UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 23, 2006
---------------------------
Semtech Corporation
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
--------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-6395 95-2119684
--------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
200 Flynn Road
Camarillo, California 93012-8790
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
805-498-2111
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
--------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
At meetings on February 23, 2006 and February 28, 2006, the Compensation
Committee of the Board of Directors of Semtech Corporation (the "Committee")
took the following actions, including actions with regard to the compensation of
executive officers who will be named in the Summary Compensation Table of
Company's 2006 Proxy Statement (the "Named Executive Officers").
Base Salaries. The Committee considered the base salaries of the Named Executive
Officers and determined to adjust the base salaries of the Named Executive
Officers as follows, effective February 27, 2006. The Committee noted that Mr.
Wilson's last base salary adjustment was effective in September 2002 and that
the base salaries of the other Named Executive Officers receiving increases had
been in effect since November 2003.
NAME FY2006 REVISED
ANNUAL BASE ANNUAL BASE
SALARY SALARY
John D. Poe (1) $600,000 $600,000
Acting Chief Executive Officer
David G. Franz $215,057 $222,000
Chief Financial Officer
Paul D. Peterson $215,004 $230,000
Vice President, Sales and Marketing
Jeffrey T. Pohlman $180,198 $205,000
Vice President, Protection Products
John M. Wilson $200,078 $205,000
Vice President, Power Management Products
(1) Since September 27, 2005, Mr. Poe, Chairman of the Board, has been serving
as acting Chief Executive Officer on an interim basis until a replacement is
identified and assumes the Chief Executive Officer role. Mr. Poe is paid
$50,000 per month for these services, with the amount subject to future review
by the Committee. The Committee did not take any action in February 2006 with
respect to Mr. Poe; the annualized payment information is included here for
the sake of completeness. When the CEO position is filled, compensation
information for the new CEO will be disclosed in accordance with SEC rules.
Cash Bonus Incentive Plan. In order to more closely align awards with Company
and business unit performance, the Committee amended and restated the Company's
Cash Bonus Incentive Plan ("Plan") effective as of its fiscal year 2007 that
began on January 30, 2006. The following brief summary of the material elements
of the amended and restated Plan does not purport to be complete and is
qualified in its entirety by the Plan document attached as Exhibit 10.1 and
incorporated herein by reference.
Participants. Participants are salaried employees selected each fiscal year
based on recommendations by their supervisors, with the endorsement of the
applicable business unit managers or corporate function heads.
Bonus Pool. As early as feasible at the beginning of each fiscal year, the Chief
Executive Officer recommends to the Committee for its review and approval an
amount to be established as a bonus pool for the fiscal year. The proposed pool
amount is calculated as the sum of (a) the target bonus awards for employees
recommended to be participants for the Plan Year and (b) an estimate of target
awards for positions that may be filled during the Plan (new hires who may
become participants on a pro rata basis). To assist the Committee in making a
determination with respect to the recommendation, the proposed bonus pool is
also expressed as a percentage of earnings before interest and taxes
("EBIT"), as set forth in the Company's annual business plan ("Business Plan").
However, for this purpose such EBIT is computed prior to the deduction of
incentive compensation payments to be paid under the Plan and may exclude
anticipated extraordinary items. As discussed below, actual awards may exceed
target awards under certain circumstances. In no event will the aggregate
incentive compensation payments under the Plan for a fiscal year exceed 205% of
the bonus pool established for that fiscal year.
Award Calculation. Incentive compensation awards are calculated as follows under
the supervision of the Company's Chief Financial Officer.
Subject to any discretionary adjustments made pursuant to the Plan and any
limitations contained in the Plan, awards are determined by mutliplying the
Participant's Target Award by the sum of
30% of the Individual Performance Factor, 50% of the relevant Business
Unit Performance Factor, and 20% of the Corporate Performance Factor
(for Participants who are members of a Business Unit); or
30% of the Individual Performance Factor and 70% of the Corporate
Performance Factor (for Participants other than the Chief Executive
Officer who are members of a corporate functional group rather than a
Business Unit).
30% of the Individual Performance Factor and 70% of the CEO Corporate
Performance Factor (for the Chief Executive Officer).
1. Target Levels and Target Awards.
A participant's annual base salary (as of the date of the calculation)
is multiplied by a target percentage that is based on the participant's
position. This establishes the participant's Target Award.
Target levels are based on the level of importance and responsibility
of the position in the Company. Where a range has been established, the
actual target level is determined by the relevant business unit manager
or corporate functional group head and the Vice President of Human
Resources, subject to approval by the Chief Executive Officer. The
Committee determines the actual target level for the Chief Executive
Officer and each of the other executive officers.
