10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended July 29, 2007

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from              to             

Commission file number 1-6395

SEMTECH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-2119684
(State or other jurisdiction incorporation or organization)	(I.R.S. Employer Identification No.)

200 Flynn Road, Camarillo, California, 93012-8790

(Address of principal executive offices, Zip Code)

Registrant’s telephone number, including area code: (805) 498-2111

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  ¨    No  x

Number of shares of Common Stock, $0.01 par value per share, outstanding at August 31, 2007: 63,555,986

SEMTECH CORPORATION

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED JULY 29, 2007

			Page
PART I - FINANCIAL INFORMATION			3
	ITEM 1.	Financial Statements	3
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	35
	ITEM 4.	Controls and Procedures	36
PART II – OTHER INFORMATION			37
	ITEM 1.	Legal Proceedings	37
	ITEM 1A.	Risk Factors	37
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
	ITEM 3.	Defaults Upon Senior Securities	38
	ITEM 4.	Submission of Matters to a Vote of Security Holders	38
	ITEM 5.	Other Information	39
	ITEM 6.	Exhibits	39

2

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

SEMTECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands, except per share data)

(Unaudited)

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Net sales	$	67,048	$	64,921	$	127,614	$	130,864
Cost of sales		30,058		29,558		57,371		57,590
Gross profit		36,990		35,363		70,243		73,274
Operating costs and expenses:
Selling, general and administrative		17,943		17,512		36,124		32,636
Product development and engineering		10,581		10,189		20,586		20,891
Acquisition related items		275		275		551		640
Insurance related legal expenses		324		106		499		266
Total operating costs and expenses		29,123		28,082		57,760		54,433
Operating income		7,867		7,281		12,483		18,841
Interest and other income, net		3,542		3,161		9,257		6,083
Income before taxes		11,409		10,442		21,740		24,924
Provision for taxes		2,387		2,012		4,787		4,737
Net income	$	9,022	$	8,430	$	16,953	$	20,187
Earnings per share:
Basic	$	0.13	$	0.12	$	0.24	$	0.28
Diluted	$	0.13	$	0.11	$	0.24	$	0.27
Weighted-average number of shares:
Basic		66,984		72,291		69,687		72,433
Diluted		68,844		73,929		71,212		74,311

See accompanying notes. The accompanying notes are an integral part of these statements.

3

SEMTECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except share data)

	July 29 2007			January 28 2007
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	179,736		$	162,674
Temporary investments		25,945			125,979
Receivables, less allowances		29,170			25,588
Inventories		21,741			20,493
Deferred income taxes		3,646			3,495
Assets held for sale		63			8,222
Other current assets		10,461			9,476
Total current assets		270,762			355,927
Property, plant and equipment, net		36,655			40,573
Investments, maturities in excess of 1 year		28,715			49,827
Deferred income taxes		25,726			28,190
Goodwill		32,532			32,687
Other intangibles, net		3,732			4,284
Other assets		7,869			10,166
Total Assets	$	405,991		$	521,654
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,603		$	9,909
Accrued liabilities		12,715			14,635
Income taxes payable		2,632			1,974
Deferred revenue		2,463			2,151
Deferred income taxes		1,480			1,500
Other current liabilities		—			315
Total current liabilities		31,893			30,484
Deferred income taxes		2,569			2,539
Other long-term liabilities		7,682			7,450
Stockholders’ equity:
Common stock, $0.01 par value, 250,000,000 shares authorized, 77,994,044 issued and 63,469,236 outstanding on July 29, 2007 and 77,061,426 issued and 72,304,877 outstanding on January 28,2007		783			774
Treasury stock, at cost, 14,524,808 shares as of July 29, 2007 and 4,756,549 shares as of January 28, 2007		(234,571	)		(85,955	)
Additional paid-in capital		332,004			315,972
Retained earnings		265,397			250,517
Accumulated other comprehensive income (loss)		234			(127	)
Total stockholders’ equity		363,847			481,181
Total Liabilities and Stockholders’ Equity	$	405,991		$	521,654

See accompanying notes. The accompanying notes are an integral part of these statements.

4

SEMTECH CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended
	July 29 2007			July 30 2006
Cash flows from operating activities:
Net income	$	16,953		$	20,187
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,491			5,659
Deferred income taxes		483			(1,949	)
Stock-based compensation		6,576			8,471
Tax benefit on stock based compensation		2,935			5,810
Excess tax benefits		(2,883	)		(1,529	)
Gain on disposition of property, plant and equipment		(1,501	)		(41	)
Changes in assets and liabilities:
Accounts receivable		(3,582	)		(2,417	)
Inventories		(1,248	)		(1,846	)
Other assets		1,312			1,886
Accounts payable and accrued liabilities		458			1,824
Deferred revenue		312			111
Income taxes payable		658			1,782
Other liabilities		155			1,148
Net cash provided by operating activities		26,119			39,096
Cash flows from investing activities:
Purchase of available-for-sale investments		(90,300	)		(104,757	)
Proceeds from sales and maturities of available-for-sale investments		211,808			110,970
Proceeds on sale of assets		9,950			1,165
Additions to property, plant and equipment		(1,310	)		(1,640	)
Net cash provided by investing activities		130,148			5,738
Cash flows from financing activities:
Excess tax benefit received on stock options		2,883			1,529
Exercise of stock options		7,076			2,240
Purchase of common stock		(150,038	)		(14,240	)
Issuance of treasury stock		874			906
Other		—			(1	)
Net cash used in financing activities		(139,205	)		(9,566	)
Effect of exchange rate changes on cash and cash equivalents		—			17
Net increase in cash and cash equivalents		17,062			35,285
Cash and cash equivalents at beginning of period		162,674			65,520
Cash and cash equivalents at end of period	$	179,736		$	100,805

See accompanying notes. The accompanying notes are an integral part of these statements.

