return (“TSR”) relative to the SPDR S&P Semiconductor ETF index (“Relative TSR PSUs”).
A primary objective of the program is to provide a framework that increases Mr. Maheswaran’s compensation opportunity in scenarios where LoRa is as successful as the Board of Directors believes is possible. At the same time, the program also puts a much greater percentage of compensation at risk but includes a portion of time-vesting RSUs to maintain a threshold level of retention value.
Mr. Maheswaran’s fiscal year 2020 equity grant consisted of three equity vehicles (as described in the chart below). Taken together, the target value of the equity granted was weighted 85% to performance-based equity with rigorous performance goals (based on the grant date value of the target number of shares subject to the awards). The grant represents annualized target total compensation within the market range of compensation awarded to CEOs of companies in our compensation peer group.
Summary of Fiscal Year 2020 CEO Equity Grant
Equity Vehicle | Target RSUs / Reported | Summary of Key Terms | ||
Absolute Stock Price PSUs | 320,000 / $11.69M | • 30% of the RSUs covered by the award will vest if the30-day average closing price of our stock equals or exceeds $71.00 prior to March 5, 2024 • 70% of the RSUs covered by the award will vest if the30-day average closing price of our stock equals or exceeds $95.00 prior to March 5, 2024 | ||
Relative TSR PSUs | 160,000 / $9.58M | • Between 0% and 200% of the target number of units is eligible to vest based on our relative TSR performance during equally weighted1-,2-,3-, and4-year performance periods • Our TSR performance is measured relative to the performance of the SPDR S&P Semiconductor ETF • Our TSR must exceed the benchmark performance by at least 50% for the maximum number of shares to vest | ||
Time Vesting RSUs | 70,000 / $3.85M | • RSUs vest annually over a four-year vesting period measured from the date of grant of the awards | ||
Total | 550,000 / $25.13M | • Performance-based equity is 85% of target value • Sustained outperformance relative to semiconductor benchmark and 73% price appreciation required for full vesting of shares (based on the closing price of the Company’s common stock on the date of grant of the award) |
1. | Reported value reflects the grant date fair value of the target number of RSUs subject to the awards as calculated for reporting in our Summary Compensation Table on page 67. See footnote (1) to the Summary Compensation Table and the Grants of Plan-Based Awards table on page 69. |
The Compensation Committee determined the magnitude of Mr. Maheswaran’s fiscal year 2020 equity grant taking into consideration the annualized value of the award over a four-year time period. In determining the size of theup-front grant, the Compensation Committee also considered the fact that there is no upside vesting for the Absolute Stock Price PSUs described below (i.e., the maximum vesting level is 100% of the number of units subject to the award), and the significant risk of forfeiture of the Absolute Stock Price PSUs presented by the significant stockholder value that must be created in order for the award to vest.
36 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
SUMMARY OF FISCAL YEAR 2017 NAMED EXECUTIVE OFFICER COMPENSATION
OurApproval of the CEO’s fiscal year 2017 compensation policies and payouts reflect our overarching philosophy ofpay-for-performance. Among the more significant aspects and results2020 equity grant followed extensive discussions among members of our Compensation Committee and Board of Directors. During the process of finalizing and approving the program, the Compensation Committee considered that the Company’s market capitalization had increased by approximately $2.5 billion during an approximately10-year time period. Roughly half of that occurred during the last three years with the emergence of the Company’s LoRa technology and because of other strategic initiatives driven by our CEO. In particular, the decision to pursue the LoRa technology was a direct result of Mr. Maheswaran’s vision and the Compensation Committee and Board of Directors believe that ensuring Mr. Maheswaran’s ongoing leadership will be the most critical factor in determining LoRa’s ultimate success. The Compensation Committee also considered that Mr. Maheswaran would have other meaningful opportunities available to him and determined to act proactively to help ensure his retention and alignment with stockholders’ long-term interests.
As part of the Compensation Committee’s consideration of making anup-front, long-term stock grant to Mr. Maheswaran, we also reached out to 21 stockholders who together own more than 60% of our common stock and our Compensation Committee Chair had calls with 10 stockholders who together own approximately 30% of our common stock. The objectives of these meetings included soliciting stockholders’ views on executive programscompensation structures that includedup-front equity award grants with significant performance-based components. The general feedback received during these meetings was that stockholders would want to consider the specific terms of anup-front grant, but there was general support for our NEOsanup-front grant that placed a significant portion of long-term compensation opportunities “at risk” and contingent on creating meaningful stockholder value. Taking this outreach into account, along with other analyses it considered, the Compensation Committee, with respect to the Absolute Stock Price PSUs described above, increased the amount of stockholder value that would need to be created in order for the award to vest from the range of values it had otherwise been considering. Accordingly, the Compensation Committee determined to award Mr. Maheswaran anup-front, long-term stock grant, significantly weighted to performance-based vesting. The Compensation Committee intends that the award represents Mr. Maheswaran’s entire long-term equity incentive award opportunity for fiscal years 2020-2023, and does not intend to grant an additional equity award to Mr. Maheswaran before fiscal year 2017 are2024.
Taking all of the following, eachfactors noted above into account, the Compensation Committee believes that theup-front grant is reasonable and in the best interests of our stockholders.
Mr. Maheswaran was also eligible to earn an annual bonus under the CEO Bonus Plan, which is discussed in more detail below in this Compensation Discussion and Analysis (“CD&A”):was determined based on four factors:
35% weighted on ournon-GAAP operating income achievement relative to emphasize a strongpay-for-performance culture through the design of the compensation programs for our Named Executive Officers. A majority of the target compensation opportunity providedplan
25% weighted to our executives is awarded in the form ofat-risk incentives for which the realized value varies based on our operating and/or share price performance. In addition, our incentive programs incorporate aggressive goals that measure both short and long term performance as well as, in the case of the bonusnet revenue growth achievement relative to plan applicable
20% weighted to our CEO, performanceEPS and net revenue growth relative to a peer group.group of performance comparators
20% weighted to an evaluation of our emphasis on performance-basedMr. Maheswaran’s individual performance
The Compensation Committee has maintained a mix of absolute and relative financial performance and individual performance measurement in the CEO Bonus Plan to ensure that Mr. Maheswaran’s performance is evaluated broadly in the context of both short- and long-term compensation for our NEOs, their total compensation reported in the Summary Compensation Table is not equal to the compensationobjectives that they realized during each fiscal year. In fiscal 2017, despite our strong operating performance and improved financial results, performance share awards tied to our performance from fiscal 2015 through fiscal 2017 were forfeited with no payment due to our failure to achieve threshold levels of revenue and operating income. In addition, stock options that vested during the year were underwater as of their respective vesting dates. As a result, the 2017 compensation actually “realized” by our NEOs (calculated as discussed under “Realized Compensation” below) was significantly less than the 2017 total compensation reported in the Summary Compensation Table. Please see the discussion under “Realized Compensation” below.
drive shareholder value.
CHIEF EXECUTIVE OFFICER REALIZED COMPENSATION
In evaluating our NEOs’Mr. Maheswaran’s compensation, we believe it is important to understand not only the potential value of incentive awards at the time they are granted, but also the value actually realized by the executiveshim from theirhis awards. The Realized Compensation Table below supplements the Summary Compensation Table that appears on page 6367 and shows the fiscal year 2020 targeted compensation for Mr. Maheswaran and the compensation actually realized by Mr. Maheswaran in fiscal year 2017 by each NEO.2020. The primary difference between
Semtech Corporation2020 Proxy Statement | 37
COMPENSATION DISCUSSION AND ANALYSIS
the Realized Compensation Table and the Summary Compensation Table is the method used to value stock options and stock awards. Securities and Exchange Commission (“SEC”)SEC rules require that the grant date fair value of all stock options and stock awards be reported in the Summary Compensation Table for the year in which they were granted. As a result, a significant portion of the total compensation amounts reported in the Summary Compensation Table relates to stock options and stock awards that have not vested, a substantial portion of which are subject toperformance-based vesting requirements in addition totime-based vesting requirements, and for which the value is therefore uncertain (and which may end up having no value at all, such as with our performance-based restricted stock unit awards granted in fiscal years 2013, 2014 and 2015 for the three-year performance periods ending in fiscal years 2015, 2016 and 2017, respectively, which were forfeited in their entirety)all). In contrast,
The “Fiscal Year 2020 Annualized Target” column of the Realized Compensation Table below includes only those stock optionsshows Mr. Maheswaran’s actual base salary and stock awards held by the NEOs that vested duringtarget annual cash incentive for fiscal year 2017 (including those2020, as well asone-quarter of the grant date value of his equity awards granted in prior years) and showsfiscal year 2020.One-quarter of the grant date value of thoseMr. Maheswaran’s equity awards asgranted in fiscal year 2020 is shown because the Compensation Committee intends that the fiscal year 2020 awards represent Mr. Maheswaran’s entire long-term equity incentive award opportunity for fiscal years 2020-2023. The Compensation Committee does not intend to grant an additional equity award to Mr. Maheswaran before fiscal year 2024.
The “Realized Compensation” column of the applicable vesting date. As shown in the Realized Compensation Table below our CEO’s total realized compensation calculated in this manner was $3,410,734shows Mr. Maheswaran’s actual base salary and annual cash incentive award for fiscal year 2017, which is $1,415,750less than2020, as well as the value (as of the applicable vesting date) of his equity awards that actually vested during fiscal year 20172020.
As shown below, Mr. Maheswaran’s realized compensation (calculated as noted above) during fiscal year 2020 was 36%less than the annualized target value of his compensation and 81%less than his total compensation as calculated for purposes ofreported in the Summary Compensation Table. The Compensation Committee believes that this outcome is indicative of the strongpay-for-performance profile of the compensation strategy applicable to our CEO. In particular, the performance-based equity grants awarded to Mr. Maheswaran in the beginning of our fiscal year have generated no realized compensation valueto-date but continue to provide a significant long-term incentive opportunity and support retention with a meaningful balance of unvested value.
REALIZED COMPENSATION TABLE — FISCAL YEAR 2020
Semtech Corporation2017 Proxy Statement | 35
COMPENSATION DISCUSSION AND ANALYSIS
Realized Compensation Table – Fiscal Year 2017 | ||||||||||||||||||||||||||||||||
Name | Fiscal Year | Salary ($) | Option Awards ($) (1) | Stock Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total Realized Compensation ($) | Difference Between Total Realized Compensation and Total Compensation as Reported in Summary Compensation Table ($) | ||||||||||||||||||||||||
Mohan R. Maheswaran President and Chief Executive Officer | 2017 | $598,769 | $0 | $1,486,649 | $1,200,000 | $125,316 | $3,410,734 | $(1,415,750) | ||||||||||||||||||||||||
Emeka N. Chukwu Executive Vice President and Chief Financial Officer | 2017 | $375,000 | $0 | $299,922 | $306,000 | $76,442 | $1,057,365 | $(1,085,961) | ||||||||||||||||||||||||
Charles B. Ammann Executive Vice President, General Counsel and Secretary | 2017 | $359,077 | $0 | $239,761 | $293,760 | $81,548 | $974,146 | $(509,061) | ||||||||||||||||||||||||
Gary M. Beauchamp Executive Vice President and General Manager, Signal Integrity Products Group | 2017 | $310,069 | $0 | $487,701 | $302,193 | $25,446 | $1,125,408 | $(523,468) | ||||||||||||||||||||||||
James J. Kim Senior Vice President, Worldwide Sales | 2017 | $325,000 | $0 | $240,289 | $265,200 | $57,290 | $887,779 | $(1,110,574) |
Pay Element | Fiscal Year 2020 Annualized Target | Realized Compensation* | ||||||||
Base Salary | $ | 620K | $ | 620K | ||||||
CEO Bonus Plan | $ | 775K | $ | 279K | ||||||
Absolute Stock Price PSUs | $ | 2,922K | $ | 0 | ||||||
Relative TSR PSUs | $ | 2,396K | $ | 1,429K | ||||||
Time Vesting RSUs | $ | 963K | $ | 2,613K | ||||||
Total | $ | 7,676K | $ | 4,941K |
No value is included in Realized Compensation for the Absolute Stock Price PSUs because no portion of that award vested in fiscal year 2020. |
The |
The Realized Compensation value shown for Time Vesting RSUs represents the value (based on the closing price for a share of |
This information is supplemental to, and should be read in connection with, the Summary Compensation Table that appears on page 63.
3638 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
FISCAL YEAR 2020 NAMED EXECUTIVE OFFICER (OTHER THAN CEO) COMPENSATION
The structure of compensation awarded to our Named Executive Officers, other than our CEO, in fiscal year 2020 was consistent with the approach in fiscal year 2019. In addition to base salary, there were three components of the short- and long-term incentive opportunity awarded to our other Named Executive Officers.
Summary of Key Terms | ||
|
plan
| |
Relative TSR PSUs | • Between 0% and 200% of the vest based on our relative TSR performance during equally weighted1-,2-, and3-year performance periods
performance of the SPDR S&P Semiconductor ETF
| |
Time Vesting RSUs | • Shares vest annually over a three-year vesting period measured from
|
For fiscal year 2020, our NEOs (other than our CEO) earned annual cash incentive payouts between 75% and 77.5% of their target incentive for the year based solely on their individual performance. Since we did not achieve our Company performance goals for the 2020 annual cash incentive plan due to the macro economic challenges described above, our executives did not receive any payment for the Company performance portion of the annual cash incentives.
Semtech Corporation2017 Proxy Statement | 37
COMPENSATION DISCUSSION AND ANALYSISIn addition, there were three tranches of Relative TSR PSUs for which the performance period ended on January 26, 2020 (the last day of our fiscal year). The following chart outlines the percentage of the target number of RSUs subject to the awards that vested based on our performance for performance periods ended January 26, 2020.
Grant Year | Performance Period | Percent of Target RSUs Earned | |||||
Fiscal Year 2018 | • Fiscal 2018 – 2020 (3 years) | 26.43 | % | ||||
Fiscal Year 2019 | • Fiscal 2019 – 2020 (2 years) | 90.16 | % | ||||
Fiscal Year 2020 | • Fiscal 2020 (1 year) | 0 | % |
Our Compensation Committee believes the outcomes of our incentive programs are consistent with a strongpay-for-performance culture, recognizing the below target earnings on both our short- and long-term incentive programs.
20162019 NONBINDING ADVISORY VOTE RESULTSRESULTS; STOCKHOLDER ENGAGEMENT
The Company’s stockholders are provided with an opportunity to cast an annualnon-binding advisory vote on the Company’s executive compensation program through asay-on-pay proposal. At the Company’s Annual Meeting of Stockholders held in June 2016,2019, approximately 87%93% of the votes cast approved the executive compensation for our NEOs as described in our Proxy Statement for that Annual Meeting. As part of its normal process, the Compensation Committee reached out to certain Company stockholders in fiscal year 20162019 to seek feedback on the Company’s executive compensation program and in particular its
Semtech Corporation2020 Proxy Statement | 39
COMPENSATION DISCUSSION AND ANALYSIS
long-term incentive program. After consideration of the feedback received in fiscal year 2019, the Compensation Committee determined that the Company’s executive compensation policies for fiscal year 2020 would be similar to those in effect for fiscal year 2019 except as to Mr. Maheswaran’s long-term equity incentive award. As noted above, we reached out directly to stockholders to discuss their views on executive compensation structures that includedup-front equity award grants with significant performance-based components, such as our grant to Mr. Maheswaran in fiscal year 2020. Taking this outreach into account, along with other analyses it considered, the Compensation Committee, with respect to the Absolute Stock Price PSUs described below, increased the amount of stockholder value that would need to be created in order for the award to vest from the range of values it had otherwise been considering.
The Compensation Committee took this feedback into account, and will continue to reach out to and engage with certain of the Company’s stockholders to seek their feedback or to review their voting guidelines and to consider the outcome of the Company’ssay-on-pay proposals when making future compensation decisions for the NEOs. After consideration of the feedback received in fiscal year 2016 along with the positive results from thenon-binding advisory vote on the Company’s executive compensation program at the June 2016 Annual Meeting of Stockholders, the Compensation Committee determined that the Company’s executive compensation policies for fiscal year 2017 would be similar to those in effect for fiscal year 2016, with a significant emphasis on performance and alignment with stockholder interests.
During fiscal year 2017, the Compensation Committee continued to reach out to some of our stockholders as it was evaluating changes to the Company’s performance-based long term incentive plan. After discussion among its members and with the assistance of its independent compensation consultant, the Compensation Committee revised the equity incentive award program for our NEOs for fiscal year 2018 as described under “Changes in Equity Incentive Award Program for Fiscal Year 2018” below.
OUR GUIDING COMPENSATION PRINCIPLES
Core Philosophy
Our Compensation Committee believes that Company growth, financial performance, and increasing stockholder value depend to a significant degree on our ability to structure a compensation program that enables us to: (1) align the interests of our executives with the interests of our stockholders; (2) hold our executives accountable for performance, with appropriateperformance-based rewards earned in return for superior performance and the risk of reduced or no payment or vesting for those awards if performance falls short of targeted levels; and (3) attract, retain, and motivate qualified and high-performing executives.
Core Components of Compensation and Compensation Levels
To achieve our executive compensation objectives, we have three primary components to our compensation program: (1) base salary; (2) annual cash incentive opportunities; and(3) long-term equity incentive awards. In setting specific base salary, target annual cash incentive and equity award levels for each NEO, the Compensation Committee considers and assesses, among other factors it may consider relevant, the following:
The compensation levels at our peer group of companies for comparable positions;
Various subjective factors relating to the individual recipient – the executive’s scope of responsibility, prior experience, past performance, advancement potential, impact on results, and compensation level relative to other Company executives; and
For equity awards, the executive’s historical total compensation, including prior equity grants, tenure with the Company, the number and value of unvested shares and the timing of vesting of those awards, the expense to the Company for equity grants under applicable accounting standards, equity expense measured as a percentage ofnon-GAAP operating income, and the potential dilutive effect such grants may have on existing stockholders.
The Compensation Committee gives no single factor any specific weight. Except as otherwise noted below, the Compensation Committee does not target our executives’ compensation levels and elements of our executive
38 | Semtech Corporation2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
compensation program to a specific market or peer group level. Each executive’s compensation level, as well as the appropriate mix of equity award types and other compensation elements, ultimately reflects the Compensation Committee’s business judgment in consideration of these factors and stockholder interests.
Note that theThe Compensation Committee assesses executive compensation developments at companies in our peer group, and in the market generally, and has the right to change our executive compensation philosophy, components, levels, and structure from time to time as it may determine are in the best interests of the Company and our stockholders.
40 | Semtech Corporation2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The basefollowing table presents the key elements of our executive compensation programs:
Key Elements of Compensation | ||||
Element | Purpose | Characteristics | ||
Annual salary | To attract and retain qualified executives. | Provide a stable source of income and be competitive with the applicable market. | ||
Short-term annual cash incentives | To attract and retain qualified executives; to motivate and reward achievement of annual business and individual goals and objectives designed to increase stockholder value. | This element involves annual performance-based cash awards. The amount earned (if any) varies based on actual results achieved relative topre-determined annual target goals. | ||
Long-term multi-year equity incentives | To align interests of executives with stockholders; to reward performance over time based on stock price; and to provide an additional retention incentive through multi-year vesting schedules. | Performance-based awards make up a significant component; the amount realized (i.e., the value ultimately received by the recipient) depends on the achievement of performance goals and/or is directly tied to our stock price performance. | ||
Other compensation and benefits | To provide competitive and customary benefits (e.g., health insurance, life insurance, 401(k) retirement plans). | Company sponsored/subsidized benefit plans as provided to the general employee population, as well as Company matching contributions to selected employee contributory plans. |
Distribution of Compensation
The Compensation Committee distributes compensation among each of the core elements on the basis of the element’s usefulness to meet one or more of our compensation objectives. The Compensation Committee believes that for our executive officers, a significant proportion of total compensation should consist of (1) variable, performance-based components, such as annual cash incentives, which establishes a fixed amount of annual compensation that provides a level of economic securitycan increase or decrease to reflect changes in corporate and stability from year to year, is setindividual performance on an individualannual basis, byand (2) equity compensation, which is structured to reinforce and encourage management’s commitment to enhancing profitability and stockholder value over the Compensation Committee.long-term.
For fiscal year 2020, total compensation (based on the compensation amounts reported in the Summary Compensation Table) for the Company’s NEOs was distributed as follows:
Semtech Corporation2020 Proxy Statement | 41
COMPENSATION DISCUSSION AND ANALYSIS
Pay-for-Performance Philosophy
Our compensation program is designed to drive behavior that supports sustained stockholder returns and effectivepay-for-performance outcomes over time. To achieve this objective, the executive compensation program approved by our Compensation Committee: (1) emphasizes, as noted above, both performance-based compensation (through annual cash incentives and performance-based stock awards) and equity compensation (through time-based and performance-based stock awards); (2) balances short-term performance incentives provided by the annual cash incentive plan the Compensation Committee sets a target annual cash incentive potential for each executive expressed as a percentage of base salary. The Committee also sets what it believes to be aggressive annual business plan goals for the cash incentive plan. Those processes are described later in this CD&A. The approach of the Committee is to set business plan goals such that, in its judgment, achievement of those goals will result in the Company generally outperforming its peer group of companies. Because the Compensation Committee believes the goals established for the annual bonus plan are rigorous and will be achieved only if the Company performs at a high level, the Compensation Committee sets the target opportunity for the annual cash incentive plan above the median for comparable positions in our peer group to provide appropriate incentives for strong performance. Consistent with this approach, annual cash incentives for our NEOs generally paid out at substantially less than the targeted levels for fiscal years 2015 and 2016, and paid out at greater than the targeted levels for fiscal year 2017. Also, as explained in more detail below, even if the Company achieved 100% of the target level of the key financial goal, the program only pays 80% for that portion of the target annual cash incentive. An NEO would receive 100% payout for the key financial goal portion of their target annual cash incentive upon achievement of 105% of plan.
It is our policy that more than half of the total direct compensation for our executives should come from future compensation opportunities delivered through ourlong-term equity incentive plan. As used in this CD&A, “total direct compensation” refers to the combination of the base salary, annual cash incentive, and the grant date fair value of equity awards granted to an executive as determined for purposes of the Company’s financial reporting. We use a combination of stock options,time-based restricted stock units, andperformance-based restricted stock units (subject to bothtime- andperformance-based vesting requirements) under ourlong-term incentive plan. Through the combination of (1) the inherentlyperformance-based nature of stock options (the value of which depends on future appreciation in our stock price), (2) themulti-year vesting oftime-based restricted stock units (the ultimate value of which depends on our stock price), and (3) themulti-year performance requirements for theperformance-based restricted stock units (the ultimate value of which also depends on our stock price in addition to thetime- andperformance-based vesting conditions), the compensation actually delivered to our executives from thelong-term incentive plan depends directly on our stock price. We believe these factors align the interests of our executives with those of our stockholders. The combination of the awards under ourlong-term equity incentive plan with each executive’s annual cash incentive opportunity results in a significant portion of our NEO’s total direct compensation beingperformance-based and/or dependent on our stock price.
Our philosophy in establishing our executive compensation program is to balance short-term performance incentives (provided by the annual cash incentive plan) with long-term performance incentives (providedprovided by the equity awards). We also look to balanceawards; (3) balances the use of (1) absolute performance metrics versus relative performance metrics evaluated against selected peers,peers; and(2) (4) balances the use of formula-based performance criteria versus criteria involving the exercise of judgment by the Compensation Committee. The Compensation Committee assesses the cost of executive compensation relative to Company net revenue andnon-GAAP operating income(non-GAAP operating income, as considered by the Compensation Committee in this context, is defined below).
Semtech Corporation2017 Proxy Statement | 39
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee believes that executive compensation should be based primarily on objectively determinable factors, both for the Company on its own, as well as in comparison to peer companies. Performance goals may includenon-GAAP operating income, net revenue growth, TSR, earnings per share (“EPS”) and other financial and operational metrics, both on an absolute basis or relative to our group of peer companies. The Compensation Committee also believes that executive compensation should have a component based additionally, although not primarily, on subjective factors, such as leadership, how well each executive helps the Company achieve its strategic goals, each executive’s ability to attract, retain and develop subordinates,key talent, and how each executive’s efforts contribute to enhancing the Company’s relationship and status with the investor community. The use of both objective and subjective factors, however, does not prevent the Compensation Committee from adjusting compensation up or down if, after considering all of the relevant circumstances, it believes total compensation can be structured to better serve our stockholders’ interests.
Our executive compensation philosophy has historically reflected a combination of rigorous performance goals and short- and long-term incentive opportunities that are at least equal to the median for comparable positions in our peer group. In particular, as explained in more detail below, the bonus plan applicable to our NEOs pays 80% of the financial component of the bonus plan when achieving 100% of thenon-GAAP operating income goal of the plan. Our NEOs would receive 100% payout for the key financial goal portion of their target annual cash incentive upon achievement of 105% of plan.
42 | Semtech Corporation2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
BEST PRACTICES |
We also believe that stockholder interests are further served by other executive compensation-related practices that we follow. These practices include: ✓ No Minimum Payouts. We do not have minimum payment levels under our Executive Bonus Plan, our CEO Bonus Plan or for our performance-based equity awards. ✓ Long-Term Equity Incentives. All of our equity incentive awards have multi-year vesting and/or performance requirements, with approximately 50% of the target value of equity (or 85% in the case of our CEO) granted to our named executive officers having both time- and performance-vesting requirements. ✓ No Material Perks. We do not provide significant perquisites. ✓ No TaxGross-Ups. We do not pay taxes on our executives’ behalf through“gross-up” payments (including excise taxgross-up payments in connection with a change in control transaction). ✓ Executive Change in Control Retention Plan Has No Single-Trigger Benefits. Our Executive Change in Control Retention Plan has a double-trigger provision (benefits require both a change in control and termination of employment) rather than a single-trigger provision (under which benefits are triggered automatically by any change in control). ✓ NoRe-Pricing of Stock Options. We prohibitre-pricing of “underwater” stock options (stock options where the exercise price is below the then-current market price of our stock) without stockholder approval. ✓ Executives Subject to Stock Ownership Guidelines. Our executive officers are subject to stock ownership guidelines, under which the executives are expected to acquire and maintain a specified level of equity ownership in the Company. The CEO’s targeted level of ownership is five times his annual base salary, while our other NEOs’ targeted level of ownership is two times their annual base salary. ✓ Equity Award Holding Period Requirements. Our stock ownership guidelines include equity award holding period requirements. If an executive officer’s level of ownership of Company common stock does not satisfy the targeted level under our stock ownership guidelines, the executive officer is expected to hold at least 50% of the net vested shares acquired upon the exercise, payment or vesting of any Company equity award granted to the executive officer after August 17, 2016. ✓ Clawback Policy. The Company maintains a “clawback” policy that allows our Board of Directors or the Compensation Committee to require reimbursement or cancellation of awards or payments made under our cash and equity incentive plans to the Company’s officers in certain circumstances where the amount of the award or payment was determined based on the achievement of financial results that were subsequently the subject of an accounting restatement due to material noncompliance with applicable securities laws. ✓ Anti-Hedging Policy. Our Stock Trading Guidelines prohibit our officers and directors from engaging in hedging transactions in relation to the Company’s stock or equity awards (including unvested equity awards) as collateral for any margin account or other form of credit arrangement. ✓ Anti-Pledging Policy. Our Stock Trading Guidelines prohibit our officers and directors from pledging any Company stock that they own. ✓ Stockholder Engagement. We seek annual stockholder feedback on our executive compensation program. ✓ Independent Compensation Consultant. Our Compensation Committee retains an independent compensation consultant for independent advice and market data. |
Semtech Corporation2020 Proxy Statement | 43
COMPENSATION DISCUSSION AND ANALYSIS
Role of Management, Consultants and Others in Determining Compensation
All decisions regarding compensation of our executive officers are made by the Compensation Committee. The Compensation Committee provides regular updates to the Board of Directors regarding its decisions.
Our CEO provides recommendations to the Compensation Committee regarding the compensation of our executive officers (other than for himself). Our CEO further participates in the executive compensation decision-making process as follows:
Presents overall results of the Company’s performance and achievement of historical andgo-forward business objectives and goals from management’s perspective;
Provides evaluations for other executive officers (including our NEOs, other than himself); and
Reviews peer group information and compensation recommendations and provides feedback regarding the potential impact of proposed compensation decisions (other than regarding himself).
Our CFO evaluates the financial implications of the Company’s compensation programs. Other executive officers (including other NEOs) may periodically participate in the compensation process and in Compensation Committee meetings at the invitation of the Compensation Committee to advise on performance and/or activity in areas with respect to which these executive officers have particular knowledge or expertise. None of our NEOs are members of the Compensation Committee or otherwise had any role in determining the compensation of the NEOs.
Role of Committee Advisors
The Compensation Committee may engage the services of outside advisors, experts and others to assist the Compensation Committee. Additionally, the Compensation Committee evaluates our compensation policies and practices in comparison to the published standards and guidelines ofthird-party proxy advisory services used by many institutional investors. During the majority of fiscal year 2017,2020, the Compensation Committee engaged the services of Mercer (US),Compensia, Inc. (“Mercer”Compensia”) as an independent executive compensation advisor.
During fiscal 2017, Merceryear 2020, Compensia provided support on the following matters:
the review and analysis of the compensation for our executive officers, including our CEO and the other Named Executive Officers;
the fiscal year 2020 equity award for our CEO;
the amendment of our CEO’s offer letter;
the research, development, and review of our compensation and CEO Bonus peer groups;
the determination of payouts under our performance share program and CEO bonus plan; and
advised the Compensation Committee on trends in compensation plans, compensation governance, and relevant regulatory matters.
Compensia did not provide any additional services or products to the Company during fiscal year 2020 beyond the services relating to its support of the Compensation Committee. The Compensation Committee reviewed the services provided by Compensia and considered the factors prescribed by the Securities and Exchange Commission (the “SEC”) and The Nasdaq Stock Market to assess the independence of compensation advisors. Based on its review, the Compensation Committee determined that no conflicts of interest exist between the Company and Compensia and believes that Compensia is independent.
4044 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
In August 2016, the Compensation Committee ended its engagement with Mercer and engaged Compensia, Inc. (“Compensia”) as its independent executive compensation advisor. Compensia supported the Compensation Committee on matters relating to the Committee’s assessment of the competitiveness of our executive compensation program, including the identification of companies in our compensation peer group and the design of our executive long-term incentive program.
Neither Mercer nor Compensia provided the Compensation Committee or the Company with any additional services or products during fiscal year 2017 beyond the services to the Compensation Committee described in this CD&A.
The decisions to engage Mercer and Compensia were made by the Compensation Committee. The Compensation Committee has reviewed the other services and, after consideration of such services and other factors prescribed by the Securities and Exchange Commission for purposes of assessing the independence of compensation advisors, has determined that no conflicts of interest exist between the Company and both Mercer and Compensia, and the Compensation Committee believes that both Mercer and Compensia are independent. In reaching this determination, the Company considered the following factors, all of which were confirmed by Mercer and Compensia:
Role of Peer Companies
The Compensation Committee considers various factors and criteria when determining annual salary, target annual cash incentive levels and target annuallong-term incentive award values for executives, including survey data and compensation practices at selected peer companies.companies and industry survey data provided by our compensation consultant. The applicable group of peer companies is selected annually for use as the comparative pool by the Compensation Committee during the course of the fiscal year. As noted above, the Compensation Committee also relies on peer company data as gathered, and analyses of that data prepared by our compensation consultants. The peer company information assists the Compensation Committee and the Company in identifying and understanding how our competitors andindustry-comparable companies compensate their executives in applicable compensation elements, and in determining how the Company’s compensation packages compare to industry andmarket-competitive amounts. In addition to aiding us with compensation related actions and decisions, this peer company evaluation is also informative in relation to providing compensation information that supports potential recruitment and retention of executives by the Company.
Semtech Corporation2017 Proxy Statement | 41
COMPENSATION DISCUSSION AND ANALYSIS
Because the peer companies do not universally report data for positions comparable to each of our NEOs, the Compensation Committee also reviewed market data from the Radford Global Technology survey. The Compensation Committee refers to the survey data generally and does not focus on any particular company within the survey (other than the peer companies noted below).
In selecting our fiscal year 20172020 peer group companies, the Compensation Committee focused on publicly-traded companies based in the United States (“U.S.”) that are similar to us in terms of industry, general size and business characteristics, and, like us, focus their business on analog andmixed-signal semiconductors and integrated circuits. Additionally, the Compensation Committee generally sought to limit the group of peer companies to those that have annual revenue between 50%33% and 200%300% of the Company’s annual revenue.revenue and market capitalization between 25% and 400% of the Company’s market cap at the time of the peer selection. The Compensation Committee selected the following companies as the peer group of companies for purposes of its fiscal year 20172020 executive compensation determinations (collectively, the “Peer Group”): Alpha and Omega Semiconductor Limited; Cavium, Inc.; Cirrus Logic, Inc.; Diodes Incorporated; Integrated Device Technology; Intersil Corporation; IXYS Corporation; Lattice Semiconductor Corporation; Linear Technology Corporation; Microsemi Corporation; Monolithic Power Systems, Inc.; Power Integrations, Inc.; and Silicon Laboratories Inc.