Position Target Level
President and Chief 70-150%
Executive Officer
Chief Financial Officer 70-125%
Chief Operating Officer 70-125%
Business Unit and 50-125%
Functional Unit Heads
Other Eligible Positions 10-100%
2. Individual Performance Factor.
At or near the beginning of each fiscal quarter, performance goals for
each participant are set by the participant and the participant's
supervisor. These quarterly individual performance goals are weighted
by the participant and supervisor to reflect the importance of each
objective and are generally referred to as "Most Important Tasks
(MITs)". MITs for the Chief Executive Officer are set by the Chief
Executive Officer and the Committee. From time to time other Board
members may assist the Committee with respect to the MITs of the Chief
Executive Officer.
Each quarter the Chief Executive Officer disseminates general financial
goals and strategic objectives to the business unit managers and
corporate functional heads. They, in turn, disseminate their tactical
plans and objectives to the supervisors to assist in the development of
participants' MITs. MITs are generally to be established in a manner so
as to be specific, measurable, and time specific. MITs are meant to be
attainable and realistic but also provide some challenge to achieve
results above the norm.
Each participant's quarterly MITs will include individual performance
goals related to technical, operational, financial, and/or managerial
matters such as
o research and development o sales support
o product development cycle time o marketing to key customers
o patent activity o obtaining new customers
o design wins, in terms of customer o customer support, including
programs or reference designs application matters
o operations performance o bookings
o systems improvements o billings
o supplier contracts or issues o achievement of cost savings
o production contracts or issues o budget achievement
o customer contracts or issues o free cash flow
o foundry management o working capital
o supply chain management o return on equity
o inventory control o return on sales
o manufacturing efficiencies, o return on assets
including improvement of variances o margin improvements
o quality and reliability o investor relations
o order fulfillment and delivery o corporate governance
performance o filling key positions
o legal matters
o strategic initiatives
The cumulative weighting of such individual performance goals will
total 100% for each participant. The actual weighting of a
participant's individual performance goals is determined by the
participant's supervisor. The actual weighting of the Chief Executive
Officer's individual performance goals is determined by the Committee.
After the end of each fiscal quarter, each participant's performance
against the MITs established for the quarter is assessed by the
participant's supervisor. Quarterly MITs scoring for the Chief
Executive Officer is performed the Committee. From time to time the
other Board members may assist the Committee in review of the Chief
Executive Officer's performance.
Objectives may be evaluated on a partial credit basis. A participant
may receive a quarterly MITs score in excess of 100% based upon
exceptional performance, but only with the review and approval of (a)
the participant's manager and endorsement of either (i) the Chief
Executive Officer or Chief Operating Officer (with respect to
participants in business units) or (ii) the Chief Executive Officer
(with respect to participants in corporate functional groups and
executive officers) or (b) the Committee, with respect to the Chief
Executive Officer.
After the end of the fiscal year, each participant's quarterly MITs
scores are averaged to arrive at the participant's Individual
Performance Factor. The Individual Performance Factor for any
participant, or group of participants, may be adjusted, upward or
downward, at the discretion of the Chief Executive Officer or the
Committee.
3. Organizational Performance Factors.
At the time the bonus pool is established by the Committee, the
Committee also determines the percentage of the Business Plan that must
be achieved (in terms of EBIT) in order to use 100% as the Corporate
Performance Factor in the award calculation. In doing so, the Committee
will establish a formula for generating the Corporate Performance
Factor for lesser and superior performance against the Business Plan.
In most circumstances, 100% achievement of the Business Plan will
equate to a 100% Corporate Performance Factor, but the Committee may
establish a different correlation. The Committee may adjust the formula
to establish a higher performance threshold that must be attained
before any value is assigned to
the Corporate Performance Factor. In no event will the formula result
in a Corporate Performance Factor of more than 250%.
For example, a formula established by the Committee may correlate
attainment of 100% of the Business Plan with a 100% Corporate
Performance Factor, attainment of 120% of the Business Plan with a 150%
Corporate Performance Factor, and attainment of 60% or less of the
Business Plan with a Corporate Performance Factor of zero. Even though
the formula results in a Corporate Performance Factor of zero at a 60%
performance level, the Committee may adjust the formula to require
better performance, say 70% attainment of the Business Plan, before any
value is assigned to the Corporate Performance Factor.
Taking into account the Chief Executive Officer's leadership role in
attaining the Business Plan, the Committee will likewise establish a
formula for the CEO Corporate Perfomance Factor. This formula may be
the same as the Corporate Performance Factor formula or may vary from
it. For example, the Committee may establish a formula that results in
a higher CEO Corporate Performance Factor than Corporate Performance
Factor for the same level of acheivement over and above the Business
Plan and/or which results in a lower CEO Corporate Performance Factor
than Corporate Performance Factor for the same level of achievement if
the Business Plan is not met. In no event will the formula result in a
CEO Corporate Performance Factor of more than 250%.
The Committee will likewise establish formulas with respect to the
Business Plan of each Business Unit. In no event will any formula
result in a Business Unit Performance Factor for any Business Unit of
more than 250%.