5

SEMTECH CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The accompanying interim consolidated condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the included disclosures are adequate to make the information presented not misleading. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K. Certain amounts for prior periods have been reclassified to conform to the current presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounting estimates requiring management’s most significant and subjective judgments include:

• The recognition and measurement of current and deferred income tax assets and liabilities;

• The valuation of inventory; and

• The valuation and recognition of share-based compensation

In the opinion of the Company, these unaudited statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly, in all material respects, the financial position of Semtech Corporation and its subsidiaries for the interim periods presented. The results reported in these consolidated condensed financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year.

Note 2: Fiscal Year

The Company reports on the basis of 52 and 53 week periods and ends its fiscal year on the last Sunday in January. The other quarters end on the last Sunday of April, July, and October. All quarters consist of 13 weeks except for one 14-week quarter in 53-week years. The second quarters and first six months of fiscal years 2008 and 2007 each consisted of 13 weeks and 26 weeks, respectively.

Note 3: Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. The measurement and disclosure requirements are effective for the Company beginning in fiscal year 2009. The Company is currently evaluating the impact of SFAS No. 157.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits companies to choose to measure certain financial instruments and other items at fair value. The standard requires unrealized gains and losses to be reported in earnings for items measured using the fair value option. SFAS No. 159 is effective for the Company beginning in fiscal year 2009. The Company is currently evaluating the impact of SFAS No. 159.

6

Note 4: Accounting Changes

There have been no significant changes to the Company’s critical accounting policies during the quarter ended July 29, 2007.

Note 5: Comprehensive Income

The components of comprehensive income, net of tax, were as follows:

	Three Months Ended					Six Months Ended
(in thousands)	July 29 2007			July 30 2006		July 29 2007			July 30 2006
Net income	$	9,022		$	8,430	$	16,953		$	20,187
Change in net unrealized holding gain (loss) on available-for-sale investments		(127	)		357		(361	)		361
Gain (loss) for translation adjustment		2			13		—			18
Total comprehensive income	$	8,897		$	8,800	$	16,592		$	20,566

Note 6: Earnings Per Share

The computation of basic and diluted earnings per common share was as follows:

	Three Months Ended				Six Months Ended
(In thousands, except per share amounts)	July 29, 2007		July 30, 2006		July 29, 2007		July 30, 2006
Net income	$	9,022	$	8,430	$	16,953	$	20,187
Weighted average common shares outstanding - basic		66,984		72,291		69,687		72,433
Dilutive effect of employee equity incentive plans		1,120		1,638		1,157		1,878
Dilutive effect of accelerated stock buyback		740		—		368		—
Weighted average common shares outstanding - diluted		68,844		73,929		71,212		74,311
Basic earnings per common share	$	0.13	$	0.12	$	0.24	$	0.28
Diluted earnings per common share	$	0.13	$	0.11	$	0.24	$	0.27

Basic earnings per common share are computed using the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share incorporate the incremental shares issuable, calculated using the treasury stock method, upon the assumed exercise of stock options and the vesting of restricted stock. The weighted-average number of shares used to compute basic earnings per share in the second quarters of fiscal years 2008 and 2007 was approximately 67.0 million and 72.3 million, respectively. The weighted-average number of shares used to compute diluted earnings per share in the second quarters of fiscal years 2008 and 2007 was approximately 68.8 million and 73.9 million, respectively. The weighted-average number of shares used to compute basic earnings per share in the first six months of fiscal years 2008 and 2007 was approximately 69.7 million and 72.4 million, respectively. The weighted-average number of shares used to compute diluted earnings per share in the first six months of fiscal years 2008 and 2007 was approximately 71.2 million and 74.3 million, respectively.

7

Options to purchase approximately 7.1 million shares and 8.7 million shares, respectively, were not included in the computation of the second quarters of fiscal years 2008 and 2007 diluted net income per share because such options were considered anti-dilutive. Options to purchase approximately 7.7 million shares and 7.9 million shares, respectively, were not included in the computation of the first six months of fiscal years 2008 and 2007 diluted net income per share because such options were considered anti-dilutive.

Note 7: Stock Based Compensation

Overview. The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payment” (SFAS 123R). SFAS 123R establishes generally accepted accounting principles for stock-based awards exchanged for employee services.

Share-based Payment Arrangements. The Company has various equity award plans (Plans) that provide for granting stock based awards to employees and non-employee directors of the Company. The Plans provide for the granting of several available forms of stock compensation. As of July 29, 2007, the Company has granted stock option awards (“Options”), restricted stock awards (“RSA”), and restricted stock unit awards (“RSU”) under the Plans and has also issued some stock-based compensation outside of any plan, including options and restricted stock awards issued as inducements to join the Company.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms. For awards classified as equity, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s or director’s requisite service period. For awards classified as liabilities, stock based compensation cost is measured at fair value at each reporting date until the date of settlement, and is recognized as an expense over the employee or director’s requisite service period.