Given the selection criteria described above, the Peer Group for fiscal year 2017 was modified as follows:
SUMMARY OF OUR CURRENT EXECUTIVE COMPENSATION PROGRAMS
Named Executive Officer Compensation
The following table presents the key elements of our executive compensation programs:
| ||||
| ||||
| ||||
| ||||
|
Distribution of Compensation
The Compensation Committee distributes compensation among each of the core elements on the basis of the element’s usefulness to meet one or more of our compensation objectives. The Compensation Committee believes that for our executive officers, a significant proportion of total compensation should consist of (1) variable,performance-based components, such as annual cash incentives, which can increase
42 | Semtech Corporation2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
or decrease to reflect changes in corporate and individual performance on an annual basis, and (2) equity compensation, which is structured to reinforce and encourage management’s commitment to enhancing profitability and stockholder value over thelong-term.
For fiscal year 2017, total compensation (based on the compensation amounts reported in the Summary Compensation Table) for the Company’s NEOs was distributed as follows:
Ambarella, Inc. | ||
Cirrus Logic, Inc. | Marvell Technology Group Ltd. | |
Cypress Semiconductor Corporation | MaxLinear, Inc. | |
Diodes Incorporated | Maxium Integrated Products, Inc. | |
Inphi Corporation | Monolithic Power Systems, Inc. | |
Integrated Device Technology, Inc. | Power Integrations, Inc. | |
Lattice Semiconductor Corporation | Silicon Laboratories Inc. |
Based on the Committee’s review of the industry and the revenue and market capitalization criteria noted above, the Compensation Committee included Cypress Semiconductor Corporation, Maxim Integrated Products, Inc. and Marvell Technology Group Ltd. and removed Rambus Incorporated. In addition, Cavium, Inc. and Microsemi Corporation were removed from the peer group for fiscal year 2020 because they were each acquired and ceased to be publicly-traded.
COMPONENTS OF OUR 2020 EXECUTIVE COMPENSATION PROGRAM
Annual Salary
Annual salaries are intended to provide a base level of compensation to executive officers for serving as the senior management of the Company and are paid to our executives in recognition of the skills, experience andday-to-day contributions the executive makes to the Company. Salaries for our NEOs are generally reviewed by the Compensation Committee on an annual basis. Each review does not necessarily result in an adjustment. However, as deemed appropriate at any time to help ensure ongoing market competitiveness in annual salary as an element of total compensation, the Compensation Committee may elect to provide for adjustments in annual salary. In setting base salary levels for our NEOs, the
Semtech Corporation2020 Proxy Statement | 45
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Committee considers the factors noted above under “Core Components of Compensation and Compensation Levels” and prior changes to the executive’s compensation. For newly-hired executives, the Compensation Committee also considers the executive’s compensation history and the compensation required to attract the executive to the Company. There is no specific weighting applied to any of these factors in setting annual salaries and the process ultimately relies on the subjective exercise of the Compensation Committee’s judgment.
In February 2016,March 2019, the Compensation Committee approved salary increases for three of our NEOs as detailed below:
Named Executive Officer | FY16 Annual Salary | FY17 Annual Salary | Percent Increase (FY17 vs. FY16) | FY19 Annual Salary | FY20 Annual Salary | Percent Increase (FY20 vs. FY19) | |||||||||||||||||||||
Mr. Maheswaran | $ | 580,000 | $ | 600,000 | 3.4 | % | $ | 620,000 | $ | 620,000 | 0.0 | % | |||||||||||||||
Mr. Chukwu | $ | 375,000 | $ | 375,000 | 0.0 | % | $ | 400,000 | $ | 410,000 | 2.5 | % | |||||||||||||||
Mr. Ammann | $ | 345,000 | $ | 360,000 | 4.3 | % | $ | 375,000 | $ | 375,000 | 0.0 | % | |||||||||||||||
Mr. Beauchamp (1) | $ | 279,109 | $ | 312,099 | 11.8 | % | $ | 347,510 | $ | 360,352 | 3.7 | % | |||||||||||||||
Mr. Kim | $ | 325,000 | $ | 325,000 | 0.0 | % | |||||||||||||||||||||
Mr. Silberstein | $ | 360,000 | $ | 400,000 | 11.1 | % |
(1) | Mr. Beauchamp’s annual base pay is converted from Canadian dollars (CAD) to U.S. dollars (USD) using a conversion rate of |
The Compensation Committee determined to approve salary increases for Mr. Chukwu due to the solid execution and improved capability of the accounting and finance team; for Mr. Beauchamp, due to his ongoing execution and leadership of the Signal Integrity Products Group; and for Mr. Silberstein, in connection with his promotion to Executive Vice President taking into consideration the compensation data for similar positions at the peer group companies.
Semtech Corporation2017 Proxy Statement | 43
COMPENSATION DISCUSSION AND ANALYSIS
Executive Bonus Plan
Annual cash incentive awards are designed to motivate executive officers to achieve certain strategic, operational, and financial goals which can be evaluated on an annual basis. Annual cash incentive goal setting is done as part of the annual fiscal year business planning activity of the Company. Company business goals are established at the beginning of each fiscal year by an interactive process between the Board and management. The end result of this annual business planning process is the Company’s fiscal year Annual Business Plan (“ABP”), which is reviewed and approved by the Board at its first regular meetingBoard.
As part of the process used by the Compensation Committee in the applicable fiscal year.
Following adoption ofadopting the fiscal year ABP, the Compensation Committee in consultationreviews the goals of each NEO with the Board, selects one or more specific Company andrespect to their business unit objectives consistent with the ABP that are determined by theor corporate function. The Compensation Committee to be key foralso reviews the growth and success of the Company in the applicable fiscal year and beyond. The objectives are selected so that, in the judgment of the Compensation CommitteeABP in light of available business intelligence, forecasts, and projections with the objective that, in the judgment of the Compensation Committee, superior performance willwould be required to achieve the objectives. The selected goals are then incorporated into the annual cash incentive plankey financial objectives established for the program. For the CEO, the Board weighs four factors:(1) non-GAAP Operating Income Performance, (2) net revenue growth (year-over-year), (3) Earnings Per Share (“EPS”) Growth and business unit objectives selectednet revenue growth as compared to the basis for“CEO Bonus Peers” (defined below), and (4) the annual cash incentive plan forevaluation of the other executive officers. ThisCEO’s individual performance by the Board of Directors. The Compensation Committee believes that this approach results in having consistent financial performance targets apply for annual cash incentive purposes from the senior executive level to the middle management and functional professional employees serving the Company. The annual cash incentive plans are adopted and approved by the Compensation Committee at its first regular meeting in the applicable fiscal year in concert with adoption of the ABP.
The ABPCertain financial goals to be used for annual cash incentive purposes are established on anon-GAAP basis. As used in this Proxy Statement,“non-GAAP operating income” means our operating income, adjusted to exclude from the applicable financial measure, as reported for purposes of our financial statements, items
46 | Semtech Corporation2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
such asshare-based compensation, restructuring, integration, transaction and otheracquisition-related expenses, intangible amortization and impairments, and other items which would not otherwise have been incurred by the Company in the normal course of the Company’s business operations or are not reflective of the Company’s core results over time. The Compensation Committee believes that the excluded items do not reflect the primary operating performance of the Company. The Company reports the exclusions reflected in the calculation ofnon-GAAP amounts each quarter when it publicly reports its earnings.
Each executive has a target annual cash incentive potential that is set as a percentage of annual base salary. That target annual cash incentive is set by the Compensation Committee for each executive officer position after considering the factors noted above under “Core Components of Compensation and Compensation Levels” and the target annual cash incentive levels of comparable positions among our Peer Group. There is no specific weighting applied to any of these factors in setting the target annual cash incentive levels and the process ultimately relies on the subjective exercise of the Compensation Committee’s judgment. For fiscal year 2017,
As noted above, the Compensation Committee sets what it believes to be aggressive annual business plan goals for the cash incentive plan. The approach of the Compensation Committee is to set business plan goals such that, in its judgment, achievement of those goals will result in the Company generally outperforming its peer group of companies. Because the Compensation Committee believes the goals established for the annual bonus plan are rigorous and will be achieved only if the Company performs at a high level, the Compensation Committee sets the target opportunity for the annual cash incentive opportunities were generallyplan above the median for comparable positions withinin our Peer Group but were balanced by targeted financial goals that the Compensation Committee believed would be difficult to obtain, such that the annual cash incentive opportunity would motivate and payprovide appropriate incentives for superiorstrong performance. As evidence of the Compensation Committee’sgoal-setting process, the financial goals established by the Compensation Committee for these purposes for fiscal year 2017 exceeded plan at 112% and paid out at 114%. The 2017 plan was established to pay out at 100% when 105% of plan was achieved. As noted earlier, however,Consistent with this approach, annual cash incentives for our NEOs generally paid out at substantially less than theor slightly below targeted levels for fiscal years 2015year 2018, below targeted levels for fiscal year 2019 (or slightly above the targeted level for our CEO), and 2016.below targeted levels for fiscal year 2020. Also, as explained in more detail below, even if the Company achieved 100% of the target level of the key financial goal, the program only pays 80% for that portion of the target annual cash incentive. An NEO would receive 100% payout for the key financial goal portion of their target annual cash incentive upon achievement of 105% of plan.
Executive Bonus Plan (excluding CEO)
Our NEOs (other than our CEO) participate in an annual cash incentive program (referred to herein as the “Executive Bonus Plan”). The Executive Bonus Plan provides each executive with an opportunity to earn an annual cash incentive based on the Company’s performance in relation to certainpre-established annual financial goals as well as the executive’s individual performance.
44 | Semtech Corporation2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
For fiscal year 2017,2020, the target annual cash incentive potential (expressed as a percentage of base salary) for each of our NEOs (other than our CEO) was as follows:
Named Executive Officer | Target Annual Cash Incentive as Percentage of Base Salary | |||||
Mr. Chukwu Executive Vice President and Chief Financial Officer | 80 | % | ||||
Mr. Ammann Executive Vice President, General Counsel and Secretary | 80 | % | ||||
Mr. Beauchamp Executive Vice President and General Manager, Signal Integrity Products Group | 80 | % | ||||
Mr.
| 80 | % |
Target annual cash incentive amounts
Semtech Corporation2020 Proxy Statement | 47
COMPENSATION DISCUSSION AND ANALYSIS
These target incentives for fiscal year 2020 were the same as inthe fiscal year 20172019 level for Messrs. Chukwu and Beauchamp. Theeach NEO, except that the Compensation Committee determined to increase Mr. Silberstein’s target annual cash incentive amounts for Messrs. Ammann and Kim were increased from 75% of his base salary in fiscal year 2016 to 80% of base salary in fiscal year 2017. The Compensation Committee made these changesconnection with his promotion to bring their respective target annual cash incentive in line with target annual cash incentiveExecutive Vice President taking into consideration the compensation data for executive and senior vice presidentsimilar positions respectively, at the Company.peer group companies.
Under the Executive Bonus Plan, each executive’s target annual cash incentive for fiscal year 20172020 was scored in two parts. Fifty percent (50%) of the target annual cash incentive potential was based on the Company’s attainment of a key financial goal for the fiscal year (the “Company Performance Portion”) as set by the Compensation Committee at the start of the fiscal year. The remaining fifty percent (50%) of the executive’s target annual cash incentive potential was based on the executive’s individual performance for the fiscal year (the “Individual Performance Portion”). The Compensation Committee believes this allocation between Company and individual performance creates an appropriate balance between achieving short term (one year) financial objectives and longer term infrastructure and product expansion goals. In particular, during fiscal year 2017 considerable time was devoted by the NEOs towards further development of the Company’s LoRa technologies and support of LoRaWAN network deployments, including growth in the membership of the LoRa™ Alliance. Focused investment also was placed on the development of signal integrity products that support up to 100 Gbps and emerging 400 Gbps applications targeted at datacenter and 10Gbps passive optical networking (“PON”) applications, wireless charging platforms targeted at industrial and wearable applications, wireless and sensing platforms targeted at Internet of Things (IoT) and proximity sensing applications, and protection platforms targeted athigh-end consumer applications and a broad range of communications applications. The Compensation Committee believes that allocating 50% of the annual target incentive for the NEOs (other than the CEO) to the individual performance component provides it with the flexibility to incentivize and reward achievements that promote the long-term growth and success of the Company.Company, and that the allocation between Company and individual performance creates an appropriate balance between achieving short-term (one year) financial objectives and longer term infrastructure and product expansion goals.
In particular, during fiscal year 2020 the NEOs again dedicated significant time and energy towards further developing the Company’s strategic growth engines that position the Company for growth in the next three to five years, specifically, building upon the Company’s emerging leadership position in the LPWAN (Low Power Wide Area Network) segment of IoT (Internet of Things) through the development of the Company’s LoRa technology and support of global LoRaWAN network deployments and the expansion of the LoRa ecosystem through the rapidly expanding LoRa Alliance®. In addition, the management team expanded the Company’s strong position in high speed Optical connectivity platforms in the Cloud and Hyperscale Datacenter market and the emerging 10GPON and 5G infrastructure markets. While the IoT market, the Hyperscale Datacenter market, the 10GPON market and the 5G infrastructure markets are all in their early stages of evolution, we believe that they are four of the most exciting, high growth sectors in the semiconductor industry and that the Company’s R&D investments and executive leadership have positioned the Company well to gain leading positions in these segments. The Company also continues to benefit from the increasing need for mobility as its Protection and Proximity sensing platforms enable the industry to build higher performance, reliable and safe mobile systems. Despite numerous headwinds in fiscal year 2020, the executive team continued to establish very strong market positions in our targeted segments and execute on several new technology platforms in these targeted markets which should produce strong results and help the Company to secure its strategic goals over the next few years.
Additionally, the Compensation Committee retains broad discretion to adjust (up or down, including withholding entirely) part or all of a proposed annual cash incentive payment.
Company Performance Portion of Fiscal Year 20172020 Executive Bonus Plan (excluding CEO)
As described above, the financial goals are established by the Compensation Committee at the start of the applicable fiscal year. For our fiscal year 2017,2020, the key financial performance goal established by the Compensation Committee wasnon-GAAP operating income. The Compensation Committee believesnon-GAAP operating income is currently the best measure of the Company’s core operating performance, as it reflects the essential results of ongoing base business functions and results without the impact (positive or negative) of extraordinary andnon-operational matters. The Compensation Committee further believes thatnon-GAAP operating income, as the metric used for the fiscal year financial performance goal, focuses performance on the parallel objectives of increasing revenue and controlling operating expenses.
The target set for fiscal year 2020non-GAAP operating income was $219,578,000, which was approximately 18% higher than ournon-GAAP operating income achieved for fiscal year 2019 as taken into account in determining fiscal year 2019 bonuses for the NEOs. In the judgment of the Compensation
48 | Semtech Corporation20172020 Proxy Statement | 45
COMPENSATION DISCUSSION AND ANALYSIS
The target set for fiscal year 2017non-GAAP operating income was $110,600,000 which was more than 70%higher than ournon-GAAP operating income achieved for fiscal year 2016 as taken into account in determining fiscal year 2016 bonuses for the NEOs. In the judgment of the Compensation Committee in light of available business intelligence, forecasts and projections at the time it established this goal, superior performance would be required to achieve the goal. The Compensation Committee also established a scoring matrix to determine the percentage of the Company Performance Portion payable based on actual 2017fiscal year 2020non-GAAP operating income performance against the fiscal year 20172020 goal of $110,600,000$219,578,000 as follows:
Non-GAAP Operating Income as a Percentage of the Target | Percentage of Company Performance Portion Payable | ||||
Below 80% of the target | 0 | % | |||
80% of the target | 50 | % | |||
90% of the target | 60 | % | |||
100% of the target | 80 | % | |||
105% of the target | 100 | % | |||
110% of the target | 110 | % | |||
120% of the target | 130 | % | |||
125% of the target | 140 | % | |||
130% of the target or better | 150 | % |
Driven by the factors noted previously, our fiscal year 2020non-GAAP operating income of $124,912,000 was less than 80% of the target level: pay none of the Company Performance Portion
Our fiscal year 2017non-GAAP operating income of $124,203,000 was 112% of the $110,600,000 goal for the year. Based on this result and the matrix above, the Compensation Committee determined that 114%0% of the Company Performance Portion would be paid.
Individual Performance Portion of Fiscal Year 20172020 Executive Bonus Plan (excluding CEO)
For each executive’s Individual Performance Portion of the Executive Bonus Plan, the Compensation Committee receives and considers the CEO’s subjective managerial assessment of the executive. The CEO evaluates several key executive performance criteria in his overall evaluation of individual executive performance with no specific weight being applied to any one factor. Matters evaluated include:
(1) | Performance of the business or functional unit or department the executive is responsible for managing. |
(2) | The executive’s contributions to achievement of the Company’s financial and operational goals and strategic objectives. |
(3) | The ability of the executive to lead and develop key subordinates. |
(4) | Related individualized andfunction-specific managerial observations and impressions of executive job performance. |
Based on the individual performance assessment, an executive may receive from 0% to 200%of the target for the Individual Performance Portion as recommended by the CEO (for NEOs other than himself) and approved by the Compensation Committee.
46 | Semtech Corporation2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The Individual Performance Portion for each NEO reflects the Compensation Committee’s assessment of the performance of the department or business unit the executive is responsible for, the executive’s
Semtech Corporation2020 Proxy Statement | 49
COMPENSATION DISCUSSION AND ANALYSIS
individual performance as assessed by the CEO, and the executive’s contributions to the Company’s overall operating performance. The following NEO achievements in fiscal year 20172020 were highlighted in the Compensation Committee’s determinations:
NAMED EXECUTIVE OFFICER | KEY ACCOMPLISHMENTS | |
Mr. Chukwu | 1. Mr. Chukwu strengthened the 2. Mr. Chukwu successfully refinanced the 3. Mr. Chukwu maintained an active and robust engagement with equity investors. Mr. Chukwu also led the | |
Mr. Ammann | 1. Mr. Ammann led apro-active and 2. Mr. Ammann negotiated several key strategic agreements, including three key corporate agreements with 3. Mr. Ammann also implemented a contract software licensing system, and prepared a suite of software license agreements for the Company’s use (Cloud services, sensors, gateways, network servers, SaaS platform, etc.) to address the needs of the LoRa | |
Mr. Beauchamp | 1. Through Mr. Beauchamp’s leadership, the Company’s Signal Integrity Products Group 2. Mr. Beauchamp also led our Signal Integrity Products Group to its first major design wins in the emerging 5G wireless segment and 3. Mr. Beauchamp closed a significant deal which included substantialnon-recurring engineering (NRE) fees to the Company to develop three parts for the emerging LiDAR segment. This is a new segment that will take another 24 months to 36 months to generate revenues, but demonstrates the strong recognition that the Company’s customers have for its Signal Integrity Products Group innovation led by Mr. Beauchamp. 4. Despite theUS-China trade uncertainties, the ban on shipments of certain products and the more recent coronavirus issues globally including in China, the Company continues to build a strong business in China through continuous innovation and execution. |
50 | Semtech Corporation2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
NAMED EXECUTIVE OFFICER | KEY ACCOMPLISHMENTS | |
Mr. | 1. Mr. Silberstein led the Company’s operations and IT departments well in fiscal year 2020 despite numerous operational challenges including geopolitical tensions creating tremendous supply chain uncertainties and demand volatility. 2. Mr. Silberstein upgraded the Company’s worldwide IT network, retiring legacy systems and the multi-protocol label switching (MPLS) system. The MPLS system was replaced with a new ZOOM video conference system worldwide to enable employees globally to video conference, thereby reducing the need to travel significantly. 3. Mr. Silberstein also led the Company’s new Cloud-based disaster recovery implementation reducing recovery time from eight hours to two hours, and introduced several new strategic cyber security initiatives to protect the Company |
After consideration of the factors and accomplishments described above, the Committee approved the following individual performance factors: Mr. Chukwu – 90%150%; Mr. Ammann – 90%150%; Mr. Beauchamp – 135%;155% and Mr. KimSilberstein – 90%155%. Mr. Beauchamp’s percentage was larger than the percentage set for the other executives because the Compensation Committee considered the record net revenue year for the Signal Integrity Products Group in fiscal year 2017, the success of the Group’s Clock Data Recovery (CDR) and Physical Media Devices (PMD) platforms, including progress toward the introduction of a high-performance, single-lamda, 100Gbps PAM4 platform, and the leadership position of the Group’s platforms in the Optical connectivity market to be particularly important in assessing individual contributions for the year.
Total Fiscal Year 20172020 Executive Bonus Plan Payments (excluding CEO)
The combination of the Company Performance Portion and the Individual Performance Portion for each NEO resulted in the following annual cash incentive payments to the NEOs for fiscal year 20172020 under the Executive Bonus Plan. The Compensation Committee did not exercise any discretion to adjust final payment amounts once they had been determined based on the Company and Individual Performance Portions.
NAMED EXECUTIVE OFFICER | TARGET BONUS | ACHIEVED BONUS | TARGET BONUS | ACHIEVED BONUS | ||||||||||||||
Mr. Chukwu | $ | 300,000 | $ | 306,000 | $ | 328,000 | $ | 246,000 | ||||||||||
Mr. Ammann | $ | 288,000 | $ | 293,760 | $ | 300,000 | $ | 225,000 | ||||||||||
Mr. Beauchamp | $ | 242,726 | $ | 302,193 | ||||||||||||||
Mr. Kim | $ | 260,000 | $ | 265,200 | ||||||||||||||
Mr. Beauchamp (1) | $ | 288,282 | $ | 223,418 | ||||||||||||||
Mr. Silberstein | $ | 320,000 | $ | 248,000 |
(1) | Mr. Beauchamp’s target bonus amount is converted from Canadian dollars (CAD) to U.S. dollars (USD) using a conversion rate of 1 CAD = 0.76039 USD which was the CAD to USD conversion rate as of January 26, 2020. |
CEO Bonus Plan
The Company maintains an annual cash incentive plan for our CEO (the “CEO Bonus Plan”). The CEO Bonus Plan was established in recognition of the unique role of the CEO and the desire to provide him an incentive to achieve additional goals that are not measured in the Executive Bonus Plan. Under the CEO Bonus Plan, the CEO has a target annual cash incentive potential expressed as a percentage of base salary, which the CEO is eligible to receive based on the achievement of certain absolute and relative financial goals and on the Board’s assessment of the CEO’s overall performance. The CEO Bonus Plan
Semtech Corporation2017 Proxy Statement | 47
COMPENSATION DISCUSSION AND ANALYSIS
provides that, depending on performance, the CEO’s annual cash incentive payout in any year may range from 0% to 200% of the CEO’s annual base salary level.bonus potential. For fiscal year 2017,2020, the target annual cash incentive for Mr. Maheswaran was 125% of his annual base salary which was the same target annual cash incentive percent that had been in effect for him in fiscal year 2016.(or $775,000).
The CEO Bonus Plan contained four weighted factors:(1) non-GAAP Operating Income Performance; (2) Net Revenue Growthnet revenue growth (year-over-year); (3) Earnings Per Share (“EPS”) GrowthEPS growth and Net Revenue Growthnet revenue growth as compared to the “CEOCEO Bonus Peers” (defined below);Peers; and (4) the evaluation of the CEO’s individual performance by the Board of Directors. These factors and their weighting are described below:below.
Non-GAAP Operating Income Performance – 25%35% of the CEO’s annual cash incentive was based on the Company’s attainment ofnon-GAAP operating income goals ($110,600,000,219,578,000, which was more than 70% higher than our
non-GAAPSemtech Corporation operating income achieved for fiscal year 2016 as taken into account in determining the fiscal year 2016 bonus for the CEO). This portion of the CEO Bonus Plan used the samenon-GAAP operating income target as under the Company Performance Portion of the Executive Bonus Plan as discussed above. Attainment of this portion of the CEO Bonus Plan is calculated by reference to the following chart indicating the level of Company performance and the corresponding percentage of attainment.2020 Proxy Statement | 51
COMPENSATION DISCUSSION AND ANALYSIS
approximately 18% higher than ournon-GAAP operating income achieved for fiscal year 2019 as taken into account in determining the fiscal year 2019 bonus for the CEO). This portion of the CEO Bonus Plan used the samenon-GAAP operating income target as under the Company Performance Portion of the Executive Bonus Plan as discussed above. Attainment of this portion of the CEO Bonus Plan is calculated by reference to the following chart indicating the level of Company performance and the corresponding percentage of attainment. |
Non-GAAP Operating Income as a Percentage of the Target | Percentage of Attainment | ||||
Below | 0 | % | |||
| 50 | % | |||
| 60 | % | |||
100% of the target | 80 | % | |||
105% of the target | 100 | % | |||
110% of the target | 110 | % | |||
120% of the target | 130 | % | |||
125% of the target | 140 | % | |||
130% of the target | 150 | % | |||
150% of the target or better | 200 | % |
Net Revenue Growth – 25% of the CEO’s annual cash incentive was based on net revenue growth goals. Attainment of this portion of the CEO Bonus Plan is calculated using the following formula (provided the resulting percentage cannot be greater than 200% or less than 0%):
Attainment Percentage | = | 100% multiplied by | (Fiscal year minus prior fiscal year (Net minus prior fiscal year |
EPS and Net Revenue Growth compared to CEO Bonus Peers – 20% of the CEO’s annual cash incentive was based on the Company’s achievements in net revenue growth and EPS growth, as measured relative to such growth at the following companies (collectively, the “CEO Bonus Peers”), which were selected and established as the CEO Bonus Peers by the Compensation Committee at the start of fiscal year 2017:2020:
Analog Devices,Cypress Semiconductor Corporation
Inphi Corporation
MACOM Technology Solutions Holdings, Inc.; Integrated Device Technology, Inc.; Intersil Corporation; IXYS Corporation; Linear Technology Corporation;
Maxim Integrated Products, Inc.; Microsemi Corporation;
MaxLinear, Inc.
Microchip Technology Incorporated
Monolithic Power Systems, Inc.;
ON Semiconductor Corporation; Corporation
Power Integrations, Inc.;
Silicon Laboratories, Inc. and Texas Instruments Incorporated.
For each CEO Bonus Peer, EPS growth and Net Revenuenet revenue growth were measured by comparing that company’s performance levels for the company’sits four consecutive fiscal year that ends with or duringquarters ending in the Company’s 2017fourth quarter of its 2020 fiscal year against the company’s performance levels for its immediately precedingthe same four consecutive fiscal quarters one year prior, in each case as reflected in its reported financial information.
4852 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation Committee determined that it was appropriate to use a different set of companies for CEO Bonus Plan purposes as compared to the Peer Group used generally for compensation comparisons identified above. TheseThe fiscal year 20172020 CEO Bonus Peers were specifically selected for use to measure our CEO’s performance based on similarities to the Company in terms of industry focus, business unit product lines, business characteristics, and status as a competitor of the Company in whole or in material part. Since this group of companies was used to measure performance as described above and not as a reference point to establish actual compensation levels, the Compensation Committee did not feel it necessary or appropriate to limit the group of companies considered based on the size of the company. The selected group of companies establishes anindustry-representative set of directly competitive companies, and the Compensation Committee believes that comparison to and measurement against the performance of the CEO Bonus Peers provides a meaningful performance incentive to Mr. Maheswaran.
Attainment of this portion of the CEO Bonus Plan is calculated by reference to the following chart indicating the level of Company performance and the corresponding percentage of attainment. As indicated in the chart, if the Company did not achieve the threshold 50th percentile level for either the EPS growth metric or the Net Revenuenet revenue growth metric, no payout would be made for this component.
Net Revenue Growth Relative to CEO Bonus Peers | Earnings Per Share Growth Relative to CEO Bonus Peers | Percentage of Attainment | ||||||
Below 50th percentile | Below 50th percentile | 0 | % | |||||
Below 50th percentile | 50th percentile or better | 50 | % | |||||
50th percentile or better | Below 50th percentile | 50 | % | |||||
At or above 50th percentile but below 75th percentile | At or above 50th percentile but below 75th percentile | 100 | % | |||||
75th percentile or better | At or above 50th percentile but below 75th percentile | 150 | % | |||||
At or above 50th percentile but below 75th percentile | 75th percentile or better | 150 | % | |||||
75th percentile or better | 75th percentile or better | 200 | % |
Board of Directors CEO Performance Evaluation – 30%20% of the CEO’s annual cash incentive is based on the assessment by the Board (excluding the CEO) of the CEO’s overall performance and leadership. The Board evaluates the CEO’s individual performance in five major categories:
1. | Strategy – including establishment of, and attainment in relation to, annual and longer-range strategic objectives. |
2. | Operations – including overall operational effectiveness and results, measured in part by factors such as effectiveness in research and development spending, costs of quality, and revenue per employee metrics. |
3. | Finance and Human Capital – including overall quality, transparency and accuracy of financial reporting both external and to the Board, and overall employee morale, retention rates, and motivation. |
4. | Board Relations – including overall level, frequency, availability, and materiality of interactions with and reports to the Board of Directors in his capacity as CEO. |
5. | Stockholder Relations and Value – including analyst, investor, and overall market assessment of the Company as an industry leader and high quality investment. |
Evaluation of the CEO’s individual performance by the Board involves, by its nature, subjective judgments made in good faith, in considering factors that are included in and relevant to the major categories noted above. The Board considers all of these factors to be equally weighted in making its evaluation.
Semtech Corporation20172020 Proxy Statement | 4953
COMPENSATION DISCUSSION AND ANALYSIS
The Chairman of the Board provides the summarized results of this annual evaluation to the Compensation Committee. The Compensation Committee considers the evaluation report and establishes an award from 0% to 200% of the target attributable to this factor.
As noted above for the Executive Bonus Plan, the Compensation Committee retains broad discretion (up or down, including withholding entirely) part or all of a proposed annual cash incentive payment to the CEO.
Fiscal Year 20172020 CEO Bonus Plan Targets and Results
Non GAAP Operating Income Performance – Thenon-GAAP operating income goal and scoring matrix for the CEO Bonus Plan are the same as that set forth for the Executive Bonus Plan described above under “Executive Bonus Plan – Company Performance Portion of Fiscal Year 20172020 Executive Bonus Plan (excluding CEO).” For fiscal year 2017,2020, thenon-GAAP operating income goal was set at $110,600,000$219,578,000 as a part of the ABP process. This goal was more than 70%approximately 18% higher than ournon-GAAP operating income achieved for fiscal year 20162019 and taken into account under our fiscal year 20162019 CEO Bonus Plan ($79,600,000)186,370,000). At the time the fiscal year 20172020non-GAAP operating income goal was set, the Compensation Committee’s judgment was that this goal would be difficult to achieve. For fiscal year 2017,2020, thenon-GAAP operating income achieved was $124,203,000,$124,912,000, resulting in a 125%0% payout for this portion of the CEO Bonus Plan.
Net Revenue Growth (Year-over-Year)(Year-over-Year) – The net revenue goal established by the Board in the Company’s fiscal year 20172020 ABP was $521,000,000,$700,100,000, which reflected revenue growth of $30,000,000$72,904,000 or 6.1%11.6% above actual 2016fiscal year 2019 net revenue. The Compensation Committee believed that, in the general economic environment at the time the net revenue growth goal was being established, with the global business forecasts available to us, achieving that specified level of net revenue would be challenging yet achievable. The net revenue taken into account under the CEO Bonus Plan for fiscal year 20172020 was $549,668,000 (which included an adjustment of $5.4 million of share-based compensation associated with the issuance of a warrant to Comcast),$547,500,000 resulting in a 196%0% payout for this portion of the CEO Bonus Plan.
Performance Relative to CEO Bonus Peers based on EPS Growth and Net Revenue Growth – This portion of the CEO Bonus Plan is based on a combination of comparativethe Company’s net revenue growth and EPS growth.growth as compared to the CEO Bonus Peers identified above. The Company’s EPS growth for the full fiscal year 20172020 was an increasea decrease of 61.6%-31.1% year-over-year. This EPS performance exceededwas at the performance of all of11th percentile relative to the CEO Bonus Peers. The Company’s net revenue for the full fiscal year 20172020 was an increasea decrease of 11%-15.6% year-over-year. This net revenue growth performance was at the 81st16th percentile of the CEO Bonus Peers. The combined performance on net revenue growth and EPS growth resulted in a 200%0% payout for this portion of the CEO Bonus Plan.