After the end of each fiscal year, the actual EBIT performance of the
Company is compared to the Business Plan. The percentage of the
Business Plan achieved is used in the previously established formulas
to determine the Corporate Performance Factor and CEO Corporate
Performance Factor carried into the award computations. A similar
comparison of each business unit's results against the business unit's
Business Plan is made to determine the Business Unit Performance Factor
for each business unit. These organizational performance factors may be
adjusted upward or downward at the discretion of the Chief Executive
Officer or the Committee, provided that the Chief Executive Officer may
not adjust the CEO Corporate Performance Factor. In no event will any
such adjustment result in a Corporate Performance Factor, CEO Corporate
Performance Factor, or Business Unit Performance Factor of more than
250%.
4. Adjustments and Limitations
Before the calculated awards are presented to the Committee, the award
for any participant or group of participants may be adjusted, upward or
downward, at the discretion of the Chief Executive Officer. The
recommended award for any participant, or group of participants, may be
adjusted, upward or downward, at the discretion of the Committee.
Examples of factors that could lead to an adjustment are subjective
criteria such as the participant's initiative, leadership, teamwork,
judgment, and creativity.
In no event will an incentive compensation payment under the Plan to
any participant for a fiscal year exceed 205% of the participant's
Target Award for that fiscal year.
Payment of Awards. No award is payable under the Plan unless and until the
Committee authorizes the awards for Participants generally and for executive
officers in particular. Awards authorized by the Committee are paid within two
and one-half months after the end of the fiscal year, but only after the
Company's registered independent public accountant has completed its audit of
the Company's financial statements for that fiscal year. Unpaid awards are
subject to cancellation or downward revision if the Committee determines such
action is warranted based on audit results.
Awards of Annual Incentive Compensation for Efforts in Fiscal Year 2006. The
Committee approved incentive compensation awards for the Named Executive
Officers for efforts during fiscal year 2006 (January 31, 2005 through January
29, 2006) as follows. These awards were made under the Plan as it existed during
fiscal year 2006 (see Exhibits 10.1 and 10.19 to the Company's annual report on
Form 10-K filed on April 15, 2005).
NAME BONUS PERCENT OF PERCENT OF
TARGET BONUS BASE
SALARY(1)
Jason L. Carslon(2)
Former Chief Executive
Officer --- --- ---
Mr. Poe(3) --- --- ---
Mr. Franz $56,829 38% 26%
Mr. Peterson $70,000 47% 33%
Mr. Pohlman $151,366 120% 84%
Mr. Wilson $62,867 45% 31%
(1) Base salary in effect during fiscal year 2006.
(2) The Company and Mr. Carlson executed an Agreement and Release in October
2005 that provides that Mr. Carlson is not entitled to any bonus under the
Plan for services in fiscal year 2006. For more information, see the
Company's reports on Form 8-K filed on October 3, 2005 and October 14,
2005.
(3) The Committee previously determined that the monthly fee paid to Mr. Poe
for serving as acting CEO is all inclusive; thus he is not eligible for an
award under the Plan.
Annual Incentive Compensation for Efforts in Fiscal Year 2007. The Committee
established a bonus pool for incentive compensation to be earned in fiscal year
2007. The Committee further determined the percentage of the Business Plan that
must be achieved in fiscal year 2007 in order to use 100% as the Corporate
Performance Factor and established a formula for generating the Corporate
Performance Factor for lesser and superior performance against the Business
Plan. The Committee made similar determinations with respect to the fiscal year
2007 Business Unit Performance Factor for each business unit.
The Named Executive Officers are eligible to earn the following minimum, target,
and maximum bonus awards under the Plan during fiscal year 2007.
Incentive Awards as Percentage of Base Salary
Minimum (1) Target Maximum (2)
Mr. Poe(3) --- --- ---
Mr. Franz 0 75% 153.75%
Mr. Peterson 0 90% 184.50%
Mr. Pohlman 0 75% 153.75%
Mr. Wilson 0 75% 153.75%
(1) The Plan does not guarantee an award for any participant.
(2) The maximum award any participant may receive under the Plan is 205% of the
target award.
(3) The Committee previously determined that the monthly fee paid to Mr. Poe
for serving as Acting CEO is all inclusive; thus he is not eligible for an
award under the Plan. When the CEO position is filled, information
regarding the new CEO's bonus will be disclosed in accordance with SEC
rules
As in prior years, each of the Named Executive Officers will have individual
performance goals established on a quarterly basis related to technical,
operational, financial, and/or managerial matters such as those described above.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit 10.1 Semtech Corporation Cash Bonus Incentive Plan
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: March 1, 2006 SEMTECH CORPORATION
By: /s/ David G. Franz, Jr.
-----------------------------
David G. Franz, Jr.
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit Number Description of Document
-------------- -----------------------
10.1 Semtech Corporation Cash Bonus Incentive Plan