The Company uses the Black-Scholes pricing model to value Options. Expected volatilities are based on historical volatility using daily and monthly stock price observations. For option grants made after January 30, 2006, the Company uses an expected life equal to the midpoint between the vesting date and the date of contractual expiration of the options, as permitted by the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin 107. For option grants issued before January 30, 2006, the Company had used a consistent 5-year expected life assumption. The Company has not historically paid a cash dividend and the Board of Directors has not indicated an intent to declare a cash dividend in the foreseeable future. Accordingly, a dividend yield of zero has been assumed for purposes of estimating the fair value of Options. The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant. The estimated fair value of the Options is amortized to expense using the straight-line method over the vesting period.

Assumptions in Determining Fair Value of Options

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Expected lives, in years		4.09 - 4.85		4.36 - 4.85		4.09 - 4.85		4.36 - 4.85
Estimated volatility		56% - 59%		55% - 59%		56% - 59%		53% - 59%
Dividend yield		—		—		—		—
Risk-free interest rate		4.7% - 4.9%		4.6% - 4.9%		4.7% - 4.9%		4.6% - 4.9%
Weighted -average fair value on grant date of options granted	$	15.90	$	7.76	$	15.90	$	9.27

8

The estimated fair value of restricted stock (RSA and RSU) awards was calculated based on the market price of the Company’s common stock on the date of grant. Some RSU awards made during the second quarter of fiscal year 2008 are classified as liabilities rather than equity. For awards classified as liabilities, the cost of these awards was re-measured on July 29, 2007.

Financial Statement Effects and Presentation. The following table shows total pre-tax, stock-based compensation expense included in the Consolidated Condensed Statements of Income for the quarter and six months ended July 29, 2007 and July 30, 2006, respectively,:

Allocation of Stock-based Compensation

(in thousands)	Three Months Ended					Six Months Ended
	July 29 2007		July 30 2006			July 29 2007		July 30 2006
Cost of sales	$	187	$	372		$	497	$	506
Selling, general and administrative		2,662		2,763			4,092		5,422
Product development and engineering		1,101		1,072			1,835		2,260
Stock-based compensation, pre-tax	$	3,950	$	4,207		$	6,424	$	8,188
Net change in stock-based compensation captitalized into inventory	$	192	$	(15	)	$	152	$	283
Total stock-based compensation	$	4,142	$	4,192		$	6,576	$	8,471

Impact of Stock-based Compensation

(in thousands)	Three Months Ended						Six Months Ended
	July 29 2007			July 30 2006			July 29 2007			July 30 2006
Stock-based compensation	$	3,950		$	4,207		$	6,424		$	8,188
Associated tax effect		(1,158	)		(1,253	)		(1,863	)		(2,344	)
Net effect on net income	$	2,792		$	2,954		$	4,561		$	5,844
Effect on earnings per share -
Basic	$	0.04		$	0.04		$	0.07		$	0.08
Diluted	$	0.04		$	0.04		$	0.06		$	0.08
Weighted average number of shares -
Basic		66,984			72,291			69,687			72,433
Diluted		68,844			73,929			71,212			74,311

For the three month periods ended July 29, 2007 and July 30, 2006, the tax benefit realized from option exercise activity was $1.9 million and $0.1 million, respectively. The tax benefit realized from option exercise activity for the six month periods ended July 29, 2007 and July 30, 2006 was $3.1 million and $1.4 million, respectively.

9

Stock Option Awards. The Company has historically granted stock option awards to both employees and non-employee directors. The grant date for these awards is equal to the measurement date. These awards were valued as of the measurement date and are amortized over the requisite vesting period. A summary of the activity for stock option awards in the three months and six months ended July 29, 2007 is presented below:

Information regarding outstanding stock option awards

(in thousands, except for per share price)	Number of Shares		Weighted Average Exercise Price (per share)		Aggregate Intrinsic Value (1)		Aggregate Unrecognized Compensation
January 29, 2007	13,393
Grants	—		$	—
Exercises	(395	)			$	2,915.2
Cancellations and forfeitures	(2,814	)
April 29, 2007	10,184						$	16,683.1
Grants	2,516		$	16.16
Exercises	(586	)			$	4,685.1
Cancellations and forfeitures	(313	)
July 29, 2007	11,801						$	32,180.5

(1) Represents the difference between the exercise price and the value of Semtech stock at the time of exercise.

Performance Unit Awards. In the second quarter of fiscal year 2008, the Company granted performance vested RSU’s to select employees. These awards have a performance condition in addition to a service condition. The performance condition relates generally to the Company’s revenue and operating income measured against internal goals. Under the terms of these awards, assuming the highest level of performance with no cancellations due to forfeitures, the maximum number of units that can be earned in the aggregate is 350,000. In this scenario, the maximum number of shares that could be issued thereunder would be 175,000; additionally, the Company would have a liability equal to the value of 175,000 shares on the settlement date, which would be settled in cash. At July 29, 2007, the number of these units expected to vest, which includes a factor for forfeitures and a current assessment of the likelihood of meeting the performance measures, was approximately 143,260. The following table summarizes performance unit award activity during the second quarter of fiscal year 2008:

Information regarding outstanding performance unit awards

	Total Units	Subject to Share Settlement	Subject to Cash Settlement			Weighted Average Grant Date Fair Value (per share)		Aggregate Unrecognized Compensation Cost
(in thousands, except for per share price)		Units	Units	Recorded Liability
April 29, 2007	—	—	—		—			$	—
Granted	175	88	87			$	16.14
Exercised	—	—	—
Cancelled/Forfeited	—	—	—
Change in Liability					107.1
July 29, 2007	175	88	87	$	107.1			$	2,699.2