Board of Directors CEO Individual Performance Evaluation – In addition to considering financial results, the Board also evaluated the CEO’s performance for fiscal year 20172020 in the five individual performance categories noted above.
Specifically, the Board considered the Company’s achievements realized in fiscal year 20172020 under the CEO’s leadership includingdespite facing several challenges outside the further developmentcontrol of the Company. The Company has invested in China over the last 12 years as it has been regarded as one of the fastest and largest emerging geographies worldwide. The Company has achieved tremendous success in China in recent years. In fiscal year 2020, the geopolitical tensions between the United States and China with ongoing trade tariff uncertainties led to significant business issues for the Company as customers in China questioned the wisdom of placing their key technology needs with a U.S. supplier. In addition, the U.S. imposed restrictions of shipments of certain products to Huawei, a key customer to the Company, led to both a direct revenue impact as certain of the Company’s products could not be shipped to Huawei and an indirect impact as Huawei was unable to build complete systems in some cases and therefore did not need components from the Company. Both of these events were out of the control of the CEO and the Company and yet both events had a significant impact on the Company’s business. Despite these major headwinds, the Company
54 | Semtech Corporation2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
continued to establish a strong portfolio of products, improve its strategic positions in its target markets, and continued to execute well on its strategic growth engines. The Company continued to establish its LoRa technologies,technology as the growthemergingde facto standard for the LPWAN (Low Power Wide Area Network) segment within the IoT market as it established significant milestones in membershipterms of Global Operators, Network Providers, Gateways deployed, and end devices deployed. In addition, establishing the LoRa Alliance and working with strategically important new members, such as Amazon, Intel and Dish ensured that the global acceleration of trial LoRa networks and deployments, and the growthtechnology momentum would continue. The Company also continued to establish its strong position in the number of announced LoRa networks remainedHyperscale Datacenter market with new optical connectivity products targeted at the 100Gbps, 200Gbps and 400Gbps, and signed a strategic development agreement to jointly develop advanced technology for the enterprise computing space. In addition, the Company has emerged as a technology leader in the 10GPON market and a key focus fortechnology provider to the CEO. Therapidly growing 5G infrastructure markets. These positions are being established after several years of critical technology investment. With regard to these significant achievements the Board considered the CEO’s performance in this regard to be superior, as the LoRa Alliance grew to over 450 companies during fiscal year 2017 (which significantly exceededoutstanding. The Board also recognized that the Company’s expectations) and as LoRa networks were announced or initiated in more than 50 countries worldwide.financial performance did not reflect the significant accomplishments during the year despite the many uncontrollable events that occurred. Other key achievements under Mr. Maheswaran’s leadership included the leadershipcontinued improvement of the CEO included the further development of signal integrity products that support up to 100 Gbps applications, and wireless charging and protection product lines. The Board believes these and other achievementsCompany’s infrastructure with no major cyber security events in fiscal year 2017 well-position2020, the Company to take advantage of somerefinancing of the industry’s fastest-growing markets including Internet of Things (IoT), datacenterCompany’s debt to enable a new, $600M facility, the continued relationship building and associated markets, passive optical networking (PON), 4G/LTE wireless base stations,high-end consumer devices, and emerging automotive infotainment markets. The Board also reviewed the developmentcommitment to communicate on an ongoing basis to major stockholders, continued management of the newer members toCompany’s operations and balance sheet, and the Company’s senior management team under the CEO’s leadershipongoing drive to establish new relationships and again, found the CEO’s performance to be superior in this regard.projects with key strategic customers. The Compensation Committee also considered the Board’s comments and input on the performance of the CEO in the five major
50 | Semtech Corporation2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
categories discussed above. Taking all of these items into account, the Compensation Committee established an individual performance factor of 160%180% for this portion of the CEO Bonus Plan, which was then adjusted downward so that Mr. Maheswaran’s total payout under the CEO Bonus Plan would not exceed the CEO Bonus Plan payment cap of 200% of Mr. Maheswaran’s fiscal year 2017 base salary level approved by the Compensation Committee in February 2016.Plan.
CEO Annual Cash Incentive Payment for Fiscal Year 20172020
Based on the established goals and the results described above, for fiscal year 2017,2020, Mr. Maheswaran received a total payout under the CEO Bonus Plan of $1,200,000,$279,000, equal to approximately 160%36% of his target annual cash incentive amount and 200% of his fiscal year 2017 base salary level approved by the Compensation Committee in February 2016.amount.
Equity Incentive Awards
The Compensation Committee believes that equity incentive awards serve to align the interests of executives with those of the Company’s stockholders, motivatecomplement annual cash incentives by motivating executives to create and sustain value in the Company, over a longer term than annual cash incentives (which are typically paid on ashort-term, or annual, basis), and encourage our executives to avoid taking excessive risks that might have a significant short term or prolonged negative impact on our stock price.
The following discussion of equity awards generally applies to the equity awards granted in fiscal year 2020 to our Named Executive Officers other than our CEO. The equity awards granted in fiscal year 2020 to our CEO are discussed separately below under “Fiscal Year 2020 CEO Equity Incentive Awards.”
The equity award vehicles used in fiscal year 20172020 for the Named Executive Officers with the exception of the CEO were:
time-based
restricted stock unit awards that vest in three equal annual installments (“Time-Based Units”); and
performance-based
Each of these equity award vehicles constituted approximately 50% of the total target value of equity granted to help our executives satisfyNamed Executive Officers (with the exception of the CEO, whose award was more heavily weighted toward performance) for fiscal year 2020. In approving these equity awards, the Compensation
Semtech Corporation2020 Proxy Statement | 55
COMPENSATION DISCUSSION AND ANALYSIS
Committee believed a mix of restricted stock units and performance-based restricted stock units would provide appropriate additional incentives to create value for our executive stock ownership guidelines
AllFor performance-based equity awards, the Compensation Committee believed that relative TSR would be an effective measure for evaluating our performance over a sustained time horizon while adjusting for broader market conditions in a volatile industry sector. The availability of an index comprised of a group of comparable semiconductor companies provides a strong benchmark for comparison of our relative TSR performance, and the use of relative TSR as a performance metric supplements the financial metrics we use to evaluate performance under our bonus plan.
Our equity incentive awards have someare subject to multi-year vesting or measurement period component. Generally, vesting. The equity awarded to our Named Executive Officers (with the periods areexception of the CEO) in fiscal year 2020 vests over three or four years. Thismulti-year element serves as a significant “holding period” in terms of requiring the executive to retain the underlying equity interest until some future date following the grant date of the award. The Compensation Committee believes that the inclusion of this vesting period component further aligns thelong-term interests of the executive with thelong-term interests of the Company’s stockholders and functions as a retention incentive for the executive.
In granting equity awards, the Compensation Committee considers the factors noted above under “Core Components of Compensation and Compensation Levels” and the value of such awards in comparison to awards to comparable executives within our Peer Group. There is no specific weighting applied to any of these factors and the process ultimately relies on the Compensation Committee’s judgment. Thegrant-date value ofequity-based incentives granted to our NEOs during fiscal year 2017, while determined on an individual basis, was generally positioned above the median for comparable positions within our Peer Group. The Compensation Committee believed that positioning these values to generally be above the median for comparable positions for the Peer Group was balanced by theperformance-based restricted stock units having targeted goals that the Compensation Committee believed would be difficult to obtain. For example, and as previously noted, all of the performance-based restricted stock unit awards granted by the Company in fiscal years 2013, 2014 and 2015 for the three-year performance periods ending in fiscal years 2015, 2016 and 2017, respectively, were forfeited with no payment.
For fiscal year 2017, the Compensation Committee determined that a balance oftime-based restricted stock units,performance-based restricted stock units, and stock options provided the best incentive to executives to responsibly create growth in stockholder value and to provide complimentary motivations for performance as well as retention. In addition, the Compensation Committee believed that this mix of awards was consistent with our performance-based philosophy as a substantial portion of each NEO’s total annual equity awards was performance-based through stock options (which have value only if the Company’s stock price appreciates) and performance-based restricted stock units.
Semtech Corporation2017 Proxy Statement | 51
COMPENSATION DISCUSSION AND ANALYSIS
For the performance-based restricted stock units, the Compensation Committee sets goals that are intended to be challenging and attainable only if the Company performs at a high level during the performance period. The rigor of these goals is evidenced by the fact that the performance-based restricted stock unit awards granted to the NEOs in fiscal years 2013, 2014 and 2015 for the three-year performance periods ending in fiscal years 2015, 2016 and 2017, respectively, were forfeited entirely with no payment because the applicable goals were not achieved.
Restricted Stock Unit Awards
Our restricted stock unit awards represent a contingent right to receive one share of our common stock or, in the Compensation Committee’s discretion, the payment of cash for each unit in an amount equal to the fair market value of our common stock. The Compensation Committee believes that grants oftime-based vesting restricted stock unit awards (“Time-Based Units”)Units are particularly useful to motivate executives to avoid undue risk and to align their interests with those of our stockholders, since our grants of restricted stock unit awards have intrinsic economic value which correlates directly to our stock price. Thus, the value of a restricted stock unit award can go up or down depending on the changes to our stock price over time. While restricted stock unit awards will always have some intrinsic value as long as our stock remains marketable, we believe our executives are motivated to seek to increase the intrinsic value through Company performance that is reflected in favorable and sustainable increases in our stock price. We also believe that actions or business decisions carrying risks that might reduce our stock price are discouraged by the correlation between the intrinsic value of these awards and the growth of our stock price. In addition, theTime-Based Units serve as a retention incentive over themulti-year vesting period. Time-Based Units granted to our NEOs (with the exception of the CEO) vest annually over three years from the date of grant, subject to the executive’s continued employment with the Company.
Performance-Based Restricted Stock Units
Restricted stock units that are subject to bothtime- andperformance-based vesting requirements(“The Performance-Based Units”) provide an incentive forlonger-term performance, with the actual payout Units granted to the executive depending both on achieving specified financial performance goals over athree-year period and onNEOs (with the change inexception of the Company’s stock price over that period. BecausePerformance-Based Units are also subject totime-based vesting requirements, they also serve as a retention incentive over themulti-year vesting period.
Performance-Based Units grantedCEO) in fiscal year 20172020 are eligible to vest only upon achievementbased on the Company’s TSR relative to the TSR of certain goals relatedthe SPDR S&P Semiconductor ETF (NYSE:XSD) (the “Index”). The Index was selected for this purpose because of its focus on the semiconductor industry and because it is a modified equal-weighted index, which means that (as opposed to cumulative net revenuea market capitalization-weighted index) it provides relatively greater exposure tomid- and cumulative operating income achieved over an applicablethree-yearsmall-cap stocks.
A target number of Performance-Based Units is covered by each award, withone-third of the target number of units allocated to each of the three performance periods covered by the award (with the first period consisting of our 2020 fiscal year, performancethe second period consisting of our 2020 and measured on anon-GAAP basis. These performance measurements were selected because2021 fiscal years, and the Compensation Committee believes thatlong-term net revenue andnon-GAAP operating income are key drivers to building stockholder value over thelong-term. The awards are weighted 50% for net revenue and 50% fornon-GAAP operating income. The cumulativethree-year net revenue andnon-GAAP operating income goals are set in advance of the applicablethree-year performance period, and are set at levels that the Compensation Committee believes at the time of award will be challenging to attain based on then available business intelligence, forecasts and projections. The Compensation Committee believes that this structure functions as a tool to motivate our executives to focus on sustained and increasinglong-termmulti-year revenue and income growth. As noted above, the applicablethree-year goals are set based on factors and assumptions made as of the time of award. Because the goals for the entire three-year period covered by an award are set at the time the award is granted and are not changed during the performance period, the targeted performance levels for a particular fiscal year may differ depending on the year in which the related award was granted. For example, in granting an award in fiscal year 2015 with three years of performance targets, the Compensation Committee established a targeted level of performance for fiscal year 2017 that was incorporated into the cumulative three-year performance target for that award. In subsequently granting an award in fiscal year 2016 with three years of performance targets, the Compensation Committee had flexibility to establish a different target level of performance for fiscal year 2017 (which may have been higher or lower than the target incorporated into the fiscal year 2015
5256 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
award, taking into account its assessmentthird period consisting of changes in the Company, the market,our 2020, 2021 and general business conditions during 2015) for purposes of determining the cumulative three-year performance target for the2022 fiscal year 2016 award.
The number ofPerformance-Based Units subject to an award that are eligible to vest will range fromyears). Between 0% toand 200% of the original target number of units subjectallocated to each of those periods is eligible to vest based on our relative TSR performance through the award, depending onend of that period determined as follows:
Relative TSR Percentage | Award Multiplier | ||||
+50% or greater | 200% | ||||
+25% | 150% | ||||
0% | 100% | ||||
-30% | 25% | ||||
Less than-30% | 0% |
The Relative TSR Percentage for a performance period is equal to our TSR for that period minus the actual net revenue andnon-GAAP operating income generated byTSR of the Index for that performance period. For these purposes, TSR for both the Company compared to target levels in the given three fiscal year performance period applicable to the award. If the applicable performance goals are met,one-half of any vestedPerformance-Based Units will be payable in an equal number of shares of the Company’s common stock, and the remaining half will be payable in cash,Index is calculated based on the closing price ofaverage prices over the Company’s common stock on30-trading-day period preceding the performance period and the30-trading day period ending with the last day of the performance period.Performance-Based Units granted to our NEOs vest onperiod and assuming in each case that all dividends issued over the last dayperformance period are reinvested as of the applicable three-year performance period, subjectpayment date. The Award Multiplier is applied to the Company’s attainmenttarget number of shares allocated to the applicable performance goals andperiod. If the executive’s continued employment withRelative TSR Percentage falls between two levels in the Company.table above, the Award Multiplier will be determined using straight line interpolation between those levels. In addition, if the Company’s TSR for a particular performance period is negative, the Award Multiplier for that performance period is capped at 100%.
Stock OptionsFiscal Year 2020 Annual Equity Incentive Awards
TheFor fiscal year 2020, the Compensation Committee included stock options ingranted our NEOs (with the mixexception of the CEO, whose equity awards granted in fiscal year 2017 because stock options deliver no actual compensation to an executive unless there is an increase in the stock price above the exercise price of the option as set on the grant date of the option award (which is equal to the closing price of the Company’s common stock on the applicable grant date). Stock option awards that vest over time(multiple-year vesting schedules) serve to align the interests of the executive with the interests of the Company’s stockholders in growing the stock price of the Company, as the options will only have value if the fair market value of the Company’s stock appreciates above the exercise price of the options, and provide a retention incentive over the vesting period. Generally, stock option grants to our NEOs vest annually over a three-year period measured from the date of grant and in all events will terminate six years from the date of grant, subject to earlier termination in connection with a termination of the executive’s employment.
Fiscal Year 2017 Annual Equity Incentive Awards
In fiscal year 2017, the Compensation Committee granted our NEOs2020 are discussed separately below) annual stock options, Time-Based Units andPerformance-Based Units covering in the aggregate, the number of shares of our common stock set forth in the following table. As noted above, the Compensation Committee believed that this mix of awards was consistent with our performance-based philosophy as a substantial portion of each NEO’s total annual equity awards was performance-based through stock options (which have value only if the Company’s stock price appreciates) and Performance-Based Units.performance-based.
Executive | Stock Options | Time- Based Units | Performance-Based Restricted Stock Units | Time-Based Units | Performance-Based Restricted Stock Units (Target) | |||||||||||||||||
Mr. Maheswaran | 90,000 | 83,000 | 58,000 | |||||||||||||||||||
Mr. Chukwu | 15,000 | 55,000 | 20,000 | 15,000 | 15,000 | |||||||||||||||||
Mr. Ammann | 10,000 | 21,000 | 15,000 | 10,000 | 11,000 | |||||||||||||||||
Mr. Beauchamp | 15,000 | 30,000 | 20,000 | 11,000 | 12,000 | |||||||||||||||||
Mr. Kim | 15,000 | 55,000 | 18,000 | |||||||||||||||||||
Mr. Silberstein | 14,000 | 14,000 |
In consideringVesting of Fiscal Year 2020, 2019 and 2018 Performance-Based Awards
As noted above, the proposedfirst performance period for the fiscal year 2017 annual incentive awards for2020 Performance-Based Units awarded to our NEOs the Compensation Committee, after review and discussion withconsisted of our CEO, decided to grant a higher number of Time-Based Units to Messrs. Chukwu and Kim in recognition of their long service to the Company, strong efforts in positioning the Company for success in2020 fiscal year 2017 through the completion of several key internal infrastructure projects and the development of new and expanded sales capabilities, as well as recognition of several peer companies’ compensation practices and for retention purposes. Accordingly, the Time Based Unit grants for Mr. Chukwu and Mr. Kim were higher than the awardssecond performance period for the otherfiscal year 2019 Performance-Based Units awarded to our NEOs (other than(which were designed similarly to our fiscal year 2020 Performance-Based Units) consisted of our 2019 and 2020 fiscal years and the third performance period for our CEO) for fiscal 2017.
Semtech Corporation20172020 Proxy Statement | 5357
COMPENSATION DISCUSSION AND ANALYSIS
the fiscal year 2018 Performance-Based Units awarded to our NEOs consisted of our 2018, 2019 and 2020 fiscal years. Our Relative TSR Percentage and Award Multiplier for the applicable performance periods are shown in the table below.
Year of Grant | Measurement Period | % of Target Award Tied to Period | SMTC TSR | Index TSR | Relative TSR Percentage | Award Multiplier (% of Target Units | ||||||||||||||||||||||||
Fiscal Year 2018 | 3 years Ending FYE20 | 33 1/3% | 61.41% | 90.84% | -29.43% | 26.43% | ||||||||||||||||||||||||
Fiscal Year 2019 | 2 years Ending FYE20 | 33 1/3% | 45.72% | 49.65% | -3.93% | 90.16% | ||||||||||||||||||||||||
Fiscal Year 2020 | 1 year Ending FYE20 | 33 1/3% | 10.57% | 63.02% | -52.45% | 0.00% |
The remainingone-third of the total number of Performance-Based Units granted in fiscal year 2019 remain outstanding and eligible to vest based on our relative TSR performance during the three-year performance period consisting of our fiscal years 2019-2021.
The remainingtwo-thirds of the total number of Performance-Based Units granted in fiscal year 2020 remain outstanding and eligible to vest based on our relative TSR performance duringtwo- and three-year performance periods consisting of our fiscal years 2020-2021 and our fiscal years 2020-2022, respectively.
Vesting of 2015-2017 Performance-Based Restricted Stock UnitFiscal Year 2020 CEO Equity Incentive Awards
TheOur Compensation Committee and Board engaged in extensive discussions with respect to our CEO’s compensation during fiscal year 2020, focusing on retaining and motivating Mr. Maheswaran during a critical time for the Company. As background, the Compensation Committee considered that the Company’s market capitalization had increased by approximately $2.5 billion during an approximatelythree-year10-year time span. Roughly half of that occurred during the fiscal period endingyears 2017-2019 with completionthe emergence of the Company’s LoRa technology and because of other strategic initiatives driven by our CEO. In particular, the decision to pursue the LoRa technology was a direct result of Mr. Maheswaran’s vision and the Compensation Committee and Board believe that ensuring Mr. Maheswaran’s ongoing leadership will be the most critical factor in determining LoRa’s ultimate success. The Compensation Committee also considered that Mr. Maheswaran would have other meaningful opportunities available to him and determined to act proactively to help ensure his retention and alignment with stockholders’ long-term interests. Accordingly, the Compensation Committee determined to award him anup-front, long-term stock grant, significantly weighted to performance-based vesting. The Compensation Committee intends that the award represents Mr. Maheswaran’s entire long-term equity incentive award opportunity for fiscal years 2020-2023, and does not intend to grant an additional equity award to Mr. Maheswaran before fiscal year 2024.
As part of the Compensation Committee’s consideration of making anup-front, long-term stock grant to Mr. Maheswaran, we reached out to 21 stockholders who together own more than 60% of our fiscal year 2017 (fiscal years2015-2017) completed the performance measurement period applicable toPerformance-Based Unit awards granted tocommon stock and our executive officers at the beginningCompensation Committee Chair had calls with 10 stockholders who together own approximately 30% of our fiscal year 2015.common stock. The fiscal year 2015 through fiscal year 2017 cumulative net revenueobjectives of these meetings included soliciting stockholders’ views on executive compensation structures that includedup-front equity award grants with significant performance-based components. The general feedback received during these meetings was that stockholders would want to consider the specific terms of anup-front grant, but there was general support for placing a significant portion of long-term compensation opportunities “at risk” and contingent on creating meaningful stockholder value. Taking this outreach into account, along with other analyses it considered, the Compensation Committee, with respect to the Absolute Stock Price PSUs described below, increased the amount of stockholder value that would need to be created in order for the award to vest from the range of values it had otherwise been considering.
The Compensation Committee believes the four-yearnon-GAAPup-front operating income performance, compared againstgrant for Mr. Maheswaran will incentivize him to continue to drive our strategy and fully develop the targets that were set at the time those awards were issued, resulted in vestingLoRa opportunities. It is extremely stockholder-focused with 85% of the awards at 0% oftotal grant (based on the original target level. The cumulative net revenue target for fiscal year 2015 through fiscal year 2017 for purposes of the awards was $1,960,000,000 and our actual net revenue achieved for this period was $1,595,300,000. The cumulativenon-GAAP operating income target for fiscal year 2015 through fiscal year 2017 was $531,000,000, and our actualnon-GAAP operating income for this period was $338,600,000. As a result, the entire Performance-Based Unit awards were forfeited with no payment.
The following matrix reflects the payout level (the unshaded boxes, as a percentagegrant date value of the target number of unitsshares subject to the award) established for the awards, with the payout level determined based on the Company’s actual cumulative net revenue and actual cumulativenon-GAAP operating income for fiscal years 2015-2017 (the shaded areas in the chart).
2015-2017Performance-Based Restricted Stock Unit Award: Payout Matrix
Operating Income(3-year Cumulative) | ||||||||||||||||||||||||||||||||||
<$372MM (70%) | $372MM (70%) | $425MM (80%) | $478MM (90%) | $531MM (100%) | $584MM (110%) | $637MM (120%) | >=$690MM (130%) | |||||||||||||||||||||||||||
Net Revenue (3-Year Cumulative) | >=$2,352MM (120%) | 0 | % | 100 | % | 110 | % | 115 | % | 120 | % | 145 | % | 175 | % | 200 | % | |||||||||||||||||
$2,156MM (110%) | 0 | % | 90 | % | 100 | % | 105 | % | 110 | % | 130 | % | 160 | % | 180 | % | ||||||||||||||||||
$1,960MM (100%) | 0 | % | 80 | % | 90 | % | 95 | % | 100 | % | 120 | % | 140 | % | 160 | % | ||||||||||||||||||
$1,764MM (90%) | 0 | % | 70 | % | 80 | % | 85 | % | 90 | % | 110 | % | 125 | % | 140 | % | ||||||||||||||||||
$1,568MM (80%) | 0 | % | 50 | % | 60 | % | 70 | % | 80 | % | 90 | % | 105 | % | 120 | % | ||||||||||||||||||
<$1,568MM (80%) | 0 | % | 0 | % | 20 | % | 35 | % | 50 | % | 65 | % | 80 | % | 100 | % |
The applicable targets were set at the start of fiscal year 2015 based on assumptions made at the time of grant of the award. No adjustment, revision, or other discretionary remedy was applied at any time during the three fiscal year measurement period to override the end result of the actualthree-year Company performance. The Compensation Committee believes that thisthree-year fiscal year2015-2017 result reflects the true “pay for performance” basis and intent of thesePerformance-Based Units and the rigor of our executive compensation program.
Executive Ownership Restricted Stock Units
As described below under “Other Compensation Policies – Stock Ownership Guidelines,” the Compensation Committee has adopted stock ownership guidelines for our executive officers. The Compensation Committee grants additional restricted stock units (referred to as “Executive Ownership Restricted Stock Units” or “OSUs”) to certain of our executives to help them achieve the level of stock ownership targeted by the Compensation Committee under the guidelines. The Compensation Committee also believes that these grants further the Compensation Committee’s goal of aligning executives’ interests with those of our stockholders.
In August 2014, the Compensation Committee determined that annual equity grants to our executives should be more than sufficient to help them satisfy the level of ownership targeted by the Compensation
5458 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
the awards) subject to absolute and multi-year relative stock price-based vesting requirements. The percentage of the grant subject to only time-based vesting requirements, as well as the portions of the grant subject to absolute and multi-year relative stock price-based performance requirements, was carefully considered to balance the incentives, avoid incentives to take unnecessary risk, and retain a strong retention hold through a diverse range of potential future scenarios for our Company as well as the broader market.
In determining the size of theup-front grant, the Compensation Committee underalso considered the guidelines. Consequently,range of annualized grant values typically awarded to chief executive officers by the Committee determinedCompany’s Peer Group, the fact that there is noup-side vesting for the Absolute Stock Price PSUs described below (i.e., the maximum vesting level is 100% of the number of units subject to phase out the special Executive Ownership Restrictedaward), and the significant risk of forfeiture of the Absolute Stock Units grants soPrice PSUs described below presented by the significant stockholder value that an executive officer commencing employment withmust be created in order for the Company after August 13, 2014 will not receive such grants under this program.
award to vest. The Compensation Committee now intendsdetermined that Mr. Maheswaran’s totalup-front grant would cover 550,000 shares of Company common stock, allocated between three different types of awards as described below. Since the award is intended to grant Executive Ownership Restricted Stock Unitscover four fiscal years (2020-2023), on an annualannualized basis as appropriate, only to our executive officers who were first employed by the Company on or before August 13, 2014, in amounts to help them meet the goal of total equity ownership of approximately two times the executive’s annual base salary (five times base salary for the CEO) within five years of adoption of the stock ownership guidelines. As of April 2017, Mr. Ammann and Mr. Beauchamp are the only NEOs who will receive any additional grants under the program with Mr. Ammann’s final grant to be made during fiscal year 2020 and Mr. Beauchamp’s final grant made during fiscal year 2017. In addition to Mr. Ammann and Mr. Beauchamp, two other Company executives remained eligible at the beginning of fiscal year 2017 to receive any additional grants under the program. One executive’s eligibility expired during fiscal year 2017 and the other will expire during fiscal year 2019.
Executive Ownership Restricted Stock Units granted to the Named Executive Officers in fiscal year 2017 vest on the second and fourth anniversary of the date of grant. Vesting is subject to and contingent on the executive’s continued employment with the Company through the applicable vesting date. In addition to the vesting requirement, there is a holding period imposed on the vested Executive Ownership Restricted Stock Units. Vested Executive Ownership Restricted Stock Units are not payable until six months after the executive’s employment with the Company terminates, helping to ensure that the executive has a substantial ownership interest in the Company throughout the executive’s period of employment to align the executive’s interests with our stockholders’ interests.
In fiscal year 2017, the Compensation Committee granted our NEOs Executive Ownership Restricted Stock Units covering, in the aggregate, the number of shares subject to the award(one-fourthof our common stock set forththe total 550,000 shares is 137,500 shares) is only slightly larger than the 135,000 shares subject to Mr. Maheswaran’s equity awards granted by the Company in fiscal year 2019 (in each case, taking performance-based awards into account at the following table:
| ||||||||
|
For more information regardingtarget number of shares subject to the award). In addition, 85% of the totalup-front grant is subject to performance-based vesting conditions, while only 52% of Mr. Maheswaran’s equity awards granted by the Company in fiscal year 2019 are subject to performance-based vesting conditions (in each case, based on the grant date value of the target number of shares subject to the awards). The Compensation Committee’s objective was to provide a framework that increases Mr. Maheswaran’s compensation opportunity in scenarios where LoRa is as successful as the Board of Directors believes is possible. However, the equity awards grantedare heavily weighted to the NEOs during fiscal year 2017, see the “Grants ofPlan-Based Awards in Fiscal Year 2017” table and the accompanying narratives in this Proxy Statement.
Changes in Equity Incentive Award Program for Fiscal Year 2018
As noted earlier, during fiscal year 2017, the Compensation Committee continued to reach out to some of its stockholders as it was evaluating changes to its performance-based long term incentive plan. In particular, the Compensation Committee has received feedback from stockholders that the metrics used for the Company’s long term incentive plan were similar to those used in the Company’s short term annual cash incentive plan. In addition,equity, which creates alignment with the assistance of its independent compensation consultant, the Compensation Committee noted that a significant number of our peer companies were using relative TSRstockholder interests as a component or, in several cases,substantial portion of the only componenttotal award value is “at risk” (including the risk of theirforfeiture of the entire performance-based long term incentive plans. After consideration,awards) unless significant value is created for our stockholders. Taking all of the Compensation Committee determined that the performance-based equity awards granted to our NEOs in February 2017 for fiscal year 2018 would have a vesting requirement which would depend on the Company’s relative TSR over a three-year performance period. In addition, the Compensation Committee determined for fiscal year 2018, the Performance-Based Units for the CEO would comprise over 50% of his long term incentive compensation award and that the remaining NEOs, on average, would see a significant increase in Performance-Based Units as part of their long term incentive compensation. After taking these two changesfactors noted above into account, the Compensation Committee also decidedbelieves that theup-front grant is reasonable and in the best interests of our stockholders.
The award was granted to Mr. Maheswaran in March 2019 and consisted of three distinct components:
Semtech Corporation2017 Proxy Statement | 55
COMPENSATION DISCUSSION AND ANALYSIS
for fiscal 2018 any time-based long-term incentive compensation would be in the form of restricted stock units. The number of Time-Based Units and target number of Performance-Based Units granted to each of our NEOsMr. Maheswaran in February 2017 for fiscal year 2018 is as follows:2020 are scheduled to vest annually over a four-year vesting period measured from the date of grant of the awards.
Executive | Time-Based Units | Performance-Based Units (at target) | ||||||
Mr. Maheswaran | 65,000 | 70,000 | ||||||
Mr. Chukwu | 15,451 | 16,996 | ||||||
Mr. Ammann | 12,361 | 12,206 | ||||||
Mr. Beauchamp | 25,451 | 16,996 | ||||||
Mr. Kim | 15,451 | 16,996 |
The Time-BasedOne type of Performance-Based Unit award granted to Mr. Maheswaran in fiscal year 2020 follows the design of the Performance-Based Units awarded to theour NEOs in fiscal year 2018 have substantially2020, except that the same terms asvesting period of the Time-Based Units awardedaward was extended from three years to the NEOs in fiscal year 2017. The performance-based vesting requirements applicable to thefour years (“Relative TSR PSUs”). These Performance-Based Units grantedare eligible to the NEOs in fiscal year 2018 (the “2018 PSU Awards”) arevest based on the Company’s TSR relative to the TSR of the SPDR S&P SPDR Semiconductor ETF (NYSE:XSD) (the “Index”). A target number, applying the same vesting schedule and methodology as described above with respect to the Performance-Based Units granted to our NEOs in fiscal year 2020, except that the award consists of units is covered by each 2018 PSU Award, withfour performance periods (withone-thirdone-quarter of the target number of units covered by eachthe award allocated to each of the threefour periods, and with the first period consisting of our 2020 fiscal year, the second period consisting of our 2020 and 2021 fiscal years, in the performancethird period consisting of our 2020, 2021 and between2022 fiscal years, and the fourth period consisting of our 2020, 2021, 2022, and 2023 fiscal years). Between 0% and 200% of the target number of units allocated to each of those yearsperiods is eligible to vest based on our relative TSR performance through the end of that year. If the Company’s TSR for a particularperiod.
The other type of Performance-Based Unit awarded to Mr. Maheswaran in fiscal year 2020 is negative, the vesting percentage of the portion of the award corresponding to that year is capped at 100% regardless of the relative TSR measure.
Vesting is generally subject to the award recipient’s continued employment through the endattainment of that year. If the executive’s employment terminates prior to a change in control in circumstances that entitle the executive to severance benefits under the executive’s offer letter or under the Company’s Change In Control Retention Plan (“CIC Plan”), the time-based vesting conditions applicable to the award would no longer apply, but the award would remain subject to the performance-based vesting conditions. The executive would not be guaranteed an “at target” payout.
CEO Special PerformanceLong-Termpre-established Incentive Award
As previously disclosed in the Proxy Statement for our 2015 and 2016 Annual Meetings of Stockholders, the Company made a special equity award grant to our CEO in February 2014 (the “Special CEO Award”).