10

Restricted Stock Awards. In the second quarter of fiscal year 2008, the Company granted restricted stock awards to select employees. The grant date for these awards is equal to the measurement date. These awards are valued as of the measurement date and amortized over the requisite vesting period. A summary of the activity for restricted stock awards in the three months and six months ended July 29, 2007 is presented below:

Information regarding outstanding restricted stock awards

(in thousands, except per share price)	Number of Shares		Weighted Average Grant Date Fair Value (per share)		Aggregate Intrinsic Value (2)	Aggregate Unrecognized Compensation Cost
January 29, 2007	100
Granted	—			—
Vested	(25	)			332
Forfeited	—				—
April 29, 2007	75					$	1,313.5
Granted	599		$	16.14
Vested	(6	)			106
Forfeited	(2	)			—
July 29, 2007	666					$	10,396.8

(2) Represents the value of Semtech stock on the date that the restricted stock units vested.

Stock Unit Awards. In the second quarter of fiscal year 2008, the Company issued, for the first time, stock unit awards to non-employee directors. These RSU’s are accounted for as liabilities because they are cash settled. The value of these awards is remeasured at each reporting period until settlement and the pro-rata vested portion of the award is recognized as a liability. The following table summarizes stock unit awards activity for the three month period ended July 29, 2007:

Information regarding outstanding stock unit awards

(in thousands, except per share data)	Number of Units	Recorded Liability	Weighted Average Grant Date Fair Value (per share)		Aggregate Unrecognized Compensation Cost
April 29, 2007	—	—				—
Granted	32		$	17.61
Vested	—
Forfeited	—
Change in Liability		44.5
July 29, 2007	32	—			$	515.5

Note 8: Stock Repurchase Program and Accelerated Stock Buyback Program; Treasury Shares

In the first quarter of fiscal year 2005, the Company announced that its Board of Directors approved a program under which the Company could repurchase up to $50.0 million of its common stock. In the second quarter of fiscal year 2006, the Company announced that it had used up the initial authorization and that its Board of Directors had approved increasing the program by an additional $50.0 million. In the second quarter of fiscal year 2007, the Company announced that its Board of Directors again had authorized increasing the existing buyback program by an additional $50.0 million. Thus, the total authorized under the program is $150 million.

As of July 29, 2007, the Company had repurchased 5.4 million shares of its common stock at a cost of $99.7 million under this program. Of the repurchased shares, 1.2 million have been reissued as a result of stock option exercises; the remainder is being held as treasury shares.

11

On May 30, 2007, the Company announced that its Board of Directors approved an accelerated stock repurchase program and entered into an accelerated stock repurchase agreement (the “Agreement”) with Goldman, Sachs & Co (“Goldman Sachs”). The Agreement, supplemental to the Company’s existing stock repurchase program, provides for the repurchase of $150 million of the Company’s outstanding common stock, subject to certain purchase price adjustments.

Goldman Sachs delivered 9,836,066 shares to the Company in June 2007 and is expected to cover the borrowed shares by making open market purchases of the Company’s common stock during the course of the program. The final purchase price will be based on the volume weighted average share price of the Company’s common stock (the “VWAP price”) from the end of an initial period (which lasted approximately one month) to the end of the program. The program will end on any day of Goldman Sachs’ choosing starting approximately four months and ending approximately thirteen months after the date the agreement was signed. At program termination, the Company is expected to either receive from or pay to Goldman Sachs a purchase price adjustment based on such VWAP price, which amount may be paid in cash or shares.

Approximately one third of the repurchased shares are subject to a collar provision that establishes the minimum and maximum purchase price adjustments that the Company may receive or pay at program termination in respect of the collared shares. These minimum and maximum adjustments will be based on the VWAP price during the initial period. The remaining approximately two-thirds of the repurchased shares are not subject to the collar provision.

The initial purchase price was funded with the Company’s existing domestic cash. The Company currently intends to hold the repurchased shares as treasury stock. The outstanding shares used to calculate earnings per share were immediately reduced by the number of shares repurchased. Some of the treasury shares are expected to be reissued in the future as a result of stock option exercises.

Note 9: Investments

Temporary and long-term investments consist of government, bank and corporate obligations. Temporary investments mature within twelve months of the balance sheet date. Long-term investments have maturities in excess of one year from the date of the balance sheet. As of July 29, 2007, the Company had $25.9 million of temporary investments and $28.7 million of long-term investments. As of January 28, 2007, the Company had $126.0 million of temporary investments and $49.8 million of long-term investments. Certain short-term, highly liquid investments, namely money-market accounts are accounted for as cash and cash equivalents.

The Company classifies its investments as “available for sale” because it expects to possibly sell some securities prior to maturity. The Company’s investments are subject to market risk, primarily interest rate and credit risk. The Company’s investments are managed by a limited number of outside professional managers subject to investment guidelines set by the Company. Such guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting the Company’s investments to high quality debt instruments with relatively short-term maturities.