Vesting of the Special CEO Award was structured such that vesting would only occur if the Company’sabsolute stock price were to reach specified levels in excess of the stock price on the day of the grant.(“Absolute Stock Price PSUs”). Specifically, the Special CEO Awardthis award is eligible to vest during the period commencing February 26, 2014March 5, 2019 and ending February 26, 2019March 5, 2024 (the “Performance Period”) as follows: 30% of the restricted stock units covered by the Special CEO Awardaward will vest if, during any period of 30 consecutive120-day calendar period trading days that commences and ends during the Performance Period, the averageper-share closing price of the Company’s common stock equals or exceeds $35.00; and the Special CEO Award would vest in full if, during any consecutive
120-daySemtech Corporation calendar2020 Proxy Statement | 59
COMPENSATION DISCUSSION AND ANALYSIS
exceeds $71.00; and the award will vest in full if, during any period of 30 consecutive trading days that commences and ends during the Performance Period, the averageper-share closing price of the Company’s common stock equals or exceeds $95.00. If a change in control of the Company occurs during the Performance Period: 30% of the award will vest if the $71.00 vesting level under the awards was not previously attained and the Company’s stockholders become entitled to receiveper-share consideration in the transaction having a value equal to or greater than $71.00; the awards will vest in full if the Company’s stockholders become entitled to receiveper-share consideration in the transaction having a value equal to or greater than $95.00; and there will be proportionate vesting (between 30% and 100% of the unvested portion of the award) if the Company’s stockholders become entitled to receiveper-share consideration in the transaction having a value between $71.00 and $95.00. |
The Absolute Stock Price PSUs provide the opportunity for Mr. Maheswaran to earn approximately $7 million by achieving an increase in stockholder value of more than $1 billion within the five-year Performance Period applicable to the award (based on 30% of the total number of restricted stock units subject to the award becoming vested at aper-share price of the Company’s common stock equals or exceeds $40.00. The Special CEO Award would also vest ifequal to $71.00, as described above, and with the increase in stockholder value measured based on the number of shares of the Company’s common stock outstanding on the date of grant of the award and the closing price of a majority change in controlshare of common stock of the Company occurs duringon the date of grant of the award, $55.04). If Mr. Maheswaran earns this portion of the award, it would represent an incentive of approximately 0.65% of the total increase in stockholder value from the grant date of the award. Mr. Maheswaran will have the opportunity to additionally earn approximately $21 million by achieving a total increase in stockholder value of approximately $2.6 billion within the five-year Performance Period and, in connection with such event,applicable to the Company’s stockholders become entitled to receiveper-share consideration having a value equal to or greater than $40.00. Anyaward (based on the additional 70% of the total number of restricted stock units subject to the Special CEO Award that do not vest during the Performance Period will terminate asaward becoming vested at aper-share price of the last dayCompany’s common stock equal to $95.00, as described above, and with the increase in stockholder value measured based on the number of shares of the Performance Period. In addition, if Mr. Maheswaran’s employment withCompany’s common stock outstanding on the date of grant of the award and the closing price of a share of common stock of the Company terminates, any then unvested restricted stock units subject toon the Special CEO Award will terminate.
Asdate of April 21, 2017, nogrant of the award, $55.04). If Mr. Maheswaran earns this portion of the Special CEO Award has vested.award, it would represent an incentive of approximately 0.81% of the total increase in stockholder value from the grant date of the award.
Fiscal Year 2021 Equity Awards
Consistent with the Compensation Committee’s intent in granting Mr. Maheswaran’s equity award in fiscal year 2020, Mr. Maheswaran did not receive an equity award from the Company for fiscal year 2021. The Time-Based Units and Relative TSR PSUs awarded to our NEOs in fiscal year 2021 continued to have three-year vesting periods, with the Time-Based Units vesting annually over three years after the date of grant of the awards and the Relative TSR PSUs covering three performance periods (withone-third of the target number of units covered by the awards allocated to each of the three periods, and with the first period consisting of our 2021 fiscal year, the second period consisting of our 2021 and 2022 fiscal years, and the third period consisting of our 2021, 2022 and 2023 fiscal years).
The Compensation Committee granted our NEOs, other than Mr. Maheswaran (who did not receive a grant), the following number of Time-Based Units and Relative TSR PSUs in March 2020:
Executive | Time-Based Units | Performance-Based Restricted Stock Units (Target) | ||||||||
Mr. Chukwu | 20,556 | 20,556 | ||||||||
Mr. Ammann | 13,333 | 13,333 | ||||||||
Mr. Beauchamp | 16,667 | 16,667 | ||||||||
Mr. Silberstein | 15,556 | 15,556 |
5660 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Other Compensation
Perquisites and Benefits
During fiscal year 2017,2020, we did not provide any significant perquisites to our NEOs. The Company provides our NEOs with certain benefits aton the same level and offeringterms made available to our other employees generally, including participation in our 401(k) retirement plan, health care plans, life insurance plans, and other welfare benefit programs. The Company also reimburses each NEOfor the cost of an annual physical exam. The Compensation Committee believes that this benefit helps protect the health of the executive team at a relatively small cost to the Company.
In addition to the standard benefits offered to all of our employees generally, ourU.S.-based executives and other employees who are specifically approved by the Compensation Committee are eligible to participate in our DeferredExecutive Nonqualified Excess Plan, as amended and restated (our “Deferred Compensation Plan,Plan”), which allows our executives to elect to defer annual salary and/or annual cash incentive income. The Deferred Compensation Plan is unfunded and unsecured; however, the Company maintains life insurance policies on the lives of certain current and former participants in the plan, the benefit and accrued value of which is intended to cover a majority of the plan’s accrued liability. For the majority of fiscal year 2017,2020, the Company matched, on adollar-for-dollar basis, up to the first 20% of employee base salary contributions for our CEO, our Chief Financial Officer and our General Counsel, up to the first 15% for participants at the Vice President level, and up to the first 10% for all other participants. In January 2017, the Company reduced its level of contribution and now matches, on adollar-for-dollar basis, up to the first 10% of employee base salary contributions for our CEO, our Chief Financial Officer and our General Counsel, up to the first 8% for participants at the Vice President level, and up to the first 5% for all other participants. The Compensation Committee believes that providing the NEOs with this deferred compensation opportunity is acost-effective way to permit the executives to receive the tax benefits associated with delaying income tax on the compensation deferred, even though the related deduction for the Company is also deferred. For more information on our Deferred Compensation Plan, please see“Non-Qualified “Nonqualified Deferred CompensationPlan-Fiscal Year 2017”2020” in this Proxy Statement.
SeveranceSeverance; CEO Offer Letter
The Compensation Committee evaluates the level of severance benefits, if any, to be provided to an NEO on acase-by-case basis. Currently, Mr. Maheswaran is our only NEO covered by an agreement with the Company that provides for severance benefits outside the context of a change in control transaction.
AtMr. Maheswaran’s prior offer letter with the timeCompany was scheduled to expire in December 2019. In November 2019, the Company entered into an amended and restated offer letter with Mr. Maheswaran was hired in 2006, the(the “Offer Letter”). The Compensation Committee determined that providing himcontinuing to provide Mr. Maheswaran with certain severance and other protections was a material inducement to attracting him tounder the Company andOffer Letter was appropriate in light of his position within the Company, his overall compensation package and thepost-employment restrictions he would be subject to after he no longer works for the Company.
As amended, the Offer Letter provides for a five-year term commencing November 20, 2019, which will automatically be extended for additionalone-year periods thereafter unless either party gives written notice at least 90 days in advance that the term will not be extended. Under the Offer Letter, Mr. Maheswaran will continue to serve as the Company’s Chief Executive Officer and President, will be nominated forre-election to the Board in connection with any expiration of his term in office as a member of the Board (unless such nomination is prohibited by law or an applicable listing standard), will receive an annual base salary of $620,000 (subject to annual review by the Compensation Committee, but the Compensation Committee may not decrease such annual base salary rate), will receive Company equity awards in the discretion of the Compensation Committee, and will participate in the Company’s Chief Executive Officer Bonus Plan with an annual target bonus of not less than 125% of his base salary. Mr. Maheswaran is also entitled to participate in the Company’s benefit plans made generally available to the Company’s salaried employees and to participate in the Semtech Executive Compensation Plan (the Company’s nonqualified deferred compensation plan), with the Company matching the first 10% of his contributions to that plan.
Semtech Corporation2020 Proxy Statement | 61
COMPENSATION DISCUSSION AND ANALYSIS
Pursuant to the terms of Mr. Maheswaran’s offer letter, originally entered into in March 2006 and as subsequently amended (the “Offer Letter”),the Offer Letter, in the event Mr. Maheswaran’s employment with us is terminated for reasons other than death, disability or “cause,” or if he terminates his employment for “good reason” within 3090 days of an event giving rise to good reason, he will be entitled to 12 months of his annual salary, andup to 12 months continued welfare planbenefits (medical, dental, life andlong-term disability insurance) coverage., and, except as otherwise provided in the applicable award agreement, 12 months accelerated vesting of any outstanding and unvested equity awards that are subject only to time-based vesting requirements as of the severance date. The terms “cause” and “good reason” are defined in the Offer Letter. These severance benefits are contingent on
Mr. Maheswaran’s execution of a release agreement which, among other things, releases the Company from liability relating to his employment and the termination of his employment.employment, and Mr. Maheswaran’s agreement and compliance with aone-year post-terminationnon-competition covenant (which restricts Mr. Maheswaran from being employed by one of the members of the Company’s Peer Group if such company cannot reasonably satisfy the Company that it will preclude and prevent disclosure of the Company’s confidential information).
Change in Control Benefits
Equity Plan Change in Control Benefits
Under the terms of our stockholder approved equity incentive plans, if there is a change in control of the Company and the successor entity does not assume the obligation for the stock options or otherequity-based awards, or the awards do not otherwise remain outstanding after the transaction, then mostthe unvested stock options and other equity based awards (other thanPerformance-Based Units, described
Semtech Corporation2017 Proxy Statement | 57
COMPENSATION DISCUSSION AND ANALYSIS
below) generally will become fully vested as a result of the transaction. If the successor entity does assume the obligation for stock options or otherequity-based awards in the change in control transaction, then in the event of a loss of employment within 12 months following a “change in control,” due to termination of employment by the Company without “cause” or a “constructive termination” of the participant (as those terms are defined in the applicable plan), certain then unvested stock options and other equity based awards, (butbut not includingPerformance-Based Units granted under the Company’s 2008 and 2013Long-Term Equity Incentive Plans)Plan (the “2008 Plan”), its 2013 Long-Term Equity Incentive Plan (the “2013 Plan”) and its 2017 Long-Term Equity Incentive Plan (the “2017 Plan”), will become fully vested.
For our outstandingPerformance-Based Units granted before fiscal year 2018, on a “change in control,” if the surviving entity does not assume or continue the applicable award in effect per its original terms, and unless otherwise expressly provided for in an applicable award or participation agreement, as to any then outstanding and unvested Company equity awards that are subject to performance-based vesting conditions, the number of shares or units subject to the award will be adjusted to equal the “target” number of shares or units subject to the award, and such adjusted equity award will remain subject to any time-based vesting requirements under the original terms of the award (and will be subject to any accelerated vesting with respect to time-based vesting equity awards as described above). Mr. Beauchamp, a Canadian resident, joined the Company as part of its acquisition of Gennum Corp., and has significantly different severance benefit protections under Canadian law. While most of our NEOs participate in the CIC Plan, Mr. Beauchamp does not in light of these Canadian severance protections. Under a transitional arrangement negotiated with Mr. Beauchamp because he does not participate in the CIC Plan (the “Transitional Agreement”), as to any such Performance-Based Unit award granted to Mr. Beauchamp and outstanding at the time of a change in control, the “target” number of shares subject to the award would vest on the change in control if the change in control occurs before September 1, 2018. This automatic accelerated vesting provision applicable to Mr. Beauchamp’s Performance-Based Units does not apply to thePerformance-Based Units granted to any of our other NEOs and will expire on September 1, 2018.
As to our Performance-Based Units awarded in fiscal years 2018 PSU Awards,through 2020, and our Relative TSR PSUs awarded in fiscal year 2020 to our CEO, in the event of a change in control in which the Company’s stock ceases to be publicly-traded, the number of units subject to any portion of the award as to which the performance period did not end before the closing of the change in control will become “fixed” based on the Company’s TSR relative to the TSR of the Index for a shortened performance period ending with the change in control. In such circumstances, apro-rated portion (based on the portion of the performance period elapsed before the transaction) of the number of units that become fixed on the change in control will accelerate and be paid upon the closing of the transaction. The balance of the units will remain subject to the time-based vesting condition applicable to the awards through the end of the original applicable performance periods (unless the awards were to be terminated in connection with the transaction and not assumed by an acquiring company, in which case these units would also vest on the closing of the transaction). If the executive’s employment terminates in circumstances on or after a change in control that entitle the executive to severance benefits under the CICSemtech Corporation Executive Change in Control Retention Plan described below or the executive’s offer letter, the time-based vesting conditions applicable to the award would no longer apply and the remaining units subject to the award (after giving effect to the performance measurement on the change in control) would accelerate and become payable on the separation. Under Mr. Beauchamp’s Transitional Agreement, as to the 2018 PSU Award granted to Mr. Beauchamp, if the award is outstanding at the time of a change in control then the number of units subject to the award that become “fixed” in connection with the change in control will vest at that time if the change in control occurs before September 1, 2018. This automatic accelerated vesting provision of Mr. Beauchamp’s award does not apply to the 2018 PSU Awards granted to any of our other NEOs and will expire on September 1, 2018.
Deferred Compensation Plan
Our Deferred Compensation Plan provides for vesting of account balances attributable to Company matching contributions on involuntary termination of employment within 18 months of a change in control.
5862 | Semtech Corporation20172020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Executive Change in Control Retention Plan
The Compensation Committee believes that providing severance protections to our executive officers should a change in control occur is in the best interests of the Company and our stockholders in order to provide additional retention incentives to the selected executive officers and to encourage them to remain employed with the Company during an important time when their prospects for continued employment following a change in control transaction are often uncertain. On December 19, 2014,August 21, 2019, the Compensation Committee adopted the Semtech Corporation Executive Change in Control Retention Plan (the “CIC Plan”). The CIC Plan superseded and (which replaced in its entirety the Company’s prior Change in Control Retention Plan, the Semtech Corporation Amended and Restated Executive Change in Control Retention Plan which originally took effect on September 28, 2010 (the “Prior CIC Plan”)that would have expired in December 2019). Mr. Maheswaran’s Offer Letter includes severance protections, discussed below.above. Accordingly, he does not participate in the CIC Plan and did not participate in the Prior CIC Plan. Mr. Beauchamp is employed in Canadahas an individual letter agreement and covered by severance protections applicable under local law. Accordingly, Mr. Beauchampalso does not participate in the CIC Plan. Our other NEOs participate in the CIC Plan.
The CIC Plan provides for certain severance benefits if the participant’s employment with the Company terminates in certain circumstances in connection with a “change in control” (as defined in the CIC Plan). If the CIC Plan participant’s employment is terminated by the Company other than for “cause” (as defined in the CIC Plan) or by the participant for “good reason” (as such terms are defined in the CIC Plan), in either case during a “change in control window,” the participant will be entitled to receive certain severance benefits. For these purposes, a “change in control window” is defined as the period (1) beginning on the earlier of (a) 90 days prior to a change in control or (b) the execution of a definitive agreement to effect a transaction that, if consummated in accordance with the proposed terms, would constitute a change in control (provided that the transaction with the party to the definitive agreement is actually consummated within one year following the execution of such definitive agreement and such transaction actually constitutes a change in control), and (2) ending on the second anniversary of such change in control. A more detailed description and discussion of the CIC Plan is found below in this Proxy Statement in the report on Executive Compensation, under the heading “Potential Payments on Termination or Change in Control.”
The CIC Plan doesnot provide for automatic accelerated vesting of equity awards upon a change in control transaction, eliminating the automatic accelerated vesting provisions that had been included in the Prior CIC Plan.transaction. The CIC Plan doesnot include a tax“gross-up” provision. Instead, if any payment or benefit received by a participant in the CIC Plan in connection with a change in control of the Company would have been subject to any excise taxes imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Excise Tax”), such payments and benefits will either be reduced (but not below zero) as necessary to avoid the participant incurring any such Excise Tax or be paid in full (with the participant paying any Excise Tax due), whichever places the participant in the bestafter-tax position (taking into account federal, state and local income taxes and the Excise Tax).
A more detailed description of the CIC Plan is found below in this Proxy Statement in the report on Executive Compensation, under the heading “Potential Payments on Termination or Change in Control.”
CEO Change in Control Arrangements
As noted above, Mr. Maheswaran does not participate in the CIC Plan or the Prior CIC Plan. Severance protections for Mr. Maheswaran are provided in his Offer Letter. Mr. Maheswaran’s Offer Letter providedprovides that he would be entitled to certain enhanced severance benefits if, within 12 months following a “change in control” (ascontrol window” (which is defined in the Offer Letter)same as described for the CIC Plan above), his employment with us is terminated for reasons other than death, disability or “cause,” or if he had terminated his employment for “good reason” within 3090 days of an event giving rise to good reason. In December 2014, the Compensation Committee determined that it was advisable to amend Mr. Maheswaran’s Offer Letter to conform to certain of the provisions of the CIC Plan to provide consistency in these provisions among the executive team and to provide for a newfive-year term that will expire on December 19, 2019, subject to earlier termination upon a termination of Mr. Maheswaran’s employment. The Offer Letter amendments provide that, instead of severance benefits
Semtech Corporation2017 Proxy Statement | 59
COMPENSATION DISCUSSION AND ANALYSIS
being triggered by a termination of his employment with us within 12 months following a change in control under the circumstances described above, Mr. Maheswaran would be entitled to such enhanced severance benefits if his employment with us is terminated under the circumstances described above during a “change in control window.” For these purposes, a “change in control window” has the same meaning as provided under the CIC Plan. In the event the employment of Mr. Maheswaran is terminated under such circumstances, he would be entitled to cash severance benefits equal to two times his annual salary, two times his target annual cash incentive, apro-rated annual cash incentive for the fiscal year of the termination, and up to 24 months continued welfare planbenefits (medical, dental, life andlong-term disability insurance) coverage., accelerated vesting of his unvested Deferred Compensation Plan balance, and except as otherwise provided in the applicable award agreement, full accelerated vesting of any outstanding and unvested equity awards that are subject only to time-based vesting requirements as of the severance date.
Semtech Corporation2020 Proxy Statement | 63
COMPENSATION DISCUSSION AND ANALYSIS
These severance benefits are contingent on Mr. Maheswaran’s execution of a release agreement which, among other things, releases the Company from liability relating to his employment and the termination of his employment. In addition, Mr. Maheswaran’s Offer Letter provides that, except as provided in the applicable award agreement, upon a change in control of the Company, all outstanding and unvested performance vesting equity awards shall be deemed to meet the target level of performance for any open performance period, and will remain subject to any time-based vesting requirements (subject to accelerated vesting upon certain terminations of employment as provided above).
We believe it is appropriate to provide these protections for Mr. Maheswaran for the same reasons we provide benefits under the Change in ControlCIC Plan to the other NEOs as described above. As described above, Mr. Maheswaran’s Offer Letter also provides severance protections should his employment be terminated in certain circumstances outside of a change in control window. These provisions were negotiated with
Mr. Maheswaran when he joined the Company.
When Mr. Maheswaran was initially hired in 2006, the Company agreedisnot entitled to reimburse Mr. Maheswarana taxgross-up for the full amount of theany Excise Tax on or arising from our severance benefits paid to him as a result of a change in control (the “TaxGross-up Provision”). On February 27, 2014, the Company entered into a letter agreement (the “Letter Agreement”) with Mr. Maheswaran to amend his Offer Letter. The Letter Agreement removed from the Offer Letter the TaxGross-up Provision.Tax. Instead, Mr. Maheswaran’s payments and benefits payable in connection with a change in control will either be reduced, but not below zero, as necessary to avoid Mr. Maheswaran incurring any such Excise Tax or be paid in full, with Mr. Maheswaran paying any Excise Tax due, whichever places Mr. Maheswaran in the betterafter-tax position. This approach was retained in the December 2014 amendments to Mr. Maheswaran’s Offer Letter; Mr. Maheswaran is not entitled to a taxgross-up for any Excise Tax.
For more information on our severance and change in control arrangements with the NEOs, including a more detailed description of Mr. Maheswaran’s Offer Letter, please see “Potential Payments on Termination or Change in Control” below in this Proxy Statement.
Other Compensation Policies
Stock Ownership Guidelines and Equity Award Holding Period Requirements
To further our objective of aligning the interests of management with those of our stockholders, the Company maintains stock ownership guidelines for our executive officers. Under these guidelines, each of our executive officers is to maintain a level of equity ownership of the Company (which may include shares of the Company’s stock owned by the executive, by the executive’s spouse or minor children residing with the executive, or in a trust for estate or tax planning purposes that is revocable by the executive or the executive’s spouse, stock options, restricted stock, and restricted stock units) that has a value approximately equal to two times (five times in the case of the CEO) the annual base salary of such executive officer. We amended ourOur stock ownership guidelines in August 2016 toalso include equity award holding period requirements. Ifrequirements such that if an executive officer’s level of ownership of Company common stock does not satisfy the targeted level under our stock ownership guidelines, the executive officer is expected to hold at least 50% of the net vested shares acquired upon the exercise, payment or vesting of any Company equity award granted to the executive officer after August 17, 2016. For this purpose, the “net vested shares” generally means the number of shares acquired pursuant to the award less the number of any shares sold or withheld to pay the exercise price of the award (in the case of stock options) or any applicable tax withholding obligations in connection with the exercise, payment or vesting of the award. The applicable ownership level is expected to be achieved within five years of the effective date of the guidelines for officers serving as of the adoption of the guidelines.
Each of our NEOs has met their required level of equity ownership of the Company under our stock ownership guidelines.
60 | Semtech Corporation2017 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Description of Employment Arrangements
All of our NEOs are employed on anat-will basis and none of our NEOs are employed under the terms of an employment agreement for a fixed term. We do, however, issue written offer letters from time to time to prospective executives that set forth their initial terms of compensation and other material terms including, in the case of Mr. Maheswaran,post-termination severance obligations, in the case of Mr. Beauchamp, acceleration of certain equity awards upon a change in control of the Company, and we provide certain severance protections under the CIC Plan, as described above under “Other Compensation – Severance.”
64 | Semtech Corporation2020 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Section 162(m) Considerations
Section 162(m)Federal income tax law generally prohibits a publicly-held company from deducting compensation paid to a current or former named executive officer that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017 that were based upon attainingpre-established performance measures that were set by the Company’s Compensation Committee under a plan approved by the Company’s stockholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit.
As one of the Internal Revenue Codefactors in its consideration of 1986, as amended, generally disallows public companies a tax deduction for compensation in excess of $1 million paid to their chief executive officer and certain of their other executive officers unless certain performance and other requirements are met. The Company andmatters, the Compensation Committee reviewnotes this deductibility limitation. However, the Compensation Committee has the flexibility to take any compensation-related actions that it determines are in the best interests of the Company and consider the deductibility of executiveits stockholders, including awarding compensation under Section 162(m) when considering our executive compensation programs. However, we believe the Company’s goal of preserving the deductibility of compensation is secondary in importance to achievement of its compensation objectives, and we reserve the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible. In addition, a number of requirements must be met in orderdeductible for particular compensation to qualify under Section 162(m).tax purposes. There can be no assurance that theany compensation intended to qualify for deductibility under Section 162(m) awarded or paid by the Company will in fact be fully deductible. The Compensation Committee will continue to monitor the tax and other consequences of our executive compensation program as part of its primary objective of structuring compensation paid to our executive officers that it believes is reasonable,performance-based and consistent with the goals of the Company and its stockholders.
Clawback Policy
The Company maintains a “clawback” policy that allows our Board of Directors or the Compensation Committee to require reimbursement or cancellation of awards or payments made under our cash and equity incentive plans to the Company’s officers in certain circumstances where the amount of the award or payment was determined based on the achievement of financial results that were subsequently the subject of an accounting restatement due to material noncompliance with applicable securities laws.
Semtech Corporation20172020 Proxy Statement | 6165
The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement. Based on this review and our discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement, portions of which are incorporated by reference in the Company’s Annual Report onForm 10-K for fiscal year 2017.2020. Respectfully submitted by THE COMPENSATION COMMITTEE
Bruce C. Edwards, Chair Glen M. AntleRodolpho C. Cardenuto Ye Jane Li (1) Carmelo J. Santoro
This Compensation Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates the Compensation Committee Report by reference therein.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee members whose names appear on the Compensation Committee Report above currently comprise the Compensation Committee. No member of our Compensation Committee during fiscal year 20172020 is or has been an executive officer or employee of the Company, and no member of the Compensation Committee had any relationship requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships andrelated-party transactions. None of our executive officers now serve, or served during fiscal year 2017,2020, as a director or a member of a compensation committee (or other committee performing an equivalent function) of another entity that had one of its executive officers serving on our Board or Compensation Committee during fiscal year 20172020 or currently.
6266 | Semtech Corporation20172020 Proxy Statement
The following table presents information regarding compensation of our NEOs for service during fiscal years 2015-2017.2018-2020. Additional information regarding the compensation realized by our NEOs in fiscal year 20172020 can be found in the CD&A, including in the “Realized Compensation” discussion and table on pages 3537 and 36.38.
SUMMARY COMPENSATION TABLE – FISCAL YEAR 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY COMPENSATION TABLE – FISCAL YEARS 2018-2020 | SUMMARY COMPENSATION TABLE – FISCAL YEARS 2018-2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Base Salary (1) ($) | Bonus ($) | Stock Awards (3) ($) | Option Awards (3) ($) | Non-Equity Incentive Plan Compensation (4) ($) | All Other Compensation (5) ($) | Total ($) | Year | Salary ($) | Bonus ($) | Stock Awards (1) ($) | Option Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mohan R. Maheswaran | 2017 | 598,769 | – | 2,468,910 | 433,489 | 1,200,000 | 125,316 | 4,826,485 | 2020 | 620,000 | – | 25,126,480 | – | 279,000 | 70,475 | 26,095,955 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer | 2016 | 599,308 | – | 2,516,800 | 512,849 | 225,000 | 123,374 | 3,977,331 | 2019 | 617,692 | – | 4,694,518 | – | 788,175 | 70,094 | 6,170,479 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 550,000 | – | 6,401,063 | 356,286 | 275,000 | 102,553 | 7,684,902 | 2018 | 600,000 | – | 5,069,735 | – | 733,125 | 61,707 | 6,464,567 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Emeka N. Chukwu | 2017 | 375,000 | – | 1,313,250 | 72,633 | 306,000 | 76,442 | 2,143,326 | 2020 | 409,000 | – | 1,708,750 | – | 246,000 | 50,025 | 2,413,775 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. VP and Chief Financial Officer | 2016 | 386,923 | – | 1,144,000 | 111,389 | 160,000 | 77,385 | 1,879,696 | 2019 | 397,115 | – | 1,358,318 | – | 256,000 | 48,712 | 2,060,145 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 347,500 | – | 865,900 | 146,502 | 140,000 | 69,500 | 1,569,402 | 2018 | 375,000 | – | 1,219,215 | – | 300,000 | 47,213 | 1,941,428 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles B. Ammann | 2017 | 359,077 | – | 700,400 | 48,422 | 293,760 | 81,548 | 1,483,207 | 2020 | 375,000 | – | 1,198,046 | – | 225,000 | 46,600 | 1,844,646 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. VP, General Counsel & Secretary | 2016 | 356,769 | – | 700,700 | 74,259 | 129,375 | 80,004 | 1,341,107 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 323,654 | – | 1,237,000 | 218,574 | 247,500 | 63,839 | 2,090,567 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gary M. Beauchamp (2) | 2017 | 310,069 | – | 938,536 | 72,633 | 302,193 | 25,446 | 1,648,876 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. VP & GM, Signal Integrity Products Group | 2016 | 296,904 | – | 1,209,780 | 74,259 | 165,000 | 22,692 | 1,768,635 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 254,928 | – | 1,053,924 | 73,251 | 161,944 | 23,544 | 1,567,591 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James J. Kim | 2017 | 325,000 | – | 1,278,230 | 72,633 | 265,200 | 57,290 | 1,998,353 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior VP, Worldwide Sales | 2016 | 336,000 | – | 1,001,000 | 111,389 | 121,875 | 59,050 | 1,629,314 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | 310,000 | – | 791,680 | 109,876 | 116,000 | 54,950 | 1,382,506 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. VP, General Counsel and Secretary | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gary M. Beauchamp (6) | 2020 | 358,870 | – | 1,311,960 | – | 223,418 | 24,317 | 1,918,565 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. VP and GM Signal Integrity Products Group | 2019 | 345,582 | – | 776,212 | – | 221,172 | 24,291 | 1,367,257 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 368,364 | – | 1,573,215 | – | 237,236 | 29,325 | 2,208,140 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asaf SiIberstein | 2020 | 396,000 | – | 1,594,836 | – | 248,000 | 40,880 | 2,279,716 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exec. VP, Worldwide | 2019 | 357,692 | – | 970,247 | – | 256,500 | 37,603 | 1,622,042 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations and Information Technology | 2018 | 338,154 | – | 1,158,105 | – | 238,000 | 35,311 | 1,769,571 |
(1) |
The amounts and values noted do not necessarily correspond to any actual value that will be realized by a recipient. The stock award and option award amounts reflected in the table, and thegrant-date values noted below, are computed in accordance with FASB ASC Topic 718 for the stock and option awards granted to the NEOs in the corresponding fiscal year based on the assumptions set forth in Note 11 to the financial statements included in the Company’s Annual Report on Form10-K filed with the SEC on March |
For the Performance-Based Units granted |
Fiscal Year 2020 Performance-Based Restricted Stock Units | ||||
Aggregate Grant Date Fair Value | ||||
(Based on Monte Carlo Simulation) | Maximum Value | |||
Name | ($) | ($) | ||
Mr. Maheswaran | 9,584,400 | 17,612,800 | ||
Mr. Chukwu | 883,150 | 1,651,200 | ||
Mr. Ammann | 647,646 | 1,210,880 | ||
Mr. Beauchamp | 706,520 | 1,320,960 | ||
Mr. Silberstein | 824,276 | 1,541,120 |
Semtech Corporation20172020 Proxy Statement | 6367
EXECUTIVE COMPENSATION
Fiscal Year 2019 Performance-Based Restricted Stock Units | ||||
Aggregate Grant Date Fair Value | ||||
(Based on Monte Carlo Simulation) | Maximum Value | |||
Name | ($) | ($) | ||
Mr. Maheswaran | 2,435,768 | 4,865,000 | ||
Mr. Chukwu | 679,615 | 1,357,405 | ||
Mr. Ammann | 436,909 | 872,642 | ||
Mr. Beauchamp | 388,367 | 775,690 | ||
Mr. Silberstein | 485,450 | 969,595 |
Fiscal Year 2017Performance-Based Restricted Stock Units | ||||||||
Aggregate Grant Date Fair Value | Aggregate Grant Date Fair Value | |||||||
(Based on Probable Outcome) | (Based on Maximum Performance) | |||||||
Name | ($) | ($) | ||||||
Mr. Maheswaran | 1,015,580 | 2,031,160 | ||||||
Mr. Chukwu | 350,200 | 700,400 | ||||||
Mr. Ammann | 262,650 | 525,300 | ||||||
Mr. Beauchamp | 350,200 | 700,400 | ||||||
Mr. Kim | 315,180 | 630,360 |
Fiscal Year 2016Performance-Based Restricted Stock Units | ||||||||
Aggregate Grant Date Fair Value | Aggregate Grant Date Fair Value | |||||||
(Based on Probable Outcome) | (Based on Maximum Performance) | |||||||
Name | ($) | ($) | ||||||
Mr. Maheswaran | 1,573,000 | 3,146,000 | ||||||
Mr. Chukwu | 572,000 | 1,144,000 | ||||||
Mr. Ammann | 343,200 | 686,400 | ||||||
Mr. Beauchamp | 572,000 | 1,144,000 | ||||||
Mr. Kim | 572,000 | 1,144,000 |
Fiscal Year 2015Performance-Based Restricted Stock Units | ||||||||||||
Fiscal Year 2018 Performance-Based Restricted Stock Units | Fiscal Year 2018 Performance-Based Restricted Stock Units | |||||||||||
Aggregate Grant Date Fair Value | Aggregate Grant Date Fair Value | Aggregate Grant Date Fair Value | ||||||||||
(Based on Probable Outcome) | (Based on Maximum Performance) | (Based on Monte Carlo Simulation) | Maximum Value | |||||||||
Name | ($) | ($) | ($) | ($) | ||||||||
Mr. Maheswaran | 2,524,272 | 5,048,543 | 2,768,735 | 4,956,000 | ||||||||
Mr. Chukwu | 494,800 | 989,600 | 672,250 | 1,203,317 | ||||||||
Mr. Ammann | 247,400 | 494,800 | 482,790 | 864,185 | ||||||||
Mr. Beauchamp | 494,800 | 989,600 | 672,250 | 1,203,317 | ||||||||
Mr. Kim | 494,800 | 989,600 | ||||||||||
Mr. Silberstein | 611,140 | 1,093,931 |
The first, second and third tranches of the Performance-Based Units granted in fiscal year |
As of January 26, 2020, none of the Absolute Stock Price PSUs granted to Mr. Maheswaran in fiscal year 2020 had vested. |
(2) | Amounts set forth in the“Non-Equity Incentive Plan Compensation” column for fiscal year |
Amounts presented in the “All Other Compensation” column for fiscal year |
Employer Contributions to Compensation Plans | Employer Contributions to Compensation Plans | Employer Contributions to Compensation Plans | ||||||||||||||||
Name | 401(k) Plan ($) | Deferred Compensation Plan ($) | Statutory (Canada) Defined-Contribution Pension Plan ($) | 401(k) Plan ($) | Deferred Compensation Plan ($) | Group Retirement Saving Program (Canada) ($) | ||||||||||||
Mr. Maheswaran | 4,798 | 120,518 | – | 8,475 | 62,000 | – | ||||||||||||
Mr. Chukwu | – | 76,442 | – | 9,125 | 40,900 | – | ||||||||||||
Mr. Ammann | 8,625 | 72,923 | – | 9,100 | 37,500 | – | ||||||||||||
Mr. Beauchamp | – | – | 15,478 | – | – | 13,900 | ||||||||||||
Mr. Kim | 9,097 | 48,193 | – | |||||||||||||||
Mr. Silberstein | 9,200 | 31,680 | – |
(4) | As discussed in the CD&A above, the fiscal year 2020 stock award for Mr. Maheswaran is intended to represent Mr. Maheswaran’s entire long-term equity incentive award opportunity for fiscal years 2020-2023. The Compensation Committee did not award Mr. Maheswaran a new equity award when the Company’s annual equity awards were granted in fiscal year 2021 and does not intend to grant an additional equity award to Mr. Maheswaran before fiscal year 2024. Approximately 85% of the total grant (based on the grant date value of the target number of shares subject to the awards) is subject to absolute and multi-year relative stock price-based vesting requirements. The Company’s market capitalization would need to increase by approximately $2.6 billion within the five-year performance period applicable to the award in order for the portion of the award subject to absolute stock price-based vesting requirements to fully vest, with no portion of the Absolute Stock Price PSUs vesting unless the Company’s market capitalization increased by at least $1.0 billion during that performance period (in each case, with the increase in stockholder value |
6468 | Semtech Corporation20172020 Proxy Statement
EXECUTIVE COMPENSATION
measured based on the number of shares of the Company’s common stock outstanding on the date of grant of the award and the closing price of a share of common stock of the Company on the date of grant of the award). |
(5) | Compensation is shown for Mr. Ammann only for fiscal year 2020 as he was not a named executive officer prior to that fiscal year. |
(6) | As Mr. Beauchamp is headquartered in Canada and is paid in Canadian Dollars, the amounts reflected under “Base Salary,”“Non-Equity Incentive Plan Compensation” and “All Other Compensation” are for 2020 amounts, the U.S. Dollar equivalents at the exchange rate between the Canadian Dollar and the U.S. Dollar as of January 26, 2020, which was 0.760385 U.S. Dollar to one Canadian Dollar. For 2019, the exchange rate at January 27, 2019 of 0.75617 U.S. Dollar to one Canadian Dollar was used and for 2018 the exchange rate at January 28, 2018 of 0.81109 U.S. Dollar to one Canadian Dollar was used. |
Grants ofPlan-Based Awards in Fiscal Year 20172020
The following table presents information regarding the equity andnon-equity incentive awards granted to the NEOs during fiscal year 2017.2020. The material terms of each award are described below under “Description of Fiscal Year 20172020 Plan-Based Awards.”
GRANTS OF PLAN-BASED AWARDS – FISCAL YEAR 2020 (1)
GRANTS OFPLAN-BASED AWARDS – FISCAL YEAR 2017 (1)
|
| |||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (4) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Options Awards (per share) ($) | Grant Date Fair Value of Stock and Option Awards (5) ($) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
Mr. Maheswaran | 150,000 | 750,000 | 1,200,000 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
NQSO | 2/23/2016 | – | – | – | – | – | – | – | 90,000 | 17.51 | 433,489 | |||||||||||||||||||||||||||||||||
RSU | 2/23/2016 | – | – | – | – | – | – | 83,000 | – | – | 1,453,330 | |||||||||||||||||||||||||||||||||
PSU | 2/23/2016 | – | – | – | 29,000 | 58,000 | 116,000 | – | – | – | 1,015,580 | |||||||||||||||||||||||||||||||||
Mr. Chukwu | 75,000 | 300,000 | 450,000 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
NQSO | 2/23/2016 | – | – | – | – | – | – | – | 15,000 | 17.51 | 72,633 | |||||||||||||||||||||||||||||||||
RSU | 2/23/2016 | – | – | – | – | – | – | 55,000 | – | – | 963,050 | |||||||||||||||||||||||||||||||||
PSU | 2/23/2016 | – | – | – | 10,000 | 20,000 | 40,000 | – | – | – | 350,200 | |||||||||||||||||||||||||||||||||
Mr. Ammann | 72,000 | 288,000 | 432,000 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
NQSO | 2/23/2016 | – | – | – | – | – | – | 10,000 | 17.51 | 48,422 | ||||||||||||||||||||||||||||||||||
RSU | 2/23/2016 | – | – | – | – | – | – | 21,000 | – | – | 367,710 | |||||||||||||||||||||||||||||||||
PSU | 2/23/2016 | – | – | – | 7,500 | 15,000 | 30,000 | – | – | – | 262,650 | |||||||||||||||||||||||||||||||||
OSU | 2/23/2016 | – | – | – | – | – | – | 4,000 | – | – | 70,040 | |||||||||||||||||||||||||||||||||
Mr. Beauchamp | 62,500 | 250,000 | 375,000 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
NQSO | 2/23/2016 | – | – | – | – | – | – | – | 15,000 | 17.51 | 72,633 | |||||||||||||||||||||||||||||||||
RSU | 2/23/2016 | – | – | – | – | – | – | 30,000 | – | – | 525,300 | |||||||||||||||||||||||||||||||||
PSU | 2/23/2016 | – | – | – | 10,000 | 20,000 | 40,000 | – | – | – | 350,200 | |||||||||||||||||||||||||||||||||
OSU | 2/23/2016 | – | – | – | – | – | – | 3,600 | – | – | 63,036 | |||||||||||||||||||||||||||||||||
Mr. Kim | 65,000 | 260,000 | 390,000 | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||
NQSO | 2/23/2016 | – | – | – | – | – | – | – | 15,000 | 17.51 | 72,633 | |||||||||||||||||||||||||||||||||
RSU | 2/23/2016 | – | – | – | – | – | – | 55,000 | – | – | 963,050 | |||||||||||||||||||||||||||||||||
PSU | 2/23/2016 | – | – | – | 9,000 | 18,000 | 36,000 | – | – | – | 315,180 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2) | Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (4) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards (5) ($) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
Mr. Maheswaran | ||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | N/A | 213,125 | 775,000 | 1,550,000 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
RSU | 3/5/2019 | – | – | – | – | – | – | 70,000 | – | – | 3,852,800 | |||||||||||||||||||||||||||||||||
PSU | 3/5/2019 | – | – | – | 40,000 | 160,000 | 320,000 | – | – | – | 9,584,400 | |||||||||||||||||||||||||||||||||
APSU | 3/5/2019 | – | – | – | – | 320,000 | – | – | – | – | 11,689,280 | |||||||||||||||||||||||||||||||||
Mr. Chukwu | ||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | N/A | 82,000 | 328,000 | 574,000 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
RSU | 3/5/2019 | – | – | – | – | – | – | 15,000 | – | – | 825,600 | |||||||||||||||||||||||||||||||||
PSU | 3/5/2019 | – | – | – | 3,750 | 15,000 | 30,000 | – | – | – | 883,150 | |||||||||||||||||||||||||||||||||
Mr. Ammann | ||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | N/A | 75,000 | 300,000 | 525,000 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
RSU | 3/5/2019 | – | – | – | – | – | – | 10,000 | – | – | 550,400 | |||||||||||||||||||||||||||||||||
PSU | 3/5/2019 | – | – | – | 2,750 | 11,000 | 22,000 | – | – | – | 647,646 | |||||||||||||||||||||||||||||||||
Mr. Beauchamp | ||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | N/A | 72,070 | 288,281 | 504,492 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
RSU | 3/5/2019 | – | – | – | – | – | – | 11,000 | – | – | 605,440 | |||||||||||||||||||||||||||||||||
PSU | 3/5/2019 | – | – | – | 3,000 | 12,000 | 24,000 | – | – | – | 706,520 | |||||||||||||||||||||||||||||||||
Mr. Silberstein | ||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive | N/A | 80,000 | 320,000 | 560,000 | – | – | – | – | – | – | – | |||||||||||||||||||||||||||||||||
RSU | 3/5/2019 | – | – | – | – | – | – | 14,000 | – | – | 770,560 | |||||||||||||||||||||||||||||||||
PSU | 3/5/2019 | – | – | – | 3,500 | 14,000 | 28,000 | – | – | – | 824,276 |
Legend | ||||||
RSU APSU | Time-Based Units Absolute Stock | PSU | Performance-Based Units | |||
(1) | All equity awards were made pursuant to the |
(2) | TheNon-Equity Incentive Plan Awards made to Mr. Maheswaran were granted pursuant to the terms of our CEO Bonus Plan. AllNon-Equity Incentive Plan Awards made to our other NEOs were granted pursuant to the terms of our Executive Bonus Plan. As a participant in the CEO Bonus Plan, Mr. Maheswaran is ineligible to receive awards pursuant to the Executive Bonus Plan. AllNon-Equity Incentive Plan Awards were paid to our executives in fiscal year |
As Mr. Beauchamp is headquartered in Canada, the |
Semtech Corporation2020 Proxy Statement | 69
EXECUTIVE COMPENSATION
(3) | These columns represent awards ofPerformance-Based Units. There is no guaranteed minimum payout for these awards. |
(4) | The awards reflected in this column represent Time-Based |
Semtech Corporation2017 Proxy Statement | 65
EXECUTIVE COMPENSATION
(5) | The valuation of equity awards is computed in accordance with FASB ASC Topic 718 and based on assumptions set forth in Note 11 to the financial statements filed with the Company’s Annual Report on Form10-K filed with the SEC on March |
Description of Fiscal Year 20172020 Plan-Based Awards
Non-Equity Incentive Plan Awards
As described above in the CD&A, we maintain twonon-equity incentive plans applicable to our NEOs: our CEO Bonus Plan for Mr. Maheswaran and our Executive Bonus Plan for our other NEOs. These plans generally provide a cash payout only in the event certainpre-established Company and business unit performance objectives are met. Under the plans, each NEO has a targeted bonus potential expressed as a percentage of the NEO’s base salary. In fiscal year 2017,2020 payouts to Mr. Maheswaran were based on ournon-GAAP operating income; net revenue growth; net revenue growth and EPS growth compared to certain peer companies; and our Board’s assessment of his individual performance. For our other NEOs, payouts were based on ournon-GAAP operating income and assessments of business unit and individual performance by our CEO and the Compensation Committee. The applicable performance criteria and targets in place for fiscal year 20172020 under our CEO Bonus Plan and the criteria for assessing performance under our Executive Bonus Plan, and the payouts under these plans for our NEOs for fiscal year 2017,2020, are discussed in detail above in the CD&A. Awards under these plans are generally only paid to executives who are employed by the Company on the date awards are paid, which generally occurs in the first quarter following the end of the applicable fiscal year.
Equity Incentive Plan Awards
In fiscal year 2017,2020, we granted fourthree types of equity incentive awards to our NEOs:“non-qualified” stock options (“NQSOs”); Time-Based Units (“RSUs”);, Performance-Based Units (“PSUs”); and Executive Ownership Restrictedto our CEO only, Absolute Stock Units (“OSUs”). The NQSOs are“non-qualified” stock options, meaning that they are not intended as “incentive” stock options under Section 422 of the Internal Revenue Code of 1986, as amended.Price PSUs. The material terms of the NQSOs, RSUs PSUs and OSUsPSUs are described in the CD&A under the heading “Summary of our Current Executive Compensation Programs – Equity Incentive Awards.”
All equity awards granted in fiscal year 20172020 were granted under, and subject to, the terms and conditions of the 20132017 Plan and the award certificatesagreements applicable to such awards. Awards of NQSOs and RSUs vest over three years from the date of their grant. Awardsgrant, with the exception of OSUsMr. Maheswaran’s RSUs which vest onover four years. As described above under the fourth anniversaryheading “Compensation Discussion and Analysis – CEO Special Performance Long-Term Incentive Award,” the Absolute Stock Price PSUs were only granted to our CEO and are eligible to vest only as to 30% of the date of grant for Mr. Ammann andshares subject to the second anniversaryaward or 100% of the dateshares subject to the award if the averageper-share closing price of the grant for Mr. BeauchampCompany’s common stock equals or exceeds $71.00 or $95.00, respectively, during any consecutive30-day trading period that occurs during the performance period commencing March 5, 2019 and are generally payable only six months after the executive’s employment with the Company terminates.ending March 5, 2024. Awards of RSUs and OSUsPSUs granted in fiscal year 20172020 represent a right to receive one share of Company common stock for each unit subject to the award.
Each of the NQSOs granted in fiscal year 2017 was granted with aper-share exercise price equal to the closing market price of a share of the Company’s common stock on the grant date (or, if grant date was not a trading day, as of the last trading day preceding the grant date). Each of the NQSOs granted in fiscal year 2017 has a term of six years.award that vests.
Awards of PSUs generally vest over three years (four years for Mr. Maheswaran) from the date of their grant and onlybased on our Total Shareholder Return (“TSR”) relative to the extent the Company achieves certainpre-established performance objectives relating to cumulative net revenue and cumulativenon-GAAP operating income over the vesting period, measured on anon-GAAP basis. These revenue and operating income goals are generally set far in advanceTSR of the endSPDR S&P Semiconductor ETF (NYSE:XSD), which tracks the S&P Semiconductor Select Industry Index. TSR will be measured for the Company’s fiscal year 2020, fiscal years 2020 and 2021, and fiscal years 2020, 2021 and 2022 for each of the performancethree measurement periods (and for fiscal years 2020, 2021, 2022 and are set at levels that2023 in the Compensation Committee believes, at the time the levels are established, will be challenging to attain. Halfcase of anyMr. Maheswaran’s PSUs). The vested PSUs are payable in an equal number of shares of our common stock and the other half are payable in cash based on the closing price of the Company’s common stock on the last day of the vesting period.stock.
6670 | Semtech Corporation20172020 Proxy Statement
EXECUTIVE COMPENSATION
None of the equity incentive awards granted to our NEOs in fiscal year 20172020 entitles the recipient to dividend rights, except forthat awards of RSUs PSUs and OSUs thatPSUs include a right to distribution ofbe credited with dividend equivalents.equivalents that are subject to the same vesting and payment terms as the underlying units to which they relate. As described more fully under the heading “Potential Payments On Termination or Change in Control” below, under certain circumstances the vesting of some or all of our equity awards to our NEOs may be accelerated on the executive’s termination from the Company or on a change in control of the Company.
Outstanding Equity Awards at Fiscal 2017Year-End 2020
The following table presents information regarding the outstanding equity awards held by each NEO as of January 29, 2017:26, 2020:
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END 2017 (split-adjusted) | ||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Name (Grant Date – Award Type) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price (Per Share) ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (1)($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2) ($) | |||||||||||||||||||||||||||||
MR. MAHESWARAN | ||||||||||||||||||||||||||||||||||||||
2/23/2016 – NQSO (3) | – | 90,000 | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||
2/23/2016 – PSU (4) | – | – | – | – | – | – | 58,000 | 1,954,600 | ||||||||||||||||||||||||||||||
2/23/2016 – RSU (5) | – | – | – | – | 83,000 | 2,797,100 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – NQSO (3) | 23,333 | 46,667 | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||
2/24/2015 – PSU (4) | – | – | – | – | – | – | 55,000 | 1,853,500 | ||||||||||||||||||||||||||||||
2/24/2015 – RSU (5) | – | – | – | – | 22,000 | 741,400 | – | – | ||||||||||||||||||||||||||||||
2/25/2014 – NQSO (3) | 34,320 | 17,160 | – | 24.74 | 2/25/2020 | – | – | – | – | |||||||||||||||||||||||||||||
2/25/2014 – RSU (5) | – | – | – | – | 6,011 | 202,571 | – | – | ||||||||||||||||||||||||||||||
2/26/2014 – MPSU (6) | – | – | – | – | 220,000 | 7,414,000 | – | – | ||||||||||||||||||||||||||||||
2/26/2013 – NQSO (3) | 44,000 | – | – | 30.82 | 2/26/2019 | – | – | – | – | |||||||||||||||||||||||||||||
2/28/2012 – NQSO (3) | 44,000 | – | – | 29.35 | 2/28/2018 | – | – | – | – | |||||||||||||||||||||||||||||
TOTAL | 145,653 | 153,827 | 331,011 | 11,155,071 | 113,000 | 3,808,100 | ||||||||||||||||||||||||||||||||
MR. CHUKWU | ||||||||||||||||||||||||||||||||||||||
2/23/2016 – NQSO (3) | – | 15,000 | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||
2/23/2016 – PSU (4) | – | – | – | – | – | – | 20,000 | 674,000 | ||||||||||||||||||||||||||||||
2/23/2016 – RSU (5) | – | – | – | – | 55,000 | 1,853,500 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – NQSO (3) | 5,000 | 10,000 | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||
2/24/2015 – PSU (4) | – | – | – | – | – | – | 20,000 | 674,000 | ||||||||||||||||||||||||||||||
2/24/2015 – RSU (5) | – | – | – | – | 13,334 | 449,356 | – | – | ||||||||||||||||||||||||||||||
2/25/2014 – NQSO (3) | 13,333 | 6,667 | – | 24.74 | 2/25/2020 | – | – | – | – | |||||||||||||||||||||||||||||
2/25/2014 – RSU (5) | – | – | – | – | 5,000 | 168,500 | – | – | ||||||||||||||||||||||||||||||
2/26/2013 – NQSO (3) | 13,000 | – | – | 30.82 | 2/26/2019 | – | – | – | – | |||||||||||||||||||||||||||||
2/28/2012 – NQSO (3) | 12,000 | – | – | 29.35 | 2/28/2018 | – | – | – | – | |||||||||||||||||||||||||||||
TOTAL | 43,333 | 31,667 | 73,334 | 2,471,356 | 40,000 | 1,348,000 |
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END 2020 (split-adjusted) | ||||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name (Grant Date – Award Type) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price (Per Share) ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (1)($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2) ($) | |||||||||||||||||||||||||||||||
MR. MAHESWARAN | ||||||||||||||||||||||||||||||||||||||||
3/5/2019 – APSU (3) | – | – | – | – | – | – | 320,000 | 16,806,400 | ||||||||||||||||||||||||||||||||
3/5/2019 – PSU (4) | – | – | – | – | – | – | 30,000 | 1,575,600 | ||||||||||||||||||||||||||||||||
3/5/2019 – RSU (5) | – | – | – | – | 70,000 | 3,676,400 | – | – | ||||||||||||||||||||||||||||||||
3/6/2018 – PSU (4) | – | – | – | – | – | – | 23,334 | 1,225,502 | ||||||||||||||||||||||||||||||||
3/6/2018 – RSU (5) | – | – | – | – | 43,334 | 2,275,902 | – | – | ||||||||||||||||||||||||||||||||
2/21/2017 – RSU (5) | – | – | – | – | 21,667 | 1,137,951 | – | – | ||||||||||||||||||||||||||||||||
2/23/2016 – NQSO | 90,000 | – | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||||
2/24/2015 – NQSO | 35,000 | – | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||||
TOTAL | 125,000 | 135,001 | 7,090,253 | 373,334 | 19,607,502 | |||||||||||||||||||||||||||||||||||
MR. CHUKWU | ||||||||||||||||||||||||||||||||||||||||
3/5/2019 – PSU (4) | – | – | – | – | – | – | – | 2,500 | 131,300 | |||||||||||||||||||||||||||||||
3/5/2019 – RSU (5) | – | – | – | – | 15,000 | 787,800 | – | – | ||||||||||||||||||||||||||||||||
3/6/2018 – PSU (4) | – | – | – | – | – | – | 6,511 | 341,958 | ||||||||||||||||||||||||||||||||
3/6/2018 – RSU (5) | – | – | – | – | 13,021 | 683,863 | – | – | ||||||||||||||||||||||||||||||||
2/21/2017 – RSU (5) | – | – | – | – | 5,151 | 270,531 | – | – | ||||||||||||||||||||||||||||||||
2/23/2016 – NQSO | 15,000 | – | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||||
2/24/2015 – NQSO | 15,000 | – | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||||
2/25/2014 – NQSO | 12,000 | – | – | 24.74 | 2/25/2020 | – | – | – | – | |||||||||||||||||||||||||||||||
TOTAL | 42,000 | 33,172 | 1,742,194 | 9,011 | 473,258 |
Semtech Corporation20172020 Proxy Statement | 6771
EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END 2017 (split-adjusted) | ||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Name (Grant Date – Award Type) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price (Per Share) ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (1)($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2) ($) | |||||||||||||||||||||||||||||
MR. AMMANN | ||||||||||||||||||||||||||||||||||||||
2/23/2016 – NQSO (3) | – | 10,000 | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||
2/23/2016 – PSU (4) | – | – | – | – | – | – | 15,000 | 505,500 | ||||||||||||||||||||||||||||||
2/23/2016 – RSU (5) | – | – | – | – | 21,000 | 707,700 | – | – | ||||||||||||||||||||||||||||||
2/23/2016 – OSU (7) | – | – | – | – | 4,000 | 134,800 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – NQSO (3) | 3,333 | 6,667 | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||
2/24/2015 – PSU (4) | – | – | – | – | – | – | 12,000 | 404,400 | ||||||||||||||||||||||||||||||
2/24/2015 – RSU (5) | – | – | – | – | 6,667 | 224,678 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – OSU (7) | – | – | – | – | 2,500 | 84,250 | – | – | ||||||||||||||||||||||||||||||
2/25/2014 – NQSO (3) | 15,000 | 15,000 | – | 24.74 | 2/25/2020 | – | – | – | – | |||||||||||||||||||||||||||||
2/25/2014 – RSU (5) | – | – | – | – | 20,000 | 674,000 | – | – | ||||||||||||||||||||||||||||||
TOTAL | 18,333 | 31,667 | 54,167 | 1,825,428 | 27,000 | 909,900 |
68 | Semtech Corporation2017 Proxy Statement
EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END 2017 (split-adjusted) |
| |||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Name (Grant Date – Award Type) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price (Per Share) ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (1)($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2) ($) | |||||||||||||||||||||||||||||
MR. BEAUCHAMP | ||||||||||||||||||||||||||||||||||||||
2/23/2016 – NQSO (3) | – | 15,000 | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||
2/23/2016 – PSU (4) | – | – | – | – | – | – | 20,000 | 674,000 | ||||||||||||||||||||||||||||||
2/23/2016 – RSU (5) | – | – | – | – | 30,000 | 1,011,000 | – | – | ||||||||||||||||||||||||||||||
2/23/2016 – OSU (7) | – | – | – | – | 3,600 | 121,320 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – NQSO (3) | 3,333 | 6,667 | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||
2/24/2015 – PSU (4) | – | – | – | – | – | – | 20,000 | 674,000 | ||||||||||||||||||||||||||||||
2/24/2015 – RSU (5) | – | – | – | – | 13,334 | 449,356 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – OSU (7) | – | – | – | – | 2,300 | 77,510 | – | – | ||||||||||||||||||||||||||||||
2/25/2014 – NQSO (3) | 6,666 | 3,334 | – | 24.74 | 2/25/2020 | – | – | – | – | |||||||||||||||||||||||||||||
2/25/2014 – RSU (5) | – | – | – | – | 6,667 | 224,678 | – | – | ||||||||||||||||||||||||||||||
2/25/2014 – OSU (7) | – | – | – | – | 2,600 | 87,620 | – | – | ||||||||||||||||||||||||||||||
2/26/2013 – NQSO (3) | 5,000 | – | – | 30.82 | 2/26/2019 | – | – | – | – | |||||||||||||||||||||||||||||
2/26/2013 – OSU (7) | – | – | – | – | 2,000 | 67,400 | – | – | ||||||||||||||||||||||||||||||
TOTAL | 14,999 | 25,001 | 60,501 | 2,038,884 | 40,000 | 1,348,000 | ||||||||||||||||||||||||||||||||
MR. KIM | ||||||||||||||||||||||||||||||||||||||
2/23/2016 – NQSO (3) | – | 15,000 | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||
2/23/2016 – PSU (4) | – | – | – | – | – | – | 18,000 | 606,600 | ||||||||||||||||||||||||||||||
2/23/2016 – RSU (5) | – | – | – | – | 55,000 | 1,853,500 | – | – | ||||||||||||||||||||||||||||||
2/24/2015 – NQSO (3) | 5,000 | 10,000 | – | 28.60 | 2/24/2021 | – | – | – | – | |||||||||||||||||||||||||||||
2/24/2015 – PSU (4) | – | – | – | – | – | – | 20,000 | 674,000 | ||||||||||||||||||||||||||||||
2/24/2015 – RSU (5) | – | – | – | – | 10,000 | 337,000 | – | – | ||||||||||||||||||||||||||||||
2/25/2014 – NQSO (3) | 10,000 | 5,000 | – | 24.74 | 2/25/2020 | – | – | – | – | |||||||||||||||||||||||||||||
2/25/2014 – RSU (5) | – | – | – | – | 4,000 | 134,800 | – | – | ||||||||||||||||||||||||||||||
2/26/2013 – NQSO (3) | 12,000 | – | – | 30.82 | 2/26/2019 | – | – | – | – | |||||||||||||||||||||||||||||
2/28/2012 – NQSO (3) | 13,000 | – | – | 29.35 | 2/28/2018 | – | – | – | – | |||||||||||||||||||||||||||||
TOTAL | 40,000 | 30,000 | 69,000 | 2,325,300 | 38,000 | 1,280,600 |
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END 2020 (split-adjusted) | ||||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name (Grant Date – Award Type) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price (Per Share) ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (1)($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2) ($) | |||||||||||||||||||||||||||||||
MR. AMMANN | ||||||||||||||||||||||||||||||||||||||||
3/5/2019 – PSU (4) | – | – | – | – | – | – | 1,834 | 96,322 | ||||||||||||||||||||||||||||||||
3/5/2019 – RSU (5) | – | – | – | – | 10,000 | 525,200 | – | – | ||||||||||||||||||||||||||||||||
3/6/2018 – PSU (4) | – | – | – | – | – | – | 4,186 | 219,849 | ||||||||||||||||||||||||||||||||
3/6/2018 – OSU (6) | – | – | – | – | 1,025 | 53,833 | – | – | ||||||||||||||||||||||||||||||||
3/6/2018 – RSU (5) | – | – | – | – | 8,371 | 439,645 | – | – | ||||||||||||||||||||||||||||||||
2/21/2017 – OSU (6) | – | – | – | – | 1,500 | 78,780 | – | – | ||||||||||||||||||||||||||||||||
2/21/2017 – RSU (5) | – | – | – | – | 4,121 | 216,435 | – | – | ||||||||||||||||||||||||||||||||
2/23/2016 – OSU (6) | – | – | – | – | 4,000 | 210,080 | – | – | ||||||||||||||||||||||||||||||||
2/24/2015 – OSU (6) | – | – | – | – | 2,500 | 131,300 | – | – | ||||||||||||||||||||||||||||||||
TOTAL | 31,517 | 1,655,273 | 6,020 | 316,171 | ||||||||||||||||||||||||||||||||||||
MR. BEAUCHAMP | ||||||||||||||||||||||||||||||||||||||||
3/5/2019 – PSU (4) | – | – | – | – | – | – | 2,000 | 105,040 | ||||||||||||||||||||||||||||||||
3/5/2019 – RSU (5) | – | – | – | – | 11,000 | 577,720 | – | – | ||||||||||||||||||||||||||||||||
3/6/2018 – PSU (4) | – | – | – | – | – | – | 3,721 | 195,427 | ||||||||||||||||||||||||||||||||
3/6/2018 – RSU (5) | – | – | – | – | 7,441 | 390,801 | – | – | ||||||||||||||||||||||||||||||||
2/21/2017 – RSU (5) | – | – | – | – | 8,484 | 445,580 | – | – | ||||||||||||||||||||||||||||||||
TOTAL | 26,925 | 1,414,101 | 5,721 | 300,467 | ||||||||||||||||||||||||||||||||||||
MR. SILBERSTEIN | ||||||||||||||||||||||||||||||||||||||||
3/5/2019 – PSU (4) | – | – | – | – | – | – | 2,334 | 122,582 | ||||||||||||||||||||||||||||||||
3/5/2019 – RSU (5) | – | – | – | – | 14,000 | 735,280 | – | – | ||||||||||||||||||||||||||||||||
3/6/2018 – PSU (4) | – | – | – | – | – | – | 4,651 | 244,271 | ||||||||||||||||||||||||||||||||
3/6/2018 – RSU (5) | – | – | – | – | 9,301 | 488,489 | – | – | ||||||||||||||||||||||||||||||||
2/21/2017 – RSU (5) | – | – | – | – | 5,151 | 270,531 | – | – | ||||||||||||||||||||||||||||||||
2/23/2016 – NQSO | 4,332 | – | – | 17.51 | 2/23/2022 | – | – | – | – | |||||||||||||||||||||||||||||||
TOTAL | 4,332 | 28,452 | 1,494,300 | 6,985 | 366,853 |
Legend | ||||||
NQSO | PSU | Performance-Based Units (other than APSUs) | ||||
RSU | Time-Based Units | APSU | Absolute Stock Price Performance-Based Units | |||
OSU | Executive Ownership Restricted Stock Units | |||||
(1) | The dollar amounts shown in this column are determined by multiplying the number of shares or units reported in the “Number of Shares or Units of Stock That Have Not Vested” column by |
(2) | The dollar amounts shown in this column are determined by multiplying the number of shares or units reported in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested” column by |
Semtech Corporation2017 Proxy Statement | 69
EXECUTIVE COMPENSATION
(3) | The |
| ||||||||||||||||
| ||||||||||||||||
| ||||||||||||||||
| ||||||||||||||||
|
| ||||||||||||||||
| ||||||||||||||||
|
72 | Semtech Corporation2020 Proxy Statement
EXECUTIVE COMPENSATION
or exceeds $71.00; and the APSUs will vest in full if, during any consecutive30-day trading period that commences and ends during the Performance Period, the averageper-share closing price of the Company’s common stock equals or exceeds |
The PSUs granted in fiscal year 2019 vest based on our TSR relative to the |
The PSUs granted in fiscal year 2020 vest based on our TSR relative to the TSR of the SPDR S&P Semiconductor ETF (NYSE:XSD), which tracks the S&P Semiconductor Select Industry Index. TSR will be measured for each of the three measurement periods applicable to the award: the Company’s fiscal year 2020, fiscal years 2020 and 2021, and fiscal years 2020, 2021 and 2022 (Mr. Maheswaran has a fourth period for the Company’s fiscal years 2020, 2021, 2022 and 2023). The first measurement period resulted in the vesting of 0.00% of the target number of units in the first vesting tranche,one-third of the target number of units originally granted pursuant to the award (orone-fourth of the target number of units originally granted pursuant to the award, in the case of Mr. Maheswaran), as of the last day of fiscal year 2020. The amount reported in the table above represents the threshold number of PSUs that are eligible to vest for the fiscal year 2021 and fiscal year 2022 measurement periods (and the fiscal year 2023 measurement period, in the case of the award granted to Mr. Maheswaran)(two-thirds of the target number of units originally granted pursuant to the award; or three-fourths of the target number of units originally granted pursuant to the award, in the case of Mr. Maheswaran). |
(5) | The Time-Based Units have a time-based vesting schedule and vest in approximately equal annual installments as set forth in the following table, except that the RSUs awarded to Mr. Maheswaran on March 5, 2019 vest in approximately equal annual installments over four years after the grant date of the award: |
Grant Date | 1st Vesting Date | 2nd Vesting Date | 3rd Vesting Date | 4th Vesting Date | ||||||||||||||||
3/5/2019 | 3/5/2020 | 3/5/2021 | 3/5/2022 | 3/5/2023 | ||||||||||||||||
3/6/2018 | 3/6/2019 | 3/6/2020 | 3/6/2021 | – | ||||||||||||||||
2/21/2017 | 2/21/2018 | 2/21/2019 | 2/21/2020 | – |
(6) | For Mr. Ammann, the OSUs granted on February 24, 2015 vest on February 24, 2020, |
Option Exercises and Stock Vested in Fiscal Year 20172020
The following table identifies option awards that were exercised by our NEOs during fiscal year 20172020 and other stock awards that vested during fiscal year 20172020 that were previously granted to our NEOs:
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2017 | ||||||||||||||||||||||||||||||||||||
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2020 | OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2020 |
| ||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | ||||||||||||||||||||||||||||
Mr. Maheswaran | 43,200 | 304,583 | 72,011 | 1,486,650 | – | – | 98,204 | 5,351,344 | ||||||||||||||||||||||||||||
Mr. Chukwu | 20,100 | 155,985 | 16,666 | 299,922 | 8,000 | 234,002 | 37,360 | 2,053,584 | ||||||||||||||||||||||||||||
Mr. Ammann | – | – | 13,333 | 239,761 | 3,334 | 99,356 | 20,153 | 1,101,635 | ||||||||||||||||||||||||||||
Mr. Beauchamp | – | – | 25,000 | 487,701 | 10,000 | 370,667 | 27,054 | 1,481,731 | ||||||||||||||||||||||||||||
Mr. Kim | 21,100 | 130,098 | 13,334 | 240,289 | ||||||||||||||||||||||||||||||||
Mr. Silberstein | – | – | 26,353 | 1,394,727 |
(1) | The dollar amounts shown in the table above for option awards are determined by multiplying (i) the number of shares of our common stock to which the exercise of the option related, by (ii) the difference between theper-share closing price of our common |
Semtech Corporation2020 Proxy Statement | 73
EXECUTIVE COMPENSATION
stock on the date |
70 | Semtech Corporation2017 Proxy Statement
EXECUTIVE COMPENSATION
Nonqualified Deferred Compensation – Fiscal Year 20172020
Certain of ourOur NEOs may elect to receive some of their compensation on a deferred basis under the Deferred Compensation Plan. A participant may elect to defer up to 80% of his or her base salary andperformance-based compensation. ForUnder the majority of fiscal year 2017,Company’s current matching program under the Company matched, on adollar-for-dollar basis, up toDeferred Compensation Plan, the first 20% of employee base salary contributions for our CEO, our Chief Financial Officer and our General Counsel, up to the first 15% for participants at the Vice President level, and up to the first 10% for all other participants. In January 2017, the Company reduced its level of contribution and now matches, on adollar-for-dollar basis, up to the first 10% of employee base salary contributions for our CEO, our Chief Financial Officer and our General Counsel, up to the first 8% for participants at the Vice President level, and up to the first 5% for all other participants. Participants are always 100% vested in their deferrals and the earnings thereon. Matching contributions made by the Company vest 25% on December 31st of the calendar year during which the contribution is made. Thereafter, vesting continues 25% on December 31st for each of the following three calendar years. Amounts in participant accounts may generally be deferred until a specified date, death, disability, a change in control, or termination of employment. At the participant’s election, deferrals will generally be paid in a lump sum or in annual installments over a period of up to 20 years. Withdrawals may be made for unforeseeable emergencies and some amounts (generallypre-2005 deferrals) may be withdrawn subject to a penalty. Earnings on the account of each executive are credited to such executive based on the performance of investment vehicles chosen by the executive from a selection offered to all plan participants by the plan’s administrator. Executives may elect to change the investment vehicles applicable to their accounts at any time. The earnings associated with the Deferred Compensation Plan are related to plan participant elections made in relation to the available mutual fund investment choices as provided through the Deferred Compensation Plan.