As a result of changes in the market value of investments, the Company included $127,000 of unrealized loss and $357,000 of unrealized gain, net of tax, in comprehensive income for the second quarters of fiscal year 2008 and 2007, respectively. The tax associated with these comprehensive income items were expense of $88,000 and $239,000 in the second quarter of fiscal years 2008 and 2007, respectively. The Company included $361,000 of unrealized loss and $361,000 of unrealized gain, net of tax, in comprehensive income for the first six months of fiscal years 2008 and 2007, respectively. The tax associated with these comprehensive income items were expense of $246,000 and expense of $242,000 in the first six months of fiscal year 2008 and 2007, respectively.

Temporary and long-term investments consist of the following security types, stated at fair market value and cost basis with the difference between these amounts booked as part of comprehensive income:

Investments (in thousands)

	July 29, 2007							January 28, 2007
	Market Value		Cost Basis		Unrealized Loss			Market Value		Cost Basis		Unrealized Loss
U.S. government issues	$	17,964	$	18,200	$	(236	)	$	31,795	$	32,200	$	(405	)
State and local government issues		—		—		—			15,100		15,100		—
Corporate issues		36,696		36,816		(120	)		128,911		129,474		(563	)
Investments	$	54,660	$	55,016	$	(356	)	$	175,806	$	176,774	$	(968	)

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The Company regularly invests in auction rate securities, which within the fixed income market are very common and generally considered highly liquid. The auction rate securities the Company holds reset their coupon rate either monthly or quarterly, although the contractual maturity of auction rate securities is usually several years in the future. For purposes of reporting these securities, the Company has used the contractual maturity date, not the date of the next reset.

Investment maturities (in thousands)

	July 29, 2007				January 28, 2007
	Market Value		Cost Basis		Market Value		Cost Basis
Within 1 year	$	25,945	$	26,005	$	125,979	$	126,678
After 1 year through 5 years		28,715		29,011		49,827		50,096
	$	54,660	$	55,016	$	175,806	$	176,774

Investments and interest from cash and cash equivalents generated interest income of $3.3 million and $3.2 million in the second quarters of fiscal years 2008 and 2007, respectively and interest income of $7.6 million and $5.8 million in the first six months of fiscal years 2008 and 2007, respectively.

Note 10: Inventories

Inventories (in thousands):

	July 29 2007		January 28 2007
Raw materials	$	1,478	$	2,723
Work in process		12,837		11,410
Finished goods		7,426		6,360
	$	21,741	$	20,493

Note 11: Assets Held for Sale

In the fourth quarter of fiscal year 2007, the Company entered into a contract to sell a parcel of land in San Diego, California that was purchased in fiscal year 2001 and the Company reclassified the net book value of the land to “Held for Sale” status in its financial statements, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). The sale was completed in the first quarter of fiscal year 2008 resulting in a net gain of approximately $1.3 million. The gain on the sale is classified in the line item “Interest and other income, net” in the Consolidated Condensed Statement of Income for the six months ended July 29, 2007.

In the second quarter of fiscal year 2008, the Company made plans to dispose of underutilized equipment. The Company expects that the final sale and disposal of the assets will be completed in the third quarter of fiscal year 2008. In connection with the plan of disposal, the Company determined that the carrying values of some of the underlying assets exceeded their fair values. Consequently, the Company recorded an impairment loss of $110,000, which represents the excess of the carrying values of the assets over their fair values, less cost to sell. The impairment loss was recorded within the Interest and other income section of

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in the Income Statement for the quarter ended July 29, 2007. The carrying value of these assets is separately presented in the Balance Sheet under the caption “Assets held for sale.” No depreciation is recorded for assets classified as held for sale.

Note 12: Intangible Assets

The goodwill associated with the purchase of XEMICS, the subsidiary now know as Semtech Neuchatel, was $32.5 million as of July 29, 2007 and $32.7 million as of January 28, 2007, an insignificant amount of which is expected to be deductible for tax purposes. Presented below is a summary of the impact of changes to goodwill since the date of acquisition.

(in thousands)	Beginning balance on date of acquisition		Adjustments to date			Balance as of July 29, 2007
Goodwill	$	32,941	$	(409	)	$	32,532

There was $275,000 and $275,000 of expense in the second quarter of fiscal years 2008 and 2007, respectively, and $ 551,000 and $640,000 of expense in the first six months of fiscal years 2008 and 2007, respectively, for amortization of intangible items associated with the acquisition of XEMICS. The remaining $3.7 million balance of other intangible items, as detailed below, will be amortized over future periods. No significant residual value is expected. There are no tax-related benefits from these acquisition related costs.

Other intangibles (in thousands)

	Beginning balance on date of acquisition		Amortization to date			Balance as of July 29, 2007		Remaining period to be amortized
Core technologies		6,000		(2,273	)		3,727	47 months
Customer relationships		30		(25	)		5	11 months
Other Intangibles	$	6,030	$	(2,298	)	$	3,732

Note 13: Commitments and Contingencies

Deferred Compensation Plan

The Company maintains a deferred compensation plan for certain officers and key executives that allows participants to defer a portion of their compensation for future distribution at various times permitted by the plan. A portion of the employee’s deferral is matched by the Company, with the match subject to a vesting period. Compensation expense under this plan for the second quarter of fiscal years 2008 and 2007 totaled approximately $142,000 and $162,000, respectively. Compensation expenses under this plan, net of forfeitures, for the first six months of fiscal year 2008 and 2007 totaled $277,000 and $6,000, respectively. The Company received a credit of approximately $333,000 in the first quarter of fiscal year 2007 as a result of previously accrued compensation expense under the plan that was forfeited as a result of termination of certain plan participants.