As previously discussed, OSUsPrior to fiscal year 2019, we granted certain RSU awards to our NEOs also providethat provided for payment of any vested units subject to the award to be deferred and not made until six months after the executive’s employment with the Company terminates.terminates (referred to as “Ownership Stock Units” or “OSUs”).
The following table presents information regarding the contributions to and earnings on our NEOs’ deferred compensation balances during fiscal year 2017,2020, and the total deferred amounts for the NEOs at the end of fiscal year 2017:2020:
NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2017 | |||||||||||||||||||||||||||||||||||||||||||||
NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2020 | NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2020 |
| |||||||||||||||||||||||||||||||||||||||||||
Name | Executive Contributions In Last Fiscal Year (1) ($) | Registrant Contributions in Last Fiscal Year (2) ($) | Aggregate Earnings in Last Fiscal Year (3) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End (4) ($) | Executive Contributions in Last FY (1) ($) | Registrant Contributions in Last FY (2) ($) | Aggregate Earnings in Last FY (3) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE (4) ($) | |||||||||||||||||||||||||||||||||||
Mr. Maheswaran | 120,518 | 120,518 | 416,865 | – | 3,579,398 | 62,000 | 62,000 | 685,690 | – | 5,310,193 | |||||||||||||||||||||||||||||||||||
Mr. Chukwu | 83,654 | 76,442 | 279,578 | (47,687 | ) | 2,358,679 | 78,646 | 40,900 | 407,071 | (166,164 | ) | 3,102,471 | |||||||||||||||||||||||||||||||||
Mr. Ammann | 72,923 | 72,923 | 69,818 | – | 457,030 | 37,500 | 37,500 | 171,493 | – | 919,128 | |||||||||||||||||||||||||||||||||||
Mr. Beauchamp (5) | – | – | – | – | – | – | – | – | – | 551,460 | |||||||||||||||||||||||||||||||||||
Mr. Kim | 92,357 | 48,193 | 251,702 | – | 2,039,378 | ||||||||||||||||||||||||||||||||||||||||
Mr. Silberstein | 190,727 | 31,680 | 204,993 | (55,723 | ) | 1,985,050 |
(1) | These amounts consist of base salary deferred under the Deferred Compensation Plan in fiscal year |
(2) | All of the amounts reported as “Registrant Contributions in the Last Fiscal Year” reflect Company matching contributions that are also included in the “All Other Compensation” column of the “Summary Compensation Table – Fiscal |
74 | Semtech Corporation20172020 Proxy Statement | 71
EXECUTIVE COMPENSATION
(3) | These amounts consist of earnings credited under the Deferred Compensation Plan for fiscal year |
(4) | These amounts consist of the NEO’s fiscalyear-end balance under the Deferred Compensation Plan as well as the fiscalyear-end value of the executive’s vested OSUs (the payment of which is delayed until six months after the executive’s employment with the Company terminates). Deferred Compensation Plan balances include unvested amounts attributable to the Company’s contributions and earnings thereon. All amounts within the “Aggregate Balance at Last Fiscal Year End” column for each NEO were included in Summary Compensation Tables for previous years, to the extent the executive was named in such tables and the amounts were so required to be reported in such tables and with the value of OSUs included in the year of grant of those units based on the grant date fair value of the award. |
The Deferred Compensation Plan balance for each of the NEOs at the end of fiscal year |
(5) | Mr. Beauchamp |
Potential Payments On Termination or Change in Control
Executive Change in Control Retention Arrangements
We maintain the CIC Plan. The CIC Plan is designed to provide incentives for eligible executive officers to exert maximum efforts for the Company’s success, and to retain those persons, even in the face of a potential “change in control” of the Company (as defined in the CIC Plan). The Compensation Committee administers the CIC Plan. Eligible persons under the CIC Plan are limited to certain executive officersexecutives of the Company who are designated by the Compensation Committee as eligible to participate in the CIC Plan. Mr. Maheswaran’s Offer Letter includes certain severance protections, discussed below. Accordingly, he does not participate in the CIC Plan. Mr. Beauchamp is employed in Canadahas an individual letter agreement and covered by severance protections applicable under local law and under his Transitional Agreement. Accordingly, Mr. Beauchampalso does not participate in the CIC Plan. Our other NEOs participate in the CIC Plan.
Under the CIC Plan, a “change in control” is generally defined to include any of the following: (1) an acquisition by any individual, entity or group of more than 30% of the outstanding shares of the Company’s common stock or the outstanding voting securities of the Company (provided that if such an acquisition was specifically approved in advance by the Board, the reference to “30%” in this clause (1) shall instead be “50%”); (2) certain majority changes in the Board; (3) certain reorganizations, mergers, dispositions, or consolidations of the Company, or certain sales of substantially all of the Company’s assets; and (4) a dissolution or liquidation of the Company.
The CIC Plan provides for certain severance benefits if the participant’s employment with the Company terminates in certain circumstances in connection with a change in control. If the CIC Plan participant’s employment is terminated by the Company other than for “cause” or by the participant for “good reason” (as such terms are defined in the CIC Plan), in either case during a “change in control window,” the participant will be entitled to receive specified severance benefits. The severance benefits that would be provided in these circumstances to each of our Named Executive Officers who is a CIC Plan participant are as follows:
(1) | a cash severance benefit equal to (A) one times the sum of the participant’s annual base salary rate (at the highest annual rate during thesix-month period prior to the change in control) plus the participant’s target bonus amount (equal to the greater of the target bonus for the fiscal year in which the participant’s employment with the Company terminates or the immediately preceding fiscal year), and (B) apro-rata target bonus (based on the portion of the year the participant was employed by the Company) for the fiscal year in which the participant’s employment with the Company terminates; |
72 | Semtech Corporation20172020 Proxy Statement | 75
EXECUTIVE COMPENSATION
(2) | payment or reimbursement of the participant’s premiums to continue coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for up to 12 months; |
(3) | pursuant to the terms of the Deferred Compensation Plan, accelerated vesting of any unvested account balance under such plan; and |
(4) | unless otherwise provided for in the applicable award agreement or the participant’s CIC Plan participation agreement, accelerated vesting of any unvested Company equity awards subject to onlytime-based vesting conditions (including any such award that was originally subject toperformance-vesting conditions but as to which the award is subject only totime-based vesting conditions following a change in control (as described below)). |
The CIC Plan generally defines a “change in control window” as the period (1) beginning on the earlier of (a) 90 days prior to a change in control or (b) the execution of a definitive agreement to effect a transaction that, if consummated in accordance with the proposed terms, would constitute a change in control (provided that the transaction with the party to the definitive agreement is actually consummated within one year following the execution of such definitive agreement and such transaction actually constitutes a change in control), and (2) ending on the second anniversary of such change in control. A CIC Plan participant’s right to receive the severance benefits under the CIC Plan described above is contingent on the participant providing a general release of claims in favor of the Company and the participant complying with certain restrictive covenants in favor of the Company.aone-year post-terminationnon-competition covenant.
The CIC Plan does not provide for automatic accelerated vesting of equity awards upon a change in control transaction. The CIC Plan does not include a tax“gross-up” provision. Instead, if any payments or benefits to be received by a participant in the CIC Plan in connection with a change in control of the Company would be subject to any Excise Tax, such payments and benefits will either be reduced (but not below zero) as necessary to avoid the participant incurring any such Excise Tax or be paid in full (with the participant paying any Excise Tax due), whichever places the participant in the bestafter-tax position (taking into account federal, state and local income taxes and the Excise Tax).
Under the CIC Plan, upon the occurrence of a change in control, and unless otherwise expressly provided for in an applicable award agreement or a participant’s CIC Plan participation agreement, as to any then outstanding and unvested Company equity awards that are subject toperformance-based vesting conditions, the number of shares or units subject to the award will be adjusted to equal the “target” number of shares or units subject to the award, and such adjusted equity award will remain subject to anytime-based vesting requirements under the original terms of the award (and will be subject to any accelerated vesting with respect totime-based vesting equity awards as described above).
Unless extended by the Board or the Compensation Committee, the CIC Plan will automatically terminate on December 19, 2019,August 24, 2024, provided that (i) if a definitive agreement to effect a transaction that, if consummated in accordance with the proposed terms, would constitute a change in control is entered into before August 24, 2024, the term of the CIC Plan will not terminate earlier than the first anniversary of the date the definitive agreement is entered into or (ii) if a change in control occurs during the term of the CIC Plan then in effect, the term of the CIC Plan will not terminate earlier than the second anniversary of such change in control. The Company (acting through the Board or the Compensation Committee) may amend or terminate the CIC Plan at any time, but no amendment or termination that occurs within a change in control window will apply to a participant until the later of (a) the expiration of such change in control window or (b) three months after the Compensation Committee provides the participant with written notice of such amendment or termination, unless the participant consents to the amendment or termination or the amendment or termination does not adversely affect the participant.
Mr. Beauchamp is employed in Canada and covered by severance protections applicable under local law, pursuant to which he would be entitled to certain minimum severance benefits in the event his employment is terminated by the Company without cause, and under his Transitional Agreement with the Company. Under Mr. Beauchamp’s Transitional Agreement, if a change in control (as this term is used under the CIC Plan) of the Company occurs before September 1, 2018, he is entitled to accelerated vesting of his equity awards that
76 | Semtech Corporation20172020 Proxy Statement | 73
EXECUTIVE COMPENSATION
are outstanding and unvested at that time (with any applicable performance goals as to those outstanding awards that were granted before fiscal year 2018 considered to have been met at the “target” level).
Mr. Maheswaran’s Offer Letter
As noted above, Mr. Maheswaran does not participate in the CIC Plan. Instead, Mr. Maheswaran is entitled to certain severance benefits in connection with a termination of his employment under the circumstances described below pursuant to the terms of his Offer Letter. In the event Mr. Maheswaran’s employment with the Company is terminated for reasons other than his death, disability or “cause” (as defined in the Offer Letter), or if he terminates his employment for “good reason” (as defined in the Offer Letter) within 3090 days of an event giving rise to good reason, Mr. Maheswaran will be entitled to receive the following severance benefits:
(1) | a cash severance benefit equal to 12 months of his annual salary; |
(2) | 12 months continued welfare plan (medical, dental, life andlong-term disability insurance) |
(3) | unless otherwise provided in the applicable award agreement, 12 months accelerated vesting of any unvested Company equity awards subject to only time-based vesting conditions as of the severance date (including any such award that was originally subject to performance-vesting conditions but as to which the award is subject only to time-based vesting conditions as of the severance date). |
In the event Mr. Maheswaran’s employment by the Company is terminated under the circumstances described above and such termination of employment occurs during a “change in control window” (as defined in the Offer Letter), Mr. Maheswaran will be entitled to receive the following severance benefits:
(1) | a cash severance benefit equal to (A) two times the sum of his annual base salary rate plus his target bonus (each as in effect on the date of his termination of employment), and (B) apro-rata target bonus (based on the portion of the year Mr. Maheswaran was employed by the Company) for the fiscal year in which his employment with the Company terminates; |
(2) | 24 months continued welfare plan (medical, dental, life andlong-term disability insurance) coverage; |
(3) | pursuant to the terms of the Deferred Compensation Plan, accelerated vesting of any unvested account balance under such plan; and |
(4) | unless otherwise provided for in the applicable award agreement or the Offer Letter, accelerated vesting of any unvested Company equity awards subject to onlytime-based vesting conditions (including any such award that was originally subject toperformance-vesting conditions but as to which the award is subject only totime-based vesting conditions following a “change in control” (as described below)). |
For purposes of the Offer Letter, the terms “change in control” and “change in control window” have the same meanings as provided under the CIC Plan.
Mr. Maheswaran’s right to receive the severance benefits described above is contingent on him providing a general release of claims in favor of the Company and, in the case of an involuntary termination outside a change in control window, complying with certain restrictive covenants in favoraone-year post-terminationnon-competition covenant (which restricts Mr. Maheswaran from being employed by one of the Company.members of the Company’s Peer Group if such company cannot reasonably satisfy the Company that it will preclude and prevent disclosure of the Company’s confidential information).
Mr. Maheswaran is not entitled to a taxgross-up for any Excise Tax. Instead, if any payment or benefit received by Mr. Maheswaran in connection with a change in control of the Company would be subject to the Excise Tax, such payments and benefits will either be reduced (but not below zero) as necessary to prevent Mr. Maheswaran from incurring any such Excise Tax or be paid in full (with Mr. Maheswaran paying any Excise Tax due), whichever places Mr. Maheswaran in the bestafter-tax position (taking into account federal, state and local income taxes and the Excise Tax).
Semtech Corporation2020 Proxy Statement | 77
EXECUTIVE COMPENSATION
The Offer Letter provides that, upon the occurrence of a change in control, and unless otherwise expressly provided for in an applicable award agreement, as to any then outstanding and unvested Company equity
74 | Semtech Corporation2017 Proxy Statement
EXECUTIVE COMPENSATION
awards that are subject toperformance-based vesting conditions, the number of shares or units subject to the award will be adjusted to equal the “target” number of shares or units subject to the award, and such adjusted equity award will remain subject to anytime-based vesting requirements under the original terms of the award (and will be subject to any accelerated vesting with respect totime-based vesting equity awards under the severance provisions of the Offer Letter as described above). The Offer
Mr. Beauchamp’s Letter specifically provides that this adjustment provisionAgreement
As noted above, Mr. Beauchamp does not apply toparticipate in the Special CEO Award granted to Mr. Maheswaran in February 2014,CIC Plan. He has entered into a letter agreement with the terms of which will be governed by the award agreement evidencing the Special CEO Award. Pursuant to the terms of the award agreement evidencing the Special CEO Award, the award will vest in fullCompany that provides if a majority change“change in controlcontrol” of the Company occurs duringprior to September 1, 2021, any outstanding and unvested equity award will fully vest (with performance-based awards deemed to vest as to the Performance Period and,“target” number of shares or units for any open performance periods, except as otherwise provided in connection with such event, the Company’s stockholders becomeapplicable award agreement). Mr. Beauchamp is not entitled to receiveper-share consideration having a value equal to or greater than $40.00. In addition, ifany severance benefits, except as provided by applicable law.
For purposes of Mr. Maheswaran’s employment withBeauchamp’s letter agreement, the Company terminates, any then unvested restricted stock units subject toterm “change of control” has the Special CEO Award will terminate.same meaning as provided under the CIC Plan.
Awards under the 2008Long-TermEquity Incentive Plan and the 2013Long-Term Equity Incentive PlanAwards
Awards (including stock options, restricted stock andTime-Based Units, but not Performance-Based Units) under the 2008Long-Term Equity Incentive Plan (the “2008 Plan”), the 2013 Long-Term Equity Incentive Plan (the “2013 Plan”), and the 20132017 Long-Term Equity Incentive Plan (the “2017 Plan”) generally vest on an accelerated basis if, within 12 months following a “change in control,” the holder’s employment is terminated by the Company without cause or a “constructive termination” of the executive occurs (as those terms are defined in the award agreements). If a termination of employment is as a result of death or “disability” (as defined in the award agreement), Performance-Based Units will continue to be eligible to vest following the termination of employment; provided, however, that any Performance-Based Units that would vest at the end of the performance period based on attainment of the performance criteria will bepro-rated based on the number of whole months of participation in the performance period before the death or disability. Performance-Based Units and other awards are also subject to accelerated vesting pursuant to the terms of the CIC Plan, or Mr. Maheswaran’s Offer Letter or Mr. Beauchamp’s letter agreement, as applicable. On the occurrence of certain mergers, reorganizations, consolidations and other corporate events with respect to the Company, unless the Compensation Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of outstanding awards, then eachthen-outstanding award granted under the 2008 Plan, or the 2013 Plan and the 2017 Plan will vest and be exercisable or payable and if not exercised (to the extent such award contains an exercise feature), will terminate. With respect to Performance-Based Units granted before fiscal year 2018, in the event of (a) certain mergers or similar reorganizations under which the Company does not survive (or does not survive as a public company in respect of its common stock), or (b) a “change in control” (as defined in the award agreement), then, unless the Compensation Committee has made a provision for the substitution, assumption, exchange or other continuation or settlement of the Performance-Based Units or the Performance-Based Units would otherwise continue in accordance with their terms in the circumstances, the performance period will terminate immediately prior to such event and the number of Performance-Based Units that vest will be determined based on the Company’s actual performance for the shortened performance period and afterpro-rating the performance goals set forth in the award agreement to reflect the shortened performance period.
The Performance-Based Units awarded in 2018 are subject to a performance measurement and do not automatically convert to the “target” number of shares in connection with a change in control (even if the awards are to be terminated in connection with the change in control), notwithstanding the provisions of the CIC Plan, and Mr. Maheswaran’s Offer Letter.Letter and Mr. Beauchamp’s letter agreement. For a discussion of the treatment of the 2018 PSU Awards granted in fiscal years 2018 through 2020 in connection with a change in control, see “Change in Control Benefits – Equity Plan Change in Control Benefits” in the Compensation Discussion and Analysis section above. For a discussion of the treatment of the Absolute Stock Price PSUs granted to Mr. Maheswaran in fiscal year 2020, see “Equity Incentive Awards – Fiscal Year 2020 CEO Annual Equity Incentive Award” in the Compensation Discussion and Analysis section above.
78 | Semtech Corporation2020 Proxy Statement
EXECUTIVE COMPENSATION
The Deferred Compensation Plan
Participants in the Deferred Compensation Plan, including our NEOs, may elect on initial enrollment to have their vested account balances distributed on a change in control. Participants become 100% vested in Company contributions on the following termination events: death;attainment of “normal retirement age” (as defined in the Deferred Compensation Plan), death, “disability” (as defined in the Deferred
Semtech Corporation2017 Proxy Statement | 75
EXECUTIVE COMPENSATION
Compensation Plan);, or involuntary termination of employment within 18 months of a “change in control” (as defined in the Deferred Compensation Plan).
Death Benefit
The Company owns life insurance policies on the lives of certain of its executives, including Messrs. Maheswaran Chukwu and Kim.Chukwu. In connection with these arrangements, the Company has agreed that if Mr.Messrs. Maheswaran Mr.or Chukwu or Mr. Kim dies while employed by the Company, the Company will pay to the executive’s beneficiary or estate a death benefit of $250,000.
Mr. Maheswaran
The table below sets forth potential benefits that Mr. Maheswaran would be entitled to receive from the Company on a termination of his employment under the circumstances described above or on a change in control event, assuming occurrence on January 29, 2017.26, 2020. The calculations and results reported in this table make certain assumptions that may or may not correlate to actual events that may occur, and determinations the Company and Mr. Maheswaran may make, on the occurrence of an applicable event.
BENEFITS PAYABLE TO MR. MAHESWARAN ASSUMING CHANGE IN CONTROL OR TERMINATION EVENT ON JANUARY 29, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
BENEFITS PAYABLE TO MR. MAHESWARAN ASSUMING CHANGE IN CONTROL OR TERMINATION EVENT ON JANUARY 26, 2020 | BENEFITS PAYABLE TO MR. MAHESWARAN ASSUMING CHANGE IN CONTROL OR TERMINATION EVENT ON JANUARY 26, 2020 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefits per Offer Letter | Benefits per Offer Letter | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reason for Termination | Base Salary ($) | Non-Equity Incentives ($) | Welfare Insurances ($) | Vesting of Equity Awards (1) ($) | Other ($) | Total (2) ($) | Base Salary ($) | Non-Equity Incentives ($) | Welfare Insurances ($) | Vesting of Equity Based Awards (1) ($) | Other ($) | Total (3) ($) | ||||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Resignation For Good Reason or Termination Without Cause | 600,000 | – | 24,275 | – | – | 624,275 | 620,000 | – | 27,117 | 3,195,002 | – | 3,842,119 | ||||||||||||||||||||||||||||||||||||||||||
Termination For Cause | – | – | – | – | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||||||||||||||||
Death or Disability | – | – | – | – | 250,000 | 250,000 | – | – | – | – | 250,000 | 250,000 | ||||||||||||||||||||||||||||||||||||||||||
Change In Control (1) | – | – | – | 9,203,240 | – | 9,203,240 | – | – | – | 9,623,930 | – | 9,623,930 | ||||||||||||||||||||||||||||||||||||||||||
Certain Terminations In Connection With a Change In Control (1) | 1,200,000 | 2,250,000 | 51,462 | – | – | 3,501,462 | 1,240,000 | 2,325,000 | 574,487 | – | – | 4,139,487 |
(1) | The Change in Control presentations assume that all equity awards will accelerate and be terminated in connection with a change in control of the Company. However, under the terms of the various plans and award agreements, awards generally will not automatically accelerate on a change in control to the extent that they are assumed or otherwise remain outstanding. |
For purposes of this presentation, assuming the equity awards held by a Named Executive Officer were to accelerate on a change in control, the value of those awards has been determined as follows: The closing price of the Company’s common stock on January 27, 2017, the last trading day of its fiscal year 2017, was $33.70. As to outstanding options, the value of the options included reflects the difference between that closing price and the applicable exercise price of the option, multiplied by the number of shares of the Company’s common stock subject to the options held by Mr. Maheswaran that would have vested at the end of the fiscal year. As to restricted stock unit awards, the value of the shares underlying the awards held by Mr. Maheswaran that would have vested at the end of the fiscal year has been included based on that closing price. We estimated as of January 29, 2017 (the last day of the Company’s fiscal year 2017), based on the performance metrics associated with the awards, and taking into consideration the shortened performance periods for each award as applicable for the purposes of these calculations, that thePerformance-Based Units held by Mr. Maheswaran on that date would vest as follows: the awards granted on February 25, 2014 (fiscal year 2015) were estimated to vest at 0% of the target number of shares subject to the awards, the awards granted on February 24, 2015 (fiscal year 2016) were estimated to vest at 80% of the target number of shares subject to the awards, and the awards granted on February 23, 2016 (fiscal year 2017) were estimated to vest at 109% of the target number of shares subject to the awards. As noted in the preceding sentence, the Performance-Based Units granted in fiscal years 2016 and 2017 would be presumed to meet the applicablepro-rated performance goals required for vesting performance over the shortened performance period ending on January 29, 2017. Accordingly, for the purposes of these calculations, we have calculated the applicable vested shares per the methods described above and included the value of the same in these calculations based on the portion of the award we have assumed would vest on the change in control and applying the January 27, 2017 closing price of a share of the Company’s common stock to the number of shares subject to that portion of the award.
For purposes of this presentation, assuming the equity awards held by Mr. Maheswaran were to accelerate on a change in control, the value of those awards has been determined as follows: The closing price of the Company’s common stock on January 24, 2020, the last trading day of its fiscal year 2020, was $52.52. The value of the unvested shares underlying the restricted stock and restricted stock unit awards held by Mr. Maheswaran at the end of the fiscal year has been included based on that closing price. We estimated as of January 26, 2020 (the last day of the Company’s fiscal year 2020), based on the performance metrics associated with the awards, and taking into consideration the shortened performance periods for each award as applicable for the purposes of these calculations, that the Performance-Based Units held by Mr. Maheswaran (other than the Absolute Stock Price PSUs) on that date would vest as follows: the awards granted on March 6, 2018 (fiscal year 2019) were estimated to vest at 26.43% of the target number of shares subject to the awards and the awards granted on March 5, 2019 (fiscal year 2020) were estimated to vest at 90.16% of the target number of shares subject to the awards. As noted in the preceding sentence, the Performance-Based Units granted in fiscal years 2019 and 2020 would be presumed to meet the applicablepro-rated performance |
76 | Semtech Corporation20172020 Proxy Statement | 79
EXECUTIVE COMPENSATION
goals required for vesting performance over the shortened performance period ending on January 26, 2020. Accordingly, for the purposes of these calculations, we have calculated the applicable vested shares per the methods described above and included the value of the same in these calculations based on the portion of the award we have assumed would vest on the change in control and applying the January 24, 2020 closing price of a share of the Company’s common stock to the number of shares subject to that portion of the award. Pursuant to the terms of the Absolute Stock Price PSU award, none of the shares subject to that award would have vested assuming the consideration received by stockholders in a transaction was equal to the closing price of the Company’s common stock on January 24, 2020. Accordingly, no value has been included for these awards in the table above. |
If Mr. Maheswaran’s equity awards had been assumed and continued following a change in control, and then the awards vested pursuant to Mr. Maheswaran’s Offer Letter pursuant to a termination of employment that triggered the severance protections of his Offer Letter at the end of fiscal year 2017, the aggregate value of the equity awards held by Mr. Maheswaran that would have vested in connection with his termination of employment in these circumstances is $12,836,504 instead of (not in addition to) the $9,203,240 reflected on the “Change in Control” line in the table above as a result of applying the “target” payment levels to the Performance-Based Units.
If Mr. Maheswaran’s equity awards had been assumed and continued following a change in control, and then his employment had terminated in circumstances entitling him to severance benefits at the end of fiscal year 2020 in connection with a change in control pursuant to his Offer Letter, his equity awards would not have vested on the change in control but would have vested in connection with such termination of his employment (as to Performance-Based Units, with performance-based vesting measured based on actual performance through the change in control). The value of the equity awards that would have accelerated in these circumstances had such a termination of employment occurred at the end of fiscal year 2020 would have been the same value that would have accelerated had a change in control occurred at that time and the awards been terminated in connection with the change in control transaction ($9,623,930, calculated as described in the preceding paragraph). |
If Mr. Maheswaran’s employment had terminated in circumstances entitling him to severance benefits at the end of fiscal year 2020 but not in connection with a change in control pursuant to his Offer Letter, the value of his Time-Based Units that would have vested in these circumstances would have been $3,195,002 (determined by multiplying the unvested shares underlying the awards that would have accelerated by $52.52, the closing price of the Company’s common stock on the last trading day of fiscal year 2020). |
(2) | If Mr. Maheswaran died while employed by the Company, his estate would receive a death benefit of $250,000. |
(3) | Pursuant to the terms of his Offer Letter, if any payment or benefit received by Mr. Maheswaran in connection with a change in control of the Company would have been subject to the Excise Tax, such payments and benefits will either be reduced (but not below zero) as necessary to prevent Mr. Maheswaran from incurring any such Excise Tax (a “280G Cutback”) or be paid in full (with Mr. Maheswaran paying any Excise Tax due), whichever places Mr. Maheswaran in the bestafter-tax position (taking into account federal, state and local income taxes and the Excise Tax). This presentation assumes that Mr. Maheswaran would not be subject to a 280G Cutback in these circumstances had they occurred at the end of fiscal year |
80 | Semtech Corporation2020 Proxy Statement
EXECUTIVE COMPENSATION
Other Named Executive Officers
The table below sets forth potential benefits that Messrs. Chukwu, Ammann, Beauchamp, and KimSilberstein (the “Other Executives”) would be entitled to receive from the Company on a termination of their employment under the circumstances described above or on a change in control event, assuming occurrence on January 29, 2017.26, 2020. The calculations and results reported in this table make certain assumptions that may or may not correlate to actual events that may occur, and determinations the Company and the particular Named Executive OfficerNEO may make, on the occurrence of an applicable event.
BENEFITS PAYABLE TO OTHER EXECUTIVES ASSUMING CHANGE IN CONTROL OR TERMINATION EVENT ON JANUARY 29, 2017 | ||||||||||||||||||||||||
Reason for Termination | Base Salary ($) | Bonus ($) | Payment of Medical Benefits Premiums ($) | Vesting of Equity Based Awards (1) ($) | Other Benefits (2) ($) | Total (3) ($) | ||||||||||||||||||
Termination Without Cause | ||||||||||||||||||||||||
Mr. Chukwu | – | – | – | – | – | – | ||||||||||||||||||
Mr. Ammann | – | – | – | – | – | – | ||||||||||||||||||
Mr. Beauchamp (4) | 90,026 | – | – | – | – | 90,026 | ||||||||||||||||||
Mr. Kim | – | – | – | – | – | – | ||||||||||||||||||
Death or Disability | ||||||||||||||||||||||||
Mr. Chukwu | – | – | – | – | 250,000 | 250,000 | ||||||||||||||||||
Mr. Ammann | – | – | – | – | 122,349 | 122,349 | ||||||||||||||||||
Mr. Beauchamp | – | – | – | – | – | – | ||||||||||||||||||
Mr. Kim | – | – | – | – | 250,000 | 250,000 | ||||||||||||||||||
Change In Control (1) | ||||||||||||||||||||||||
Mr. Chukwu | – | – | – | 4,098,802 | – | 4,098,802 | ||||||||||||||||||
Mr. Ammann | – | – | – | 3,030,245 | – | 3,030,245 | ||||||||||||||||||
Mr. Beauchamp | – | – | – | 3,552,068 | – | 3,552,068 | ||||||||||||||||||
Mr. Kim | – | – | – | 3,864,344 | – | 3,864,344 | ||||||||||||||||||
Certain Terminations In Connection With a Change In Control (1) | ||||||||||||||||||||||||
Mr. Chukwu | 375,000 | 600,000 | 24,275 | – | – | 999,275 | ||||||||||||||||||
Mr. Ammann | 360,000 | 576,000 | 19,796 | 122,349 | 1,078,145 | |||||||||||||||||||
Mr. Beauchamp (4) | 90,095 | – | – | – | – | 90,095 | ||||||||||||||||||
Mr. Kim | 325,000 | 520,000 | 19,796 | – | – | 864,796 |
Semtech Corporation2017 Proxy Statement | 77
EXECUTIVE COMPENSATION
BENEFITS PAYABLE TO OTHER EXECUTIVES ASSUMING CHANGE IN CONTROL OR TERMINATION EVENT ON JANUARY 26, 2020 |
| |||||||||||||||||||||||
Reason for Termination | Base Salary ($) | Bonus ($) | Payment of Medical Benefits Premiums ($) | Vesting of Equity Based Awards (1) ($) | Other Benefits (2) ($) | Total (3) ($) | ||||||||||||||||||
Termination Without Cause | ||||||||||||||||||||||||
Mr. Chukwu | – | – | – | – | – | – | ||||||||||||||||||
Mr. Ammann | – | – | – | – | – | – | ||||||||||||||||||
Mr. Beauchamp (4) | 103,946 | – | – | – | – | 103,946 | ||||||||||||||||||
Mr. Silberstein | – | – | – | – | – | – | ||||||||||||||||||
Death or Disability | ||||||||||||||||||||||||
Mr. Chukwu | – | – | – | – | 250,000 | 250,000 | ||||||||||||||||||
Mr. Ammann | – | – | – | – | – | – | ||||||||||||||||||
Mr. Beauchamp | – | – | – | – | – | – | ||||||||||||||||||
Mr. Silberstein | – | – | – | – | 55,958 | 55,958 | ||||||||||||||||||
Change In Control (1) | ||||||||||||||||||||||||
Mr. Chukwu | – | – | – | 2,437,392 | – | 2,437,392 | ||||||||||||||||||
Mr. Ammann | – | – | – | 2,108,139 | – | 2,108,139 | ||||||||||||||||||
Mr. Beauchamp | – | – | – | 1,926,023 | – | 1,926,023 | ||||||||||||||||||
Mr. Silberstein (4) | – | – | – | 2,006,198 | – | 2,006,198 | ||||||||||||||||||
Certain Terminations In Connection With a Change In Control (1) | ||||||||||||||||||||||||
Mr. Chukwu | 410,000 | 656,000 | 27,117 | – | – | 1,093,117 | ||||||||||||||||||
Mr. Ammann | 375,000 | 600,000 | 23,135 | – | – | 998,135 | ||||||||||||||||||
Mr. Beauchamp | 103,946 | – | – | – | – | 103,946 | ||||||||||||||||||
Mr. Silberstein (4) | 400,000 | 640,000 | 27,001 | – | 55,958 | 1,122,959 |
(1) | The change in control presentations assume that all equity awards will accelerate and be terminated in connection with a change in control of the Company. However, under the terms of the various plans and award agreements, awards generally will not automatically accelerate on a change in control to the extent that they are assumed or otherwise remain |
For purposes of this presentation, assuming the equity awards held by a Named Executive Officer were to accelerate on a change in control, the value of those awards has been determined as follows: The closing price of the Company’s common stock on January 27, 2017, the last trading day of its fiscal year 2017, was $33.70. As to outstanding options, the value of the options included reflects the difference between that closing price and the applicable exercise price of the option, multiplied by the number of shares of the Company’s common stock subject to the options held by the executive that would have vested at the end of the fiscal year. As to restricted stock and restricted stock unit awards, the value of the shares underlying the awards that would have vested at the end of the fiscal year has been included based on that closing price. We estimated as of January 29, 2017 (the last day of the Company’s fiscal year 2017), based on the performance metrics associated with the awards, and taking into consideration the shortened performance periods for each award as applicable for the purposes of these calculations, that the Performance-Based Units held by the Named Executive Officers on that date would vest as follows: the awards granted on February 25, 2014 (fiscal year 2015) were estimated at 0% of the target number of shares subject to the awards, the awards granted on February 24, 2015 (fiscal year 2016) were estimated to vest at 80% of the target number of shares subject to the awards, and the awards granted on February 23, 2016 (fiscal year 2017) were estimated to vest at 109% of the target number of shares subject to the awards. As noted in the preceding sentence, thePerformance-Based Units granted in fiscal years 2016 and 2017 would be presumed to meet the applicablepro-rated performance goals required for vesting performance over the shortened performance period ending on January 29, 2017. Accordingly, for the purposes of these calculations, we have calculated the applicable vested shares per the methods described above and included the value of the same in these calculations based on the portion of the award we have assumed would vest on the change in control and applying the January 27, 2017 closing price of a share of the Company’s common stock to the number of shares subject to that portion of the award.
For purposes of this presentation, assuming the equity awards held by a Named Executive Officer were to accelerate on a change in control, the value of those awards has been determined as follows: The closing price of the Company’s common stock on January 24, 2020, the last trading day of its fiscal year 2020, was $52.52. The value of the unvested shares underlying the restricted stock and restricted stock unit awards held by the Named Executive Officer at the end of the fiscal year has been included based on that closing price. We estimated as of January 26, 2020 (the last day of the Company’s fiscal year 2020), based on the performance metrics associated with the awards, and taking into consideration the shortened performance periods for each award as applicable for the purposes of these calculations, that the Performance-Based Units held by the Named Executive Officers on that date would vest as follows: the awards granted on March 6, 2018 (fiscal year 2019) were estimated to vest at 26.43% of the target number of shares subject to the awards and the awards granted on March 5, 2019 (fiscal year 2020) were estimated to vest at 90.16% of the target number of shares subject to the awards. As noted in the preceding sentence, the Performance-Based Units granted in fiscal years 2019 and 2020 would be presumed to meet the applicablepro-rated performance |
If the Other Executives’ equity awards had been assumed and continued following a change in control, and then the awards vested pursuant to the terms of the CIC Plan (as to the executives who participate in that plan) pursuant to a termination of employment that triggered the severance protections of the CIC Plan at the end of fiscal year 2017, the aggregate value of the equity awards held by each of the Other Executives that would have vested in connection with his termination of employment in these circumstances is $4,846,942 in the case of Mr. Chukwu, $4,618,550 in the case of Mr. Kim, and $3,402,630 in the case of Mr. Ammann (each of these amounts is instead of (not in addition to) the amount reported on the Change In Control line in the table above and the larger amount is as a result of applying the “target” payment levels to the Performance-Based Units. Mr. Beauchamp does not participate in the CIC Plan.Semtech Corporation2020 Proxy Statement | 81
EXECUTIVE COMPENSATION
goals required for vesting performance over the shortened performance period ending on January 26, 2020. Accordingly, for the purposes of these calculations, we have calculated the applicable vested shares per the methods described above and included the value of the same in these calculations based on the portion of the award we have assumed would vest on the change in control and applying the January 24, 2020 closing price of a share of the Company’s common stock to the number of shares subject to that portion of the award. |
If the Name Executive Officer’s equity awards had been assumed and continued following a change in control, and then the executive’s employment had terminated in circumstances entitling the executive to severance benefits pursuant to the CIC Plan at the end of fiscal year 2020 (as to the executives who participate in that plan), the executive’s equity awards would not have vested on the change in control but would have vested in connection with such termination of his employment (as to Performance-Based Units, with performance-based vesting measured based on actual performance through the change in control). The value of the Named Executive Officer’s equity awards that would have accelerated in these circumstances had such a termination of employment occurred at the end of fiscal year 2020 would have been the same value that would have accelerated had a change in control occurred at that time and the awards been terminated in connection with the change in control transaction (calculated as described in the preceding paragraph). |
(2) | For Mr. Silberstein, the amount in this column reflects the vesting of unvested Company matching contributions |
(3) | Pursuant to the terms of the CIC Plan, if any payment or benefit received by |
(4) | Mr. Beauchamp is employed in Canada and covered by severance protections applicable under local law. |
CEOPAY-RATIO DISCLOSURE
Pursuant to the Securities Exchange Act of 1934, as amended, we are required to disclose in this proxy statement the ratio of the total annual compensation of our CEO to the median of the total annual compensation of all of our employees (excluding our CEO). Based on SEC rules for this disclosure and applying the methodology described below, we have determined that our CEO’s total compensation for fiscal year 2020 was $26,095,955 (which, as discussed in the Compensation Discussion and Analysis section above, included an equity award for our CEO that is intended as his only long-term equity incentive award opportunity for fiscal years 2020-2023), and the median of the total fiscal year 2020 compensation of all of our employees (excluding our CEO) was $84,458. Accordingly, we estimate the ratio of our CEO’s total compensation for fiscal year 2020 to the median of the total fiscal year 2020 compensation of all of our employees (excluding our CEO) to be 309 to 1.
We identified the median employee by taking into account the total cash compensation paid for fiscal year 2020 for all individuals, excluding our CEO, who were employed by us or one of our affiliates on January 26, 2020, the last day of our fiscal year. We included all employees, whether employed on a full-time, part-time, or seasonal basis. We did not make any assumptions, adjustments or estimates with respect to their total cash compensation for fiscal year 2020, and we did not annualize the compensation for any employees who were not employed by us for all of fiscal year 2020. We believe total cash compensation for all employees is an appropriate measure because we do not distribute annual equity awards to all employees.
Once the median employee was identified as described above, that employee’s total annual compensation for fiscal year 2020 was determined using the same rules that apply to reporting the compensation of our
7882 | Semtech Corporation20172020 Proxy Statement
EXECUTIVE COMPENSATION
Named Executive Officers (including our CEO) in the “Total” column of the Summary Compensation Table. The total compensation amounts included in the first paragraph of thispay-ratio disclosure were determined based on that methodology.
This pay ratio is an estimate calculated in a manner consistent with SEC rules based on the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Semtech Corporation2020 Proxy Statement | 83
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The Company currently maintains and administers the followingstock-based compensation plans. The plans are:
2017 Long-Term Equity Incentive Plan (the “2017 Plan”)
2013 Long-Term Equity Incentive Plan (the “2013 Plan”)
2008 Long-Term
Equity
The Company’s 20132017 Plan was approved by the Company’s stockholders on June 26,15, 2017. The 2013 and provides for the granting of up to 10,520,528 (as of January 25, 2015) shares of common stock in the form of stock options, stock grants or otherstock-based awards to employees,non-employee directors and consultants.
ThePlan, 2008 Plan and 1998 PlansPlan were also approved by the Company’s stockholders. NoHowever, no new awards can be madegranted under the 2013 Plan, under the 2008 Plan, noror under the 1998 Plan.
For more information about the Inducement Plan, see “Semtech Corporation 2009Long-Term Equity Inducement Plan” below.
In connection with the Company’s acquisition of SMI, the Company assumed the outstanding options under the SMI 2000 and 2007 Plans. These Plans provided for grants to employees,non-employee directors and consultants of stock options under the 2000 Plan and the 2007 Plan, as well as grants of stock appreciation rights, dividend equivalent rights, restricted stock and restricted stock units under the 2007 Plan. The Company determined that any shares remaining available for issuance under the 2007 Plan as of the acquisition of SMI would not be used for future grants. There were no shares remaining available for future awards under the 2000 Plan as of the acquisition of SMI. Shares returned from either SMI plan as a result of termination of employment of a participant, or other forfeiture, may be used for future awards, but no new shares will be available for grant under either of the plans. For purposes of any such future award, the Company tracks and administers any such shares and awards under and subject to the 2007 Plan. Pursuant to a decision of the Compensation Committee of the Company as Administrator of the 2007 Plan, the Company will only make restricted stock unit awards tonewly-hired employees from any shares that become available under the 2007 Plan.
The following table sets forth information with respect to shares of Company common stock that may be issued under our equity compensation plans as of January 29, 2017.26, 2020.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)(2) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the issued column) | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)(2) | Weighted-average exercise price of outstanding options, warrants and rights (2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the issued column) | |||||||||||||||||||||
Equity compensation plans approved by security holders | 4,306,268 | $ | 24.84 | 6,131,651 | (3) | 3,402,477 | $ | 30.26 | 9,230,822 | (3) | |||||||||||||||||
Equity compensation plans not approved by security holders | – | – | 145,496 | (4) | |||||||||||||||||||||||
Total | 4,306,268 | $ | 24.84 | 6,277,147 | 3,402,477 | $ | 30.26 | 9,230,822 |
(1) |
|
Semtech Corporation2017 Proxy Statement | 79
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
granted under the plan, and for purposes of determining the number of shares available for award grant purposes under the plan, are subject to theshare-counting ratio for |
(2) | Outstanding restricted stock awards, Time-Based Unit awards,Performance-Based Unit awards and OSUs do not have an exercise price and therefore, are not included in calculating theweighted-average exercise price of outstanding options. |
(3) | All of these shares of our common stock remain available for future issuance under our |
Our equity compensation plans not approved by security holders include the following:
(1)Semtech Corporation 2009 Long-Term Equity Inducement Plan. In connection with the Company’s acquisition of SMI in December 2009, the Compensation Committee adopted the Inducement Plan effective December 7, 2009. The objective of the Inducement Plan is to provide incentives to attract, retain, and motivate eligible persons whose potential contributions are important to promote the Company’slong-term success and the creation of stockholder value, especially as it relates to SMI, which is now a subsidiary of the Company. The Inducement Plan is intended to comply with NASDAQ Listing Rule 5635(c)(4), which governs granting certain awards as a material inducement to an individual entering into employment with the Company. The Inducement Plan was used to grant restricted stock units to certain SMI employees who joined the Company following the acquisition. Following the acquisition, the Inducement Plan has been and may be used for new hire equity grants with respect to individuals who are hired by the Company primarily to provide services to SMI, should the Board or Compensation Committee of the Board determine to do so in the future.
(2)Assumed Sierra Monolithics Options and the 2007 SMI Plan. In connection with its acquisition of SMI, the Company assumed the existing unvested stock options of SMI employees. The terms of each outstanding unvested SMI option at the time of the closing of the acquisition (award amount and price) was adjusted as necessary to provide that, at the time of the acquisition, each unvested SMI option was converted to a Company option. The Company determined that any shares remaining available for issuance under the 2007 SMI Plan as of the acquisition of SMI would not be used for future grants, however shares returned from any SMI plan as a result of termination of employment of a participant, or other forfeiture, may be used for future awards under the 2007 SMI Plan. For any new awards that may be issued under the 2007 SMI Plan, the 2007 SMI Plan is used to attract and retain the best available personnel for positions of substantial responsibility, and to promote the success of the Company’s business by granting awards to such persons. The 2007 SMI Plan is administered by the Compensation Committee of the Company. Pursuant to a decision of the Compensation Committee of the Company as Administrator of the 2007 SMI Plan, the Company will only make restricted stock unit awards from any shares that become available under the 2007 SMI Plan to employees who are hired by the Company primarily to provide services to SMI.
8084 | Semtech Corporation20172020 Proxy Statement
The Audit Committee of the Board has:
– reviewed and discussed the Company’s audited financial statements for the fiscal year ended January 29, 201726, 2020 with the Company’s management and with the Company’s independent registered public accounting firm, Deloitte & Touche LLP;
– discussed with Deloitte & Touche LLP, the matters required to be discussed by Auditing Standards 1301, Communications with Audit Committees;the applicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission; and
– received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and discussed the independence of Deloitte & Touche LLP with that firm.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements for the fiscal year ended January 29, 201726, 2020 be included in the Company’s Annual Report onForm 10-K filed with the Securities and Exchange Commission.
Respectfully submitted by THE AUDIT COMMITTEE
James T. Lindstrom, Chair | James P. Burra | Saar Gillai | Sylvia Summers |
The Audit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates the Audit Committee Report by reference therein.
Semtech Corporation20172020 Proxy Statement | 8185
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal Number 2)
On April 11, 2016, after being approved by theThe Audit Committee we dismissed Ernst & Young LLP (“EY”), an independent registered public accounting firm, as our principal accountant and the Audit Committee approved the engagement ofhas appointed Deloitte & Touche LLP (“Deloitte”), an independent registered public accounting firm, as ourthe Company’s principal accountant to perform independent audit services beginning with thefor fiscal year ending January 29, 2017.
During our fiscal years ended January 31, 2016 and January 25, 2015, and the interim period from January 31, 2016 through and including April 11, 2016, the date of EY’s dismissal, (i) there were no disagreements (as that term is defined in Item 304(a)(1)(iv) of RegulationS-K and the related instructions) between us and EY on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of EY, would have caused EY to make reference to the subject matter of the disagreement in connection with its reports on our consolidated financial statements for such years or any subsequent interim period through the date of dismissal, and (ii) there were no “reportable events” (as defined in Item 304(a)(1)(v) of RegulationS-K), except as set forth in this paragraph. As disclosed in our Annual Report onForm 10-K for the fiscal year ended January 25, 2015, we identified a material weakness in that we did not design and maintain effective controls related to evidencing the precision and nature of the review performed to approve the final estimated inventory reserves by a reviewer with the appropriate authority. As a result of insufficient evidence, our management was unable to conclude that the review control functioned at a level that would prevent a material misstatement of inventory reserves. EY’s attestation report on our internal control over financial reporting included in our Annual Report onForm 10-K for the fiscal year ended January 25, 2015 included an adverse opinion on our internal control over financial reporting as of January 25, 2015 as a result of such identified material weakness. Such material weakness was remediated as of January 31, 2016.
EY has discussed the subject matter of this material weakness with our Audit Committee.
The reports of EY on our consolidated financial statements for the fiscal years ended January 31, 2016 and January 25, 2015 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle. EY’s audit report included in our Annual Report onForm 10-K for the fiscal year ended January 25, 2015 references EY’s adverse opinion on our internal control over financial reporting as of January 25, 2015.
During our fiscal years ended January 31, 2016 and January 25, 2015, and the interim period from January 31, 2016 through and including April 11, 2016, the date of the Audit Committee’s approval of Deloitte’s engagement, neither we, nor anyone acting on our behalf, consulted Deloitte regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to our consolidated financial statements, in any case where a written report or oral advice was provided to us by Deloitte that Deloitte concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was the subject of a disagreement (as that term is defined in Item 304(a)(1)(iv) of RegulationS-K and the related instructions to Item 304 of RegulationS-K) or a “reportable event” (as that term is described in Item 304(a)(1)(v) of RegulationS-K).
We provided EY and Deloitte with a copy of the disclosures required by Item 304(a) of RegulationS-K prior to the time this proxy statement was filed with the SEC.2021.
Ratification of the appointment of the independent registered public accounting firm is not required by our Bylaws or applicable law, but has historically been submitted to stockholders as a matter of good corporate governance. If the stockholders fail to ratify the appointment, the Board will reconsider whether to retain Deloitte and may decide to retain them notwithstanding the vote. Even if the appointment is ratified, the Audit
82 | Semtech Corporation2017 Proxy Statement
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Proposal Number 2)
Committee may appoint a different independent registered public accounting firm during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its stockholders.
Representatives of Deloitte & Touche LLP are expected to attend the Annual Meeting. They will have the opportunity to make a statement, if they so desire, and respond to appropriate questions from stockholders.
THE BOARD RECOMMENDS A VOTE “FOR” PROPOSAL NUMBER 2
✓ | The Board recommends a vote FOR the ratification of appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year 2021 |
Independent Registered Public Accounting Firm
In connection with the audit of our financial statements for the fiscal year ended January 29, 2017,26, 2020, we entered into an engagement letter with Deloitte which set forth the terms for Deloitte’s performance of the audit services. The agreement provides for alternative dispute resolution.
During fiscal year 2017,2020, each new audit andnon-audit engagement of Deloitte was approved in advance by the Audit Committee or its Chairman, and none of those engagements made use of thede minimis exception contained in SEC rules. The Audit Committee has considered the nature and scope of thenon-audit services provided by Deloitte and has concluded that Deloitte’s performance of these services is compatible with the auditor’s independence.
Deloitte
The following table sets forth the aggregate fees billed, or expected to be billed, by Deloitte for the audit of our financial statements for fiscal year 2017,years 2020 and 2019, and for audit andnon-audit services rendered by Deloitte for that year:those years:
Fiscal Year 2017 | Fiscal Year 2019 | Fiscal Year 2020 | ||||||||||
Audit Fees | $ | 1,615,325 | $ | 1,773,832 | $ | 2,219,180 | ||||||
Audit-Related Fees | – | – | – | |||||||||
Tax Fees: | ||||||||||||
Tax Compliance Fees | 469,252 | 501,500 | 632,608 | |||||||||
Other Tax Fees | 74,688 | 137,500 | 32,610 | |||||||||
All Other Fees | 22,600 | – | – | |||||||||
Total | $ | 2,181,865 | $ | 2,412,832 | $ | 2,884,398 |
The amounts set forth in the table above include amounts paid to Deloitte as reimbursement forout-of-pocket expenses associated with performance of the services, but do not include Value Added Tax assessed by somenon-U.S. jurisdictions on the amount billed by Deloitte.
86 | Semtech Corporation2020 Proxy Statement
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal Number 2)
Audit Fees. This category includes fees for the audit of the Company’s financial statements and internal control over financial reporting, and for review of the financial statements included in the Company’s quarterly reports on FormForm 10-Q.
This category also includes services the auditor provided in connection with international and domestic statutory and regulatory filings and services only the Company’s independent registered public accounting firm can provide, specifically assistance with SEC filings, comment letters, and interpretation of accounting principles.
Tax Fees.
Tax Compliance Fees. This category includes fees for assistance with tax return preparation, tax compliance, and transfer pricing.
Other Tax Fees. This category includes fees for assistance with tax consulting services in connection with international entity formation and operation and consulting regarding assessment of new tax rules and regulations.
All Other Fees. This category includes fees for services not captured in the above categories.
Semtech Corporation2017 Proxy Statement | 83
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Proposal Number 2)
EY
The following table sets forth the aggregate fees billed by EY for the audit of our financial statements for fiscal year 2016, and for audit andnon-audit services rendered by EY for such year:
Fiscal Year 2016 | ||||
Audit Fees | $ | 2,547,464 | ||
Audit-Related Fees | 608,000 | |||
Tax Fees | 528,348 | |||
All Other Fees | – | |||
Total | $ | 3,683,812 |
The amounts set forth in the table above include amounts paid to EY as reimbursement forout-of-pocket expenses associated with performance of the services, but do not include Value Added Tax assessed by somenon-U.S. jurisdictions on the amount billed by EY.
Audit Fees. This category includes fees for the audit of the Company’s financial statements and internal control over financial reporting, and for review of the financial statements included in the Company’s quarterly reports onForm 10-Q. This category also includes services the auditor provided in connection with international and domestic statutory and regulatory filings and services only the Company’s independent registered public accounting firm can provide, specifically assistance with SEC filings, comment letters, and interpretation of accounting principles.
Audit-Related Fees. This category includes fees related to assistance in financial due diligence related to mergers, acquisitions and divestitures, accounting consultations and audits in connection with acquisitions, consultations concerning financial accounting and reporting standards, general advice on implementation of SEC andSarbanes-Oxley Act requirements and audit services not required by statute or regulation.Audit-related fees also includes audits of pension and other employee benefits plans, as well as the review of information technology systems and general internal controls unrelated to the audit of the financial statements.
Tax Fees. This category includes fees for assistance with transfer pricing, tax return preparation, tax compliance, and tax consulting services in connection with international entity formation and operation, foreign tax credits, and contract manufacturing.
All Other Fees. This category includes fees for services not captured in the above categories.
Policy on Audit CommitteePre-Approval
of Audit and PermissibleNon-Audit Services
The Audit Committee is responsible for appointing, compensating, and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy regardingpre-approval of all audit and permissiblenon-audit services provided by the independent registered public accounting firm. The policy calls for an annual review andpre-approval, up to specified dollar limits, of certain types of services that may be provided by the independent registered public accounting firm without obtaining specificpre-approval from the Audit Committee. During the year, circumstances may arise when it may become necessary to engage the firm for additional services not contemplated in the originalpre-approval categories. In those instances, specificpre-approval must be obtained.
The Audit Committee has delegated to its Chairman the authority to address certain requests forpre-approval of services between meetings of the Audit Committee. The Chairman must report hispre-approval decisions to the Audit Committee at its next scheduled meeting. All engagements to provide services related to internal control must be specificallypre-approved by the Audit Committee and may not bepre-approved in advance by category or by the Chairman between meetings.
The Audit Committeepre-approved all of thenon-audit services provided by our independent registered public accounting firm during fiscal years 2019 and 2020.
84 | Semtech Corporation20172020 Proxy Statement | 87
ADVISORY(NON-BINDING) VOTE ON EXECUTIVE COMPENSATION (Proposal Number 3)
As required by Section 14A of the Securities Exchange Act of 1934, as amended, we are providing our stockholders an opportunity to cast anon-binding advisory vote on the compensation of our Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the SEC and set forth in this Proxy Statement (including the CD&A, compensation tables and narratives accompanying those tables). Thisnon-binding advisory vote is also referred to as a“say-on-pay” vote.
As described more fully in the CD&A, the Company’s executive compensation program is designed to align the interests of our executives with the interests of our stockholders, hold our executives accountable for performance, and attract, retain and motivate qualified and high-performing executives. The program seeks to align executive compensation with stockholder value on an annual andlong-term basis through a combination of annual incentives andlong-term incentives. The general goals and structure of our executive compensation program remain the same as in the prior year, when the compensation of our Named Executive Officers identified in our 20162019 Proxy Statement received the support of approximately 87%93% of the votes cast on oursay-on-pay proposal at our June 20162019 annual meeting.
For these reasons, we recommend that stockholders vote in favor of the following resolution at the Annual Meeting:
RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 ofRegulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion that accompanies the compensation tables, is hereby APPROVED.
This vote is an advisory vote only and will not be binding on the Company, the Board or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Company, the Board or the Compensation Committee. Although the vote isnon-binding, we value continuing and constructive feedback from our stockholders on compensation and other important matters. The Board and the Compensation Committee will consider the voting results when making future compensation decisions for our Named Executive Officers.
✓ | The Board recommends a vote FOR the advisory resolution to approve executive compensation |
The Company’s current policy is to provide stockholders with an opportunity to vote on the compensation of the Named Executive Officers each year at the annual meeting of stockholders. It is expected that the next such vote will occur at the 20182021 Annual Meeting of Stockholders.
Semtech Corporation2017 Proxy Statement | 85
ADVISORY(NON-BINDING) VOTE REGARDING THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
(Proposal Number 4)
As described in Proposal Number 3 above, our stockholders are being provided the opportunity to cast an advisory vote on the compensation of our Named Executive Officers (referred to as a“say-on-pay” vote).
In 2011, our stockholders had the opportunity to cast an advisory vote on how often we should include asay-on-pay vote in our proxy materials for our annual meetings of stockholders or special stockholder meetings for which we must include executive compensation information in the proxy statement for that meeting (referred to as a“say-on-frequency” vote). At our 2011 annual meeting, a majority of our stockholders voted to hold asay-on-pay vote every year, and the Board determined that thesay-on-pay vote would be held annually.
We are required to hold a newsay-on-frequency vote at least every six years pursuant to Section 14A of the Securities Exchange Act of 1934, as amended. Accordingly, this Proposal Number 4 affords our stockholders the opportunity to cast an advisory vote on how often we should include asay-on-pay vote in our proxy materials for future annual meetings of stockholders (or special stockholder meetings for which we must include executive compensation information in the proxy statement for that meeting). Under this Proposal Number 4, our stockholders may vote to have future advisory votes on executive compensation every year, every two years, every three years, or abstain from voting.
We believe that advisory votes on executive compensation should be conducted every year so that our stockholders may annually express their views on our executive compensation program.
Like thesay-on-pay vote, thissay-on-frequency vote is advisory and will not be binding on the Company, the Board or the Compensation Committee. However, the Board and the Compensation Committee value constructive feedback from our stockholders and will take the outcome of this vote into account when determining the frequency of futuresay-on-pay votes.
86 | Semtech Corporation2017 Proxy Statement
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN
(Proposal Number 5)
General
At the Annual Meeting, stockholders will be asked to approve the Semtech Corporation 2017 Long-Term Equity Incentive Plan (the “2017 Plan”), which was adopted, subject to stockholder approval, by the Board of Directors onApril 26, 2017.
The Company believes that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the proposed 2017 Plan are an important attraction, retention and motivation tool for participants in the plan.
The Company’s policy has been to provide equity compensation to a significant portion of its worldwide workforce. We believe this is an important component of our business strategy to invest heavily in our human resources and talent. We rely upon our workforce to define, design and market high-performance analog and mixed-signal semiconductor products, resulting in a team of experienced engineers who combine industry expertise with advanced semiconductor design expertise to meet customer requirements and enable our customers to get their products to market rapidly. During the past fiscal year, approximately 55% of ournon-executive professional employees received an equity grant as part of their compensation. For employees at the executive level, we believe that having a significant part of compensation be delivered through equity grants is an effective tool for aligning the interests of stockholders and management and for incentivizing the accomplishment of key long-term business objectives.
The Company’s current equity compensation plan is the Semtech Corporation 2013 Long-Term Equity Incentive Plan (the “2013 Plan”). Awards also remain outstanding under, but no new awards may be granted pursuant to, the Semtech Corporation 2008 Long-Term Equity Incentive Plan, the Semtech Corporation Long-Term Stock Incentive Plan, as amended and restated, and the Semtech CorporationNon-Director andNon-Executive Officer Long-Term Stock Incentive Plan, as amended and restated (collectively and together with the 2013 Plan, the “Prior Plans”). As of April 4, 2017, a total of 4,248,963 shares of the Company’s common stock were then subject to outstanding awards granted under the Prior Plans, and an additional 4,913,052 shares of the Company’s common stock were then available for new award grants under the 2013 Plan. Our authority to grant new awards under the other Prior Plans had previously terminated.
The Board of Directors approved the 2017 Plan based, in part, on a belief that the number of shares currently available under the 2013 Plan does not give the Company sufficient authority and flexibility to adequately provide for future incentives. If stockholders approve the 2017 Plan, no new awards will be granted under the 2013 Plan after the Annual Meeting. In that case, the number of shares of the Company’s common stock that remain available for award grants under the 2013 Plan immediately prior to the Annual Meeting will become available for award grants under the 2017 Plan. An additional 12,100,000 shares of the Company’s common stock will also be made available for award grants under the 2017 Plan. In addition, if stockholders approve the 2017 Plan, any shares of common stock subject to outstanding awards under the Prior Plans that expire, are cancelled, or otherwise terminate after the Annual Meeting will also be available for award grant purposes under the 2017 Plan.
The Company continually evaluates the amount of its equity grants and attempts to balance, through stock buybacks, the amount of dilution resulting to other stockholders. Equity award amounts and related metrics are evaluated under and in relation to industry equity practices as defined by applicable standards and guidelines of third-party proxy advisory services.
Semtech Corporation2017 Proxy Statement | 87
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
We currently anticipate that the additional new shares that would be authorized for grant under the 2017 Plan (12,100,000 new shares), together with the shares currently available for new award grants under the 2013 Plan that will become available for grants under the 2017 Plan, will provide us with sufficient flexibility to continue equity awards under the 2017 Plan for approximately the next 4 years (assuming usual levels of shares becoming available for new award grants as a result of forfeitures of outstanding awards and reserving sufficient shares to cover potential payment of performance-based awards at maximum levels). Our estimate allows a small margin for unplanned business events.
We believe that an estimated4-year allowance is an appropriate balance between giving stockholders more frequent opportunity to authorize our long-term equity plan and the Company’s ability to manage plan stability and administration. However, it is impossible to predict the exact period of years over which we will grant awards covering the total number of shares that will be available under the 2017 Plan. The total number of shares that we award in any one year or fromyear-to-year may change based on any number of variables, including, without limitation, the value of our common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in compensation practices at our competitors or in the market generally, changes in the number of our employees, changes in the number of our directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards we grant, and our decisions on how we choose to balance total compensation between cash and equity-based awards.
If stockholders do not approve the 2017 Plan, the Company will continue to have the authority to grant awards under the 2013 Plan. If stockholders approve the 2017 Plan, the termination of our grant authority under the 2013 Plan will not affect awards then outstanding under the 2013 Plan or any of the other Prior Plans.
Summary Description of the 2017 Long-Term Equity Incentive Plan
The principal terms of the 2017 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2017 Plan, which appears asExhibit A to this Proxy Statement.
Purpose. The purpose of the 2017 Plan is to promote the success of the Company by providing an additional means for us to attract, motivate, retain and reward selected employees and other eligible persons through the grant of awards. Equity-based awards are also intended to further align the interests of award recipients and our stockholders.
Administration. Our Board of Directors or one or more committees appointed by our Board of Directors will administer the 2017 Plan. Our Board of Directors has delegated general administrative authority for the 2017 Plan to the Compensation Committee. The Board of Directors or a committee thereof (within its delegated authority) may delegate different levels of authority to different committees or persons with administrative and grant authority under the 2017 Plan. (The appropriate acting body, be it the Board of Directors or a committee or other person within its delegated authority is referred to in this proposal as the “Administrator”).