The Company’s liability for deferred compensation totaled $7.1 million as of July 29, 2007 and $6.6 million as of January 28, 2007, and is included in other long-term liabilities. The Company has purchased whole life insurance on the lives of certain current and former deferred compensation plan participants. This Company-owned life insurance is intended to cover a majority of the costs of the deferred compensation plan. The cash surrender value of the company-owned life insurance was $6.7 million as of July 29, 2007 and $6.4 million as of January 28, 2007, and is included in other assets.

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Legal Matters

From time to time in the ordinary course of its business, the Company is involved in various claims, litigation, and other legal actions that are normal to the nature of its business, including with respect to intellectual property, contract, product liability, employment, and environmental matters.

The Company records any amounts recovered in these matters when collection is certain. Liabilities for claims against the Company are accrued when it is probable that a liability has been incurred and the amount can reasonably be estimated. Any amounts recorded are based on periodic reviews by outside counsel, in-house counsel and management and are adjusted as additional information becomes available or assessments change.

While some insurance coverage is maintained for such matters, there can be no assurance that the Company has a sufficient amount of insurance coverage, that asserted claims will be within the scope of coverage of the insurance, or that the Company will have sufficient resources to satisfy any amount due not covered by insurance.

Management is of the opinion that the ultimate resolution of such matters now pending will not, individually or in the aggregate have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows. However, the outcome of legal proceedings cannot be predicted with any degree of certainty.

Some of the Company’s more significant pending legal matters are discussed below:

Government Inquiries

In 2006, the Company received a letter from the SEC requesting that it voluntarily provide information regarding stock options granted since 1997 as part of an informal inquiry. At about the same time, the Company received a Grand Jury subpoena from the United States District Court, Southern District of New York, requesting documents relating to the Company’s stock option practices since 1996. The Company responded to these requests in a timely manner and intends to continue to fully cooperate in these inquiries. The filing of our restated financial statements in March 2007 did not resolve these matters.

In the event that either or both of these investigations leads to action against any of our current or former directors, officers, or employees, or the Company itself, the trading price of the Company’s common stock may be adversely impacted. If the Company is subject to adverse findings in either of these matters, it could be required to pay damages or penalties or have other remedies imposed upon it which could have a material adverse effect on its business, financial condition, results of operations and cash flows. In addition, if either or both of these investigations continue for a prolonged period of time, they may have the same impact regardless of the ultimate outcome.

Shareholder Derivative Lawsuits

The Company has been served with five purported shareholder derivative lawsuits making various allegations with respect to stock option improprieties and financial reporting. The Company is named solely as a nominal defendant against whom the plaintiffs seek no monetary recovery. These lawsuits name various current and former directors, officers, and executives as individual defendants from whom various forms of monetary damages are sought.

Two purported derivative lawsuits with virtually identical complaints were filed in the Superior Court of the State of California in 2006 and consolidated into one case (“State Derivative Litigation”). The State Derivative Litigation has been stayed in favor of the duplicative Federal Derivative Litigation discussed below.

Three purported shareholder derivative lawsuits were filed in the U.S. District Court for the Central District of California in 2006 and consolidated into one case (“Federal Derivative Litigation”).

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These complaints include claims for violations of federal securities laws, breach of fiduciary duty, abuse of control, corporate waste, unjust enrichment, gross mismanagement, insider selling and misappropriation of information, and violations of the California Corporations Code. Not all claims are included in each case.

The relief sought varies among the cases. Generally, the plaintiffs are seeking an accounting, monetary damages and pre-judgment interest from the individual defendants; equitable relief; costs, fees, and expenses; orders directing the Company with respect to certain corporate governance actions, and such other relief as the Court deems just and proper.

A Special Litigation Committee of the Board has determined it is not in the interests of shareholders or the Company to pursue the claims in the cases described above and that the Company should seek to have these suits terminated. The Company has filed a motion to terminate the Federal Derivative Litigation.

The Company is unable to predict the outcome of these matters at this time.

Class Action Lawsuit

In August 2007, a purported class action lawsuit was filed against the Company and certain current and former officers on behalf of persons who purchased or acquired Semtech securities from September 11, 2002 until July 19, 2006. The case, filed in Federal Court in the Southern District of New York, alleges violations of Federal securities laws in connection with the Company’s past stock option practices. Plaintiffs demand a jury trial but make no specific monetary demand. The Company has not yet responded to the complaint.

Settled Customer Dispute and Related Insurance Matters

In fiscal years 2004 and 2005, the Company paid a customer $12 million to resolve a dispute regarding a product. The Company is vigorously pursuing insurance coverage for the full value of the settlement and filed lawsuits against three of its insurance companies.

Settlement was reached with two of the insurance companies in fiscal year 2006. A $3.0 million gain recorded for these insurance settlements in fiscal year 2006 was offset by $2.9 million of related legal expenses incurred in that year. For additional information regarding the insurance settlements, see the Form 8-K’s filed by the Company on July 7, 2005 and July 19, 2005 and Exhibit 10.1 to the Form 10-Q filed by the Company on September 9, 2005.

The case against the remaining insurance company is still pending but no trial date has been set. The Company is unable to predict if settlement will be reached prior to trial. There is no assurance that the Company will prevail at trial or that the insurance company will not appeal if the Company does prevail. Legal fees and expenses related to pursuit of the insurance recovery have been, and will continue to be, expensed in the period incurred. The legal fees and expenses for the second quarters and first six months of fiscal years 2008 and 2007 are set forth in the Consolidated Condensed Statements of Income as a separate line item titled “Insurance related legal expenses.” If the settlement amount or amount awarded at trial is less than the Company seeks, if the Company fails to prevail at trial, or if the Company or insurance company appeals the decision, total legal expenses associated with the litigation since its inception may exceed the amount recovered from the insurance companies.

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Environmental Matters

In 2001, the Company was notified by the California Department of Toxic Substances Control (“State”) that it may have liability associated with the clean-up of the one-third acre Davis Chemical Company site in Los Angeles, California. The Company has been included in the clean-up program because it was one of the companies that used the Davis Chemical Company site for waste recycling and/or disposal between 1949 and 1990. The Company has joined with other potentially responsible parties in an effort to resolve this matter with the State. The group has entered into a Consent Order with the State that requires the group to perform a soils investigation at the site and submit a draft remediation plan. In March 2007, the State approved the group’s draft remediation plan, which will be published for public comment before the final remediation plan is submitted. The State has the right to require the removal of contaminated soils and to expand the scope of work to include further investigation of groundwater contamination. The Consent Order does not require the group to remediate the site. To date, the Company’s share of the group’s expenses has not been material and has been expensed. At this time there is not a specific proposal or budget with respect to any additional studies or the clean-up of the site. Thus, no reserve has been established for this matter.

Certain contaminants have been found in the groundwater at and near the facility in Newbury Park, California that the Company leased for approximately forty years before relocating to its current facility in 2002. Monitoring results over a number of years indicate that contaminants are from adjacent facilities. It is currently not possible to determine the ultimate amount of possible future clean-up costs, if any, that may be required of the Company for this site. There are no claims pending with respect to environmental matters at the Newbury Park site. Accordingly, no reserve for clean up has been provided at this time.

Intellectual Property Disputes and Other Matters

From time to time, the Company is approached by persons seeking payment based on the Company’s alleged use of their intellectual property. The Company is also periodically named as a defendant in lawsuits involving intellectual property and other matters that are routine to the nature of its business. Management is of the opinion that the ultimate resolution of all such pending matters will not have a material adverse effect on the accompanying consolidated condensed financial statements.

Stockholder Protection Agreement

Effective June 11, 1998, the Company’s board of directors approved a Stockholder Protection Agreement to issue a Right for each share of common stock outstanding on July 31, 1998 and each share issued thereafter (subject to certain limitations). These Rights, if not cancelled by the Board of Directors, can be exercised into a certain number of Series X Junior Participating Preferred Stock after a person or group of affiliated persons acquire 25% or more of the Company’s common stock and subsequently allow the holder to receive certain additional Company or acquirer common stock if the Company is acquired in a hostile takeover. The Rights expire on July 30, 2008.

Product Warranties

The Company’s general warranty policy provides for repair or replacement of defective parts. In some cases a refund of the purchase price is offered. In certain instances the Company has agreed to other warranty terms, including some indemnification provisions.

The product warranty accrual, which is included in cost of sales, reflects the Company’s best estimate of probable liability under its product warranties. The Company accrues for known warranty issues if a loss is probable and can be reasonably estimated, and accrues for estimated incurred but unidentified issues based on historical experience.

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The following table details the change in the product warranty accrual.

Product Warranty Accrual (in thousands)

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Beginning balance	$	50	$	50	$	50	$	50
Payments made		—		—		—		—
Net expense accrued		—		—		—		—
Ending balance	$	50	$	50	$	50	$	50

If there is a substantial increase in the rate of customer claims, if the Company’s estimates of probable losses relating to identified warranty exposures prove inaccurate, or its efforts to contractually limit liability prove inadequate, the Company may record a charge against future cost of sales. Over at least the last decade, warranty expense has been immaterial to our financial statements.

Indemnification

In the normal course of its business, the Company indemnifies other parties, including customers, distributors, and lessors, with respect to certain matters. These obligations typically arise under contracts under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations and covenants related to certain matters, such as acts or omissions of Company employees, infringement of third-party intellectual property rights, and certain environmental matters. Over at least the last decade, the Company has not incurred any significant expense as a result of agreements of this type. The Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements. Accordingly, the Company has not accrued any amounts for such indemnification obligations in the first six months of fiscal year 2008.

The Company has also entered into agreements with its current and former directors and some current and former Company executives indemnifying them against certain liabilities incurred in connection with their duties. The Company’s Certificate of Incorporation and Bylaws contain similar indemnification obligations with respect to the Company’s current and former directors and employees, as does the California Labor Code. In some cases there are limits on, and exceptions to, the Company’s potential indemnification liability. Prior to fiscal year 2007, the Company had not incurred any significant expense as a result of agreements of this type for at least a decade. In fiscal year 2007, in conjunction with a review of its historical stock option practices, the Company incurred $500,000 of expense by advancing legal expenses to current and former directors, officers and executives under pre-existing indemnification agreements and to other current and former employees under the California Labor Code and a resolution of the Board authorizing such advances. In the second quarter of fiscal year 2008, the Company advanced an additional $314,000 of expenses related to these matters. For the first six months of fiscal year 2008, the Company advanced $636,000. All such advances are subject to an undertaking to repay the funds to the Company in certain circumstances. The Company expects to continue to incur significant expense in connection with such advances related to the Government inquiries, the derivative and class action litigation discussed above, and other matters associated with or stemming from the circumstances underlying the March 2007 restatement of its historical financial statements to correct stock option accounting (“restatement”). The Company cannot estimate the amount of potential future payments, if any, that it might be required to make as a result of these agreements with respect to other matters.