The Administrator has broad authority under the 2017 Plan, including, without limitation, the authority:
88 | Semtech Corporation20172020 Proxy Statement
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
No Repricing. In no case (except due to an adjustment to reflect a stock split or other event referred to under “Adjustments” below, or any repricing that may be approved by stockholders) will the Administrator (1) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.
Eligibility. Persons eligible to receive awards under the 2017 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. Currently, approximately 700 officers and employees of the Company and its subsidiaries (including all of the Company’s Named Executive Officers), and each of the eight members of the Board who are not employed by the Company or any of its subsidiaries(“Non-Employee Directors”), are considered eligible under the 2017 Plan.
Aggregate Share Limit. The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2017 Plan equals the sum of the following (such total number of shares, the “Share Limit”):
Semtech Corporation2017 Proxy Statement | 89
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
As of April 4, 2017, 4,913,052 shares were available for additional award grant purposes under the 2013 Plan, 1,464,626 shares were subject to stock options then outstanding under the Prior Plans, and 2,784,337 shares were subject to restricted stock unit and performance stock unit awards then outstanding under the Prior Plans. As noted above, no additional awards will be granted under the 2013 Plan if stockholders approve the 2017 Plan (and our authority to grant new awards under the other Prior Plans has previously terminated).
Shares issued in respect of any “full-value award” granted under the 2017 Plan will be counted against the Share Limit as 2.6 shares for every one share actually issued in connection with the award. For example, if the Company granted a bonus of 100 shares of its common stock under the 2017 Plan, 260 shares would be counted against the Share Limit with respect to that award. For this purpose, a “full-value award” generally means any award granted under the 2017 Plan other than a stock option or stock appreciation right (and also includes certain options and stock appreciation rights granted tonon-U.S. employees as described below under “Types of Awards”).
Additional Share Limits. The following other limits are also contained in the 2017 Plan. These limits are in addition to, and not in lieu of, the Share Limit for the plan described above and, in the case of share-based limits, are applied on aone-for-one basis without applying the premium share-counting ratio for full-value awards discussed above.
90 | Semtech Corporation2017 Proxy Statement
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
Share-Limit Counting Rules. The Share Limit of the 2017 Plan is subject to the following rules:
In addition, the 2017 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2017 Plan. The Company may not increase the applicable share limits of the 2017 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).
Types of Awards. The 2017 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash bonus awards. The 2017 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash.
A stock option is the right to purchase shares of the Company’s common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant.
Semtech Corporation2017 Proxy Statement | 91
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
Except as noted in the following sentence, the maximum term of an option is six (6) years from the date of grant. For stock option awards made to Company employees serving with the Company, or with a subsidiary, outside the United States, the Administrator may approve a stock option that has a maximum term longer than six years, if applicable tax laws in the location of the recipient unduly penalize the recipient or impose unfavorable tax consequences for options with asix-year term. However, any shares issued in connection with an award having a maximum term longer than six years will count against the applicable share limits of the Plan as a full-value award. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal Income Tax Consequences of Awards Under the 2017 Plan” below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2017 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.
A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of share of the Company’s common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price will be established by the Administrator at the time of grant of the stock appreciation right and generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is six years from the date of grant (except in the case of certain grants to employees outside of the United States as described above for stock options and provided that any such grant will be treated as a full-value award for purposes of the applicable 2017 Plan share limits).
The other types of awards that may be granted under the 2017 Plan include, without limitation, stock bonuses, restricted stock, performance stock, stock units or phantom stock (which are contractual rights to receive shares of stock, or cash based on the fair market value of a share of stock), dividend equivalents which represent the right to receive a payment based on the dividends paid on a share of stock over a stated period of time, or similar rights to purchase or acquire shares, and cash awards.
Any awards under the 2017 Plan (including awards of stock options and stock appreciation rights) may, subject to the minimum vesting requirement described below, be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.
Minimum Vesting Requirement. Except as provided in the next sentence, each award granted under the 2017 Plan will be subject to a minimum vesting period of one year. Awards may be granted under the 2017 Plan with minimum vesting requirements of less than one year, or no vesting requirements, provided that the total number of shares of the Company’s common stock subject to such awards will not exceed 5% of the Share Limit.
Qualified Performance-Based Awards. Under Section 162(m) of the U.S. Internal Revenue Code (“Section 162(m)”) a public corporation generally cannot take a tax deduction in any tax year for compensation it pays to its Chief Executive Officer and certain other executive officers in excess of $1 million. Compensation that qualifies as “performance-based” under Section 162(m), however, is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment ofpre-established, objective performance goals under a plan approved by the corporation’s shareholders.
The Administrator may grant awards under the 2017 Plan that are intended to be performance-based awards within the meaning of Section 162(m). Stock options and stock appreciation rights may qualify as performance-based awards within the meaning of Section 162(m). In addition, other types of awards authorized under the 2017 Plan (such as restricted stock, performance stock, stock units, and cash bonus opportunities) may be granted with performance-based vesting requirements and intended to qualify as performance-based awards within the meaning of Section 162(m) (“Qualified Performance-Based Awards”).
92 | Semtech Corporation2017 Proxy Statement
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
While the Administrator may grant awards under the 2017 Plan that qualify (or are intended to qualify) as performance-based awards within the meaning of Section 162(m), nothing requires that any award qualify as “performance-based” within the meaning of Section 162(m) or otherwise be deductible for tax purposes.
The vesting or payment of Qualified Performance-Based Awards will depend on the performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis. The Administrator will establish the criterion or criteria and target(s) on which performance will be measured. To qualify an award as performance-based under Section 162(m), the Administrator must consist solely of two or more outside directors (as this requirement is applied under Section 162(m)), the Administrator must establish criteria and targets in advance of applicable deadlines under Section 162(m) and while the attainment of the performance targets remains substantially uncertain, and the Administrator must certify that any applicable performance goals and other material terms of the grant were satisfied. The performance criteria that the Administrator may use for this purpose will include one or more of the following: earnings per share, cash flow (which means cash and cash equivalents derived from either net cash flow from operations or net cash flow from operations, financing and investing activities), stock price, total stockholder return, gross or net sales or revenue, revenue growth, operating income (before or after taxes), net income (before or after interest, taxes, depreciation and/or amortization), return on equity or on assets or on net assets or on capital or on sales, gross or net profit or operating margin, funds from operations, working capital, market share, cost containment or reduction, or any combination thereof. These performance criteria may be measured on an absolute or relative basis (including relative to the performance of other companies) and may also be expressed as a growth or decline measure relative to an amount or performance for a prior date or period. The performance measurement period with respect to an award may range from three months to ten years. The terms of the Qualified Performance-Based Awards may specify the manner, if any, in which performance targets shall be adjusted to exclude the effects of certain unusual or nonrecurring items identified in the 2017 Plan documents or otherwise specified by the Administrator at the time of establishing the goals.
Qualified Performance-Based Awards may be paid in stock or in cash (in either case, subject to the limits described under the heading “Additional Share Limits” above). The Administrator has discretion to determine the performance target or targets and any other restrictions or other limitations of Qualified Performance-Based Awards and may reserve discretion to reduce payments below maximum award limits.
Dividend Equivalents; Deferrals. The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Administrator may provide that awards under the 2017 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of common stock, provided that as to any dividend equivalent rights granted in connection with an award granted under the 2017 Plan that is subject to vesting requirements, no dividend equivalent payment will be made as to a portion of an award unless the related vesting conditions of that portion of an award are satisfied (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment will be subject to forfeiture or repayment, as the case may be, if the related vesting conditions are not satisfied).
Assumption and Termination of Awards. If an event occurs in which the Company does not survive (or does not survive as a public company in respect of its common stock), including, without limitation, a dissolution, merger, combination, consolidation, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, stock or assets of the Company, awards then-outstanding under the 2017 Plan will not automatically become fully vested pursuant to the provisions of the 2017 Plan so long as such awards are assumed, substituted for or otherwise continued. However, if awards then-outstanding under the 2017 Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards would generally become fully vested, subject to any exceptions that the Administrator may provide for in an applicable award agreement. The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2017 Plan. For example, the Administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event or in connection with a termination of the award holder’s employment. For the treatment of
Semtech Corporation2017 Proxy Statement | 93
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
outstanding equity awards held by the Named Executive Officers in connection with a termination of employment and/or a change in control of the Company, please see the “Potential Payments On Termination or Change in Control” below in this Proxy Statement.
Transfer Restrictions. Subject to certain exceptions contained in Section 5.7 of the 2017 Plan, awards under the 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).
Adjustments. As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.
No Limit on Other Authority. Except as expressly provided with respect to the termination of the authority to grant new awards under the 2013 Plan if stockholders approve the 2017 Plan, the 2017 Plan does not limit the authority of the Board of Directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.
Termination of or Changes to the 2017 Plan and Outstanding Awards. The Board of Directors may amend or terminate the 2017 Plan at any time and in any manner. Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the Board of Directors. Unless terminated earlier by the Board of Directors and subject to any extension that may be approved by stockholders, the authority to grant new awards under the 2017 Plan will terminate on April 25, 2027. Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder. The minimum vesting requirement under the 2017 Plan, as described above, does not limit or restrict the Administrator’s discretion to accelerate the vesting of any award in any circumstances it determines to be appropriate.
U.S. Federal Income Tax Consequences of Awards under the 2017 Plan
The U.S. federal income tax consequences of the 2017 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the U.S. Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.
With respect to nonqualified stock options, the company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.
94 | Semtech Corporation2017 Proxy Statement
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
The current federal income tax consequences of other awards authorized under the 2017 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income.
If an award is accelerated under the 2017 Plan in connection with a “change in control” (as this term is used under the U.S. Internal Revenue Code), the company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the U.S. Internal Revenue Code (and certain related excise taxes may be triggered). Furthermore, the aggregate compensation in excess of $1,000,000 attributable to awards that are not “performance-based” within the meaning of Section 162(m) may not be permitted to be deducted by the company in certain circumstances.
Specific Benefits under the 2017 Long-Term Equity Incentive Plan
The Company has not approved any awards that are conditioned upon stockholder approval of the 2017 Plan. The Company is not currently considering any other specific award grants under the 2017 Plan, other than the annual grants of restricted stock units to ourNon-Employee Directors described in the following paragraph. If the 2017 Plan had been in existence in fiscal 2016, the Company expects that its award grants for fiscal 2016 would not have been substantially different from those actually made in that year under the 2013 Plan. For information regarding stock-based awards granted to the Company’s Named Executive Officers during fiscal 2016, see the material under the headings “Compensation Discussion and Analysis” and “Executive Compensation” above.
As described under the heading “Director Compensation” above, our current compensation policy forNon-Employee Directors provides for eachNon-Employee Director to receive an annual award of stock-settled restricted stock units, with the number of shares subject to each award to be determined by dividing $60,000 by the closing price of our common stock on the Nasdaq Stock Market on the grant date (or the last trading day preceding such date if the grant date is not a trading day) as described above. Assuming, for illustrative purposes only, that the price of the common stock used for the conversion of the dollar amount set forth above into shares is $40, the number of shares that would be allocated to the Company’s eightNon-Employee Directors as a group pursuant to the annual grant formula over theten-year term of the 2017 Plan is approximately 120,000. This figure represents the aggregate number of shares that would be subject to the annual grants under theNon-Employee Director equity grant program for calendar years 2017 through 2026 (the ten remaining years in the term of the 2017 Plan, assuming the plan is approved and each award is made on July 1) based on that assumed stock price. This calculation also assumes that there are no new eligible directors, there continue to be eight eligible directors seated, and that there are no changes to the awards granted under theNon-Employee Director equity grant program.
The following paragraphs include additional information to help you assess the potential dilutive impact of the Company’s equity awards and the 2017 Plan. The Prior Plans are the Company’s only equity compensation plans (other than the plans assumed in connection with the acquisition of Sierra Monolithics, Inc. in December 2009 (the “Assumed Plans”)).
“Overhang” refers to the number of shares of the Company’s common stock that are subject to outstanding awards or remain available for new award grants. The following table shows the total number of shares of the Company’s common stock that were subject to outstanding restricted stock unit and performance stock unit awards granted under the Prior Plans and the Assumed Plans, that were subject to outstanding stock options granted under the Prior Plans and the Assumed Plans (with the weighted average
Semtech Corporation2017 Proxy Statement | 95
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
exercise price and remaining term of those awards), and that were then available for new award grants under the 2013 Plan as of January 29, 2017 and as of April 4, 2017. (In this 2017 Plan proposal, the number of shares of the Company’s common stock subject to restricted stock unit or performance stock unit awards granted during any particular period or outstanding on any particular date is presented based on the actual number of shares of the Company’s common stock covered by those awards and before applying the provisions of the 2013 Plan for counting these awards against the plan’s share limit as 2.6 shares for every share actually issued pursuant to the award. For performance stock unit awards, the number of shares presented is based on the “target” level of performance.)
As of January 29, 2017 | As of April 4, 2017 | |||
Shares subject to outstanding restricted stock unit awards | 2,215,669 | 2,151,480 | ||
Shares subject to outstanding performance stock unit awards | 417,000 | 632,857 | ||
Shares subject to outstanding stock options* | 1,508,488 (with a weighted-average exercise price of $24.79 and | 1,464,626 (with a weighted-average exercise price of $24.79 and | ||
Shares available for new award grants | 6,131,651 | 4,913,052 |
The weighted-average number of shares of the Company’s common stock issued and outstanding in each of the last three fiscal years was 67,471,258 shares issued and outstanding in fiscal year 2015; 65,657,076 shares issued and outstanding in fiscal year 2016; and 65,427,067 shares issued and outstanding in fiscal year 2017. The number of shares of the Company’s common stock issued and outstanding to date (as of April 4, 2017) was 65,871,984.
“Burn rate” refers to the number of shares that are subject to awards that we grant over a particular period of time. The total number of shares of the Company’s common stock subject to awards that the Company granted to employees under the 2013 Plan in each of the last three fiscal years, and to date (as of April 4, 2017) for fiscal year 2018, are as follows:
96 | Semtech Corporation2017 Proxy Statement
APPROVAL OF THE SEMTECH CORPORATION 2017 LONG-TERM EQUITY INCENTIVE PLAN (Proposal Number 5)
Thus, the total number of shares of the Company’s common stock subject to awards granted to employees under the 2013 Plan per year over the last three fiscal years (2015, 2016 and 2017) has been, on average, 2.51% of the weighted-average number of shares of the Company’s common stock issued and outstanding for the corresponding year. Performance-based vesting awards have been included above in the fiscal year in which the award was granted based on the “target” level of performance. The actual number of shares subject to restricted stock and restricted stock unit awards that included performance-based vesting requirements and that became eligible to vest each fiscal year because the applicable performance-based condition was satisfied in that year (subject to the satisfaction of any applicable time-based vesting requirements) was as follows: 0 in fiscal 2015, 0 in fiscal 2016, 0 in fiscal 2017 and 0 to date (as of April 4, 2017) in fiscal 2018. The total number of shares of Company common stock subject to stock-settled restricted stock units granted pursuant to our compensation policy forNon-Employee Directors was 0 shares in fiscal year 2015, 24,360 shares in fiscal year 2016, 21,388 shares in fiscal year 2017, and 0 shares in fiscal year 2018 through April 4, 2017.
The total number of shares of our common stock that were subject to awards granted under the 2013 Plan and the Prior Plans that terminated or expired, and thus became available for new award grants under the 2013 Plan, in each of the last three fiscal years, and to date (as of April 4, 2017) in 2018, are as follows: 334,156 in fiscal year 2015, 815,420 in fiscal year 2016, 570,649 in fiscal year 2017, and 35,308 in fiscal year 2018. Shares subject to awards under the 2013 Plan and the Prior Plans that terminated or expired and became available for new award grants under the 2013 Plan have been included when information is presented in this 2017 Plan proposal on the number of shares available for new award grants under the2013 Plan.
The closing market price for a share of the Company’s common stock as of April 4, 2017 was $33.10 per share.
Equity Compensation Plan Information
See the details in the section “Securities Authorized for Issuance Under Equity Compensation Plans” above.
Vote Required for Approval of the 2017 Long-Term Equity Incentive Plan
The Board of Directors believes that the adoption of the 2017 Plan will promote the interests of the Company and its stockholders and will help the Company and its subsidiaries continue to be able to attract, retain and reward persons important to our success.
All members of the Board of Directors and all of the Company’s executive officers are eligible for awards under the 2017 Plan and thus have a personal interest in the approval of the 2017 Plan.
Approval of the 2017 Plan requires the affirmative vote of a majority of the common stock present, or represented, and entitled to vote at the Annual Meeting. Abstentions will have the same effect as negative votes on this proposal because they represent votes that are present, but are not cast. Although brokernon-votes are considered present for quorum purposes, they are not considered entitled to vote, and so have no effect on the outcome of this proposal. Should stockholder approval of this proposal not be obtained, then the 2017 Plan will not be adopted or implemented.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE 2017 LONG-TERM EQUITY INCENTIVE PLAN AS DESCRIBED ABOVE AND SET FORTH INEXHIBIT A.
Semtech Corporation2017 Proxy Statement | 97
The management of the Company knows of no other matters that may properly be, or which are likely to be, brought before the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, persons named in the proxy or their substitutes will have discretion to vote in accordance with their best judgment on such matters.
98 | Semtech Corporation2017 Proxy Statement
EXHIBIT A
SEMTECH CORPORATION
2017 LONG-TERM EQUITY INCENTIVE PLAN
The purpose of this Semtech Corporation 2017 Long-Term Equity Incentive Plan (this “Plan”) of Semtech Corporation, a Delaware corporation (the “Corporation”), is to promote the success of the Corporation by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons and to enhance the alignment of the interests of the selected participants with the interests of the Corporation’s stockholders.
The Administrator (as such term is defined in Section 3.1) may grant awards under this Plan only to those persons that the Administrator determines to be Eligible Persons. An “Eligible Person” is any person who is either: (a) an officer (whether or not a director) or employee of the Corporation or one of its Subsidiaries; (b) a director of the Corporation or one of its Subsidiaries; or (c) an individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Corporation or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Corporation or one of its Subsidiaries) to the Corporation or one of its Subsidiaries and who is selected to participate in this Plan by the Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if such participation would not adversely affect either the Corporation’s eligibility to use FormS-8 to register under the Securities Act of 1933, as amended (the “Securities Act”), the offering and sale of shares issuable under this Plan by the Corporation or the Corporation’s compliance with any other applicable laws. An Eligible Person who has been granted an award (a “participant”) may, if otherwise eligible, be granted additional awards if the Administrator shall so determine. As used herein, “Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation; and “Board” means the Board of Directors of the Corporation.
Semtech Corporation20172020 Proxy Statement | A-1
Notwithstanding the foregoing and except for an adjustment pursuant to Section 7.1 or a repricing approved by stockholders, in no case may the Administrator (1) amend an outstanding stock option or SAR to reduce the exercise price or base price of the award, (2) cancel,
A-2 | Semtech Corporation2017 Proxy Statement
exchange, or surrender an outstanding stock option or SAR in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for an option or SAR with an exercise or base price that is less than the exercise or base price of the original award.
|
Semtech Corporation2017 Proxy Statement | A-3
provided that in no event shall the Share Limit exceed 17,031,653 shares (which is the sum of the 12,100,000 shares set forth above, plus the number of shares available under the 2013 Plan for additional award grant purposes as of the Effective Date (as such term is defined in Section 8.6.1), plus the aggregate number of shares subject to stock options previously granted and outstanding under the Prior Plans as of the Effective Date, plus 2.6 times (to reflect the Full-Value Award ratio) the aggregate number of shares subject to restricted stock, restricted stock unit and other Full-Value Awards previously granted and outstanding under the Prior Plans as of the Effective Date.
Shares issued in respect of any “Full-Value Award” granted under this Plan shall be counted against the foregoing Share Limit as 2.6 shares for every one share issued in connection with such award. (For example, if a stock bonus of 100 shares of Common Stock is granted under this Plan, 260 shares shall be charged against the Share Limit in connection with that award.) For this purpose, a “Full-Value Award” means any award under this Plan that is not a stock option grant or a stock appreciation right grant (other than a stock option or a stock appreciation right described in Section 5.8).
|
A-4 | Semtech Corporation2017 Proxy Statement
Semtech Corporation2017 Proxy Statement | A-589
Refer to Section 8.10 for application of the share limits of this Plan, including the limits in Sections 4.2 and 4.3, with respect to assumed awards. Each of the numerical limits and references in Sections 4.2 and 4.3, and in this Section 4.4, is subject to adjustment as contemplated by this Section 4.4, Section 7 and Section 8.10. The share limits of Section 4.3 shall be applied on aone-for-one basis without applying the Full-Value Award premium counting rule taken into account in determining the Share Limit. The foregoing adjustments to the share limits of this Plan are subject to any applicable limitations under Section 162(m) of the Code with respect to awards intended as performance-based compensation thereunder.
|
A-6 | Semtech Corporation2017 Proxy Statement
|
Semtech Corporation2017 Proxy Statement | A-7
|
A-8 | Semtech Corporation2017 Proxy Statement
Semtech Corporation2017 Proxy Statement | A-9
In no event shall any shares newly-issued by the Corporation be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable state law. Shares of Common Stock used to satisfy the exercise price of an option shall be valued at their fair market value. The Corporation will not be obligated to deliver any shares unless and until it receives full payment of the exercise or purchase price therefor and any related withholding obligations under Section 8.5 and any other conditions to exercise or purchase have been satisfied. Unless otherwise expressly provided in the applicable award agreement, the Administrator may at any time eliminate or limit a participant’s ability to pay any purchase or exercise price of any award or shares by any method other than cash payment to the Corporation.
|
A-10 | Semtech Corporation2017 Proxy Statement
Semtech Corporation2017 Proxy Statement | A-11
With respect to any award subject to one or more performance-based conditions, the Administrator may provide in the applicable award agreement for the adjustment of the performance-based conditions (including, without limitation, any applicable goal or target) and/or performance period, to such extent and in such manner as the Administrator may prescribe, in connection with any event or transaction described in the preceding paragraph, a sale of all or
A-12 | Semtech Corporation2017 Proxy Statement
substantially all of the business or assets of the Corporation as an entirety, any of the circumstances referenced in Section 5.2.2(b), or such other events or circumstances as the Administrator may provide.
It is intended that, if possible, any adjustments contemplated by the preceding two paragraphs be made in a manner that satisfies applicable U.S. legal, tax (including, without limitation and as applicable in the circumstances, Section 424 of the Code as to ISOs, Section 409A of the Code as to awards intended to comply therewith and not be subject to taxation thereunder, and Section 162(m) of the Code as to any Qualifying Option or SAR and any Qualifying Performance-Based Award) and accounting (so as to not trigger any unintended charge to earnings with respect to such adjustment) requirements.
Without limiting the generality of Section 3.3, any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 7.1, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.
Without limiting the preceding paragraph, in connection with any event referred to in the preceding paragraph or any change in control event defined in any applicable award agreement, the Administrator may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the Administrator in the circumstances.
For purposes of this Section 7.2, an award shall be deemed to have been “assumed” if (without limiting other circumstances in which an award is assumed) the award continues after an event referred to above in this Section 7.2, and/or is assumed and continued by the surviving entity following such event (including, without limitation, an entity that, as a result of such event, owns the Corporation or all or substantially all of the Corporation’s assets directly or through one or more subsidiaries (a “Parent”)), and confers the right to purchase or receive, as applicable and
Semtech Corporation2017 Proxy Statement | A-13
subject to vesting and the other terms and conditions of the award, for each share of Common Stock subject to the award immediately prior to the event, the consideration (whether cash, shares, or other securities or property) received in the event by the stockholders of the Corporation for each share of Common Stock sold or exchanged in such event (or the consideration received by a majority of the stockholders participating in such event if the stockholders were offered a choice of consideration); provided, however, that if the consideration offered for a share of Common Stock in the event is not solely the ordinary common stock of a successor corporation or a Parent, the Administrator may provide for the consideration to be received upon exercise or payment of the award, for each share subject to the award, to be solely ordinary common stock of the successor corporation or a Parent equal in fair market value to the per share consideration received by the stockholders participating in the event.
The Administrator may adopt such valuation methodologies for outstanding awards as it deems reasonable in the event of a cash or property settlement and, in the case of options, SARs or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the award. In the case of an option, SAR or similar right as to which the per share amount payable upon or in respect of such event is less than or equal to the exercise or base price of the award, the Administrator may terminate such award in connection with an event referred to in this Section 7.2 without any payment in respect of such award.
In any of the events referred to in this Section 7.2, the Administrator may take such action contemplated by this Section 7.2 prior to such event (as opposed to on the occurrence of such event) to the extent that the Administrator deems the action necessary to permit the participant to realize the benefits intended to be conveyed with respect to the underlying shares. Without limiting the generality of the foregoing, the Administrator may deem an acceleration and/or termination to occur immediately prior to the applicable event and, in such circumstances, will reinstate the original terms of the award if an event giving rise to an acceleration and/or termination does not occur.
Without limiting the generality of Section 3.3, any good faith determination by the Administrator pursuant to its authority under this Section 7.2 shall be conclusive and binding on all persons.
A-14 | Semtech Corporation2017 Proxy Statement
In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Administrator may in its sole discretion (subject to Section 8.1) require or grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, that the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their fair market value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the applicable withholding obligation on exercise, vesting or payment.
|
Semtech Corporation2017 Proxy Statement | A-15
A-16 | Semtech Corporation2017 Proxy Statement
Semtech Corporation2017 Proxy Statement | A-17
SEMTECHIMPORTANT ANNUAL MEETING INFORMATION 000004ENDORSEMENT LINE SACKPACKMR A SAMPLEDESIGNATION (IF ANY)ADD 1ADD 2ADD 3ADD 4ADD 5ADD 6
MMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789
000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 000000000.000000 ext 000000000.000000 extElectronic Voting InstructionsAvailable 24 hours a day, 7 days a week!Instead ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.Proxiesthis card. MR A SAMPLE DESIGNATION (IF ANY) Votes submitted by the Internet or telephoneelectronically must be ADD 1 ADD 2 received by 11:59 p.m., Eastern Time,(Eastern Time), ADD 3 on June 14, 2017.Vote by Internet•10, 2020. ADD 4 ADD 5 Online ADD 6 If no electronic voting, Go to www.investorvote.com/SMTC• Or or delete QR code and control # scan the QR code with your smartphone• Follow— login details are Δâ‰^ located in the steps outlined on the secure websiteVote by telephone•shaded bar below. Phone Call toll free1-800-652-VOTE (8683) within the USA, US territories &and Canada on a touch tone telephone• Follow the instructions provided by the recorded message
Save paper, time and money! Sign up for electronic delivery at Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.X
www.investorvote.com/SMTC 2020 Annual Meeting Proxy Card 1234 5678 9012 345
q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
ENVELOPE.q A Proposals — THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE ELECTION OF DIRECTORS, “FOR” ITEMS 2, 3 AND 5, AND “FOR” 1 YEAR FOR THE FREQUENCY OF FUTUREADVISORY VOTES ON EXECUTIVE COMPENSATION. +1. ELECTION OF DIRECTORS
The Company’s Board of Directors recommendsrecommend a vote “FOR” each ofFOR all the nominees listed below:Nominees:and FOR Proposals 2 and 3. 1. Election of Directors: + For Withhold01 - Glen M. Antle ☐ ☐04 - For Withhold For Withhold 01—James P. Burra 02—Rodolpho C. Cardenuto 03—Bruce C. Edwards 04—Saar Gillai 05—Rockell N. Hankin ☐ ☐07 - 06—Ye Jane Li 07—James T. Lindstrom 08—Mohan R. Maheswaran ☐ ☐For Withhold02 - James P. Burra ☐ ☐05 - Ye Jane Li ☐ ☐08 - Carmelo J. Santoro ☐ ☐For Withhold03 - Bruce C. Edwards ☐ ☐06 - James T. Lindstrom ☐ ☐09 - 09—Sylvia Summers ☐ ☐The Company’s Board of Directors recommends a vote “FOR” each of items 2, 3 and 5 and “FOR” 1 Year for the frequency of future advisory votes on executive compensation:
For Against Abstain
For Against Abstain 2. Ratification of the appointment of Deloitte & Touche LLP as the 3. Advisory resolution to approve executive compensation. Company’s independent registered public accounting firm for the 20182021 fiscal year. ☐ ☐ ☐1 Year 2 Years 3 Years Abstain4. To recommend, by non-binding vote, the frequency of executive compensation votes. ☐ ☐ ☐ ☐For Against Abstain3. Advisory resolution to approve executive compensation. ☐ ☐ ☐5. Proposal to approve Semtech Corporation 2017 Long-Term Equity Incentive Plan. ☐ ☐ ☐At their discretion, the named proxies are authorized to consider and vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
B Authorized Signatures — This section must be completed for your vote to be counted. — Datecount. Please date and Sign BelowNOTE:sign below. Please sign exactly as namename(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or guardian,custodian, please give full title as such.
title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.C 1234567890 J N T1UPX 3259461
MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
C 1234567890 J N T 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE ANDMR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 1UPX 457138 MMMMMMM + 037MZD MMMMMMMMMMMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. MR A SAMPLE DESIGNATION (IF ANY) Votes submitted electronically must be ADD 1 ADD 2 received by 11:59 p.m., (Eastern Time), ADD 3 on June 10, 2020. ADD 4 ADD 5 Online ADD 6 If no electronic voting, Go to www.investorvote.com/SMTC or delete QR code and control # scan the QR code — login details are Δâ‰^ located in the shaded bar below. Phone Call toll free1-800-652-VOTE02KJSF (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. www.investorvote.com/SMTC 2020 Annual Meeting Proxy Card 1234 5678 9012 345 q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q A Proposals — The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 and 3. 1. Election of Directors: + For Withhold For Withhold For Withhold 01—James P. Burra 02—Rodolpho C. Cardenuto 03—Bruce C. Edwards 04—Saar Gillai 05—Rockell N. Hankin 06—Ye Jane Li 07—James T. Lindstrom 08—Mohan R. Maheswaran 09—Sylvia Summers For Against Abstain For Against Abstain 2. Ratification of the appointment of Deloitte & Touche LLP as the 3. Advisory resolution to approve executive compensation. Company’s independent registered public accounting firm for the 2021 fiscal year. B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE C 1234567890 J N T 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 1UPX 457138 MMMMMMM + 037MZD MMMMMMMMM
Semtech Corporation 2020 Annual Meeting of Stockholders June 11, 2020, 11:00 a.m. Pacific Time Semtech Corporation Offices 200 Flynn Road, Camarillo, California 93012 Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
The Proxy Statement and the Annual Report to Stockholders for fiscal year 2017 arematerial is available at: www.investorvote.com/SMTC
Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/SMTC q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
ENVELOPE.q Semtech Corporation +SEMTECHProxy — SEMTECH CORPORATION
Notice of 2020 Annual Meeting of Stockholders –Proxy Solicited by Board of Directors for Annual Meeting — June 15, 2017THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANYThe undersigned hereby appoints11, 2020 Mohan R. Maheswaran and Emeka N. Chukwu, andor each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact andare hereby authorizes themauthorized to represent and vote as provided on the other side, all the shares of Semtech Corporation (the “Company”) Common Stockthe undersigned, with all the powers which the undersigned is entitledwould possess if personally present, at the Annual Meeting of Stockholders of Semtech Corporation to be held on June 11, 2020 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors and inFOR items 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Companymeeting or any postponement or adjournment thereof. (Items to be held June 15, 2017 (the “Annual Meeting”), at Courtyard Marriott, 4994 Verdugo Way, Camarillo, CA 93012, at 11:00 a.m. Pacific Time, or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Annual Meeting. The undersigned hereby revokes all proxies previously given by the undersigned to vote at the Annual Meeting, or any adjournment or postponement thereof.(Continued and to be marked, dated and signed,voted appear on the otherreverse side) CNon-VotingC Non-Voting Items
Change of Address — Please print new address below. Comments — Please print your comments below.
+Semtech Corporation 2020 Annual Meeting of Stockholders June 11, 2020, 11:00 a.m. Pacific Time Semtech Corporation Offices 200 Flynn Road, Camarillo, California 93012 Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders. The material is available at: www.investorvote.com/SMTC Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/SMTC q IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A -SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Semtech Corporation + Notice of 2020 Annual Meeting of Stockholders Proxy Solicited by Board of Directors for Annual Meeting — June 11, 2020 Mohan R. Maheswaran and Emeka N. Chukwu, or each of them, with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Semtech Corporation to be held on June 11, 2020 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors and FOR items 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any postponement or adjournment thereof. (Items to be voted appear on reverse side) C ON BOTH SIDES OF THIS CARD.Non-Voting Items Change of Address — Please print new address below. Comments — Please print your comments below. +