Note 14: Taxes

Effective at the beginning of the first quarter of fiscal year 2008, the Company adopted the provisions of FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109.” FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS No. 109, “Accounting for Income Taxes.” The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

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Upon adoption and the conclusion of the initial evaluation of our uncertain tax positions (UTP) under FIN 48, the Company recorded a cumulative increase in the liability for UTP by $2.1 million which was accounted for as a debit to retained earnings. At January 29, 2007, the total liability for UTP recorded in our balance sheet was $4.8 million. Because these UTP predominantly impact carryforward tax attributes, the UTP liability is recorded as a credit to non-current deferred tax assets. During the second quarter of fiscal 2008, the liability for UTP increased by approximately $190,000. For the first six months of fiscal year 2008, the UTP liability increased by approximately $326,000.

Included in the balance of unrecognized tax benefits at July 29, 2007, are $5.1 million of tax benefits that, if recognized, would impact the effective tax rate. With regard to the unrecognized tax benefits at July 29, 2007, the Company does not believe that it is reasonably possible that any portion of the unrecognized tax benefits will be recognized in the next twelve months.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes on the Consolidated Condensed Statements of Income. As of the date of adoption of FIN 48, the Company had approximately $96,000 accrued for the payment of interest and penalties. No accrual for the payment of interest and penalties was recorded in the first six months of fiscal year 2008.

The Company files U.S. federal, U.S. state, and foreign tax returns. In fiscal year 2005, the Internal Revenue Service completed its examination of our federal income tax returns through 2001 (fiscal year 2002). For state returns, the Company is generally not subject to income tax examinations for years prior to 1999 (fiscal year 2000). Our largest foreign tax presence is in Switzerland. Our Swiss tax filings have been examined through 2005 (fiscal year 2006). The Company is not currently under audit by any taxing jurisdiction.

Note 15: Segment Information

The Company operates in two reportable segments: Standard Semiconductor Products and Rectifier, Assembly and Other Products. The Rectifier, Assembly and Other Products segment has represented less than 10% of net sales for the last three fiscal years.

The Standard Semiconductor Products segment makes up the vast majority of overall sales and includes the power management, protection, test and measurement, advanced communications, wireless and sensing, and human input device product lines. The Rectifier, Assembly and Other Products segment includes the Company’s line of assembly and rectifier devices, which are the remaining products from its original founding as a supplier into the military, aerospace and industrial equipment markets.

The accounting policies of the segments are the same as those described above and in the Company’s Form 10-K for the year ended January 28, 2007 in the summary of significant accounting policies. The Company evaluates segment performance based on net sales and operating income of each segment. Management does not track segment data or evaluate segment performance on additional financial information. As such, there are no separately identifiable segment assets nor are there any separately identifiable statements of income data (below operating income).

The Company does not track or assign assets to individual reportable segments. Likewise, depreciation expense and capital additions are also not tracked by reportable segments.

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Net Sales (in thousands)

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Standard Semiconductor Products	$	60,861	$	60,955	$	116,359	$	123,362
Rectifier, Assembly and Other Products		6,187		3,966		11,255		7,502
Net Sales	$	67,048	$	64,921	$	127,614	$	130,864

Operating Income (in thousands)

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Standard Semiconductor Products	$	5,370	$	6,041	$	8,574	$	16,681
Rectifier, Assembly and Other Products		2,497		1,240		3,909		2,160
Total Operating Income	$	7,867	$	7,281	$	12,483	$	18,841

Certain corporate level expenses not directly attributable to a reportable segment are allocated to the segments based on percentage of sales. Beginning with the second quarter of fiscal year 2007, these allocated expenses include expenses associated with the Company’s investigation into its historical stock option practices, the restatement of its historical financial statements, and related matters.

Included in operating income in the second quarter of fiscal years 2008 and 2007 for the Standard Semiconductor Products segment is $ 349,000 and $2.2 million, respectively, of expense associated with the investigation into the Company’s historical stock option practices. For the first six months of fiscal years 2008 and 2007, the Standard Semiconductor Products segment incurred $2.3 million and $2.2 million, respectively, of expense associated with the investigation into the Company’s historical stock option practices.

Included in operating income for the Standard Semiconductor Products segment for the second quarters of fiscal year 2008 and 2007 are legal fees incurred by the Company in suing insurance companies to recover amounts associated with the resolution of a past customer dispute.

One end-customer that is a leading manufacturer of cellular phones and consumer equipment, and that buys products directly from the Company, accounted for approximately 13% of net sales in the second quarter of fiscal year 2008. No end-customer accounted for over 10% or more of net sales in the second quarter of fiscal year 2007. One of our Asian distributors accounted for approximately 16% of net sales in the second quarter of fiscal year 2008 and 11% of net sales in the second quarter of fiscal year 2007.

As of July 29, 2007, one end-customer that is a leading manufacturer of cellular phones and consumer equipment, and that buys products directly from the Company, accounted for approximately 13% of net accounts receivable and one of the Company’s Asian distributors accounted for approximately 12% of net accounts receivable. As of July 30, 2006, the same Asian distributor accounted for approximately 12% of net accounts receivable. Sales to the Company’s customers are generally made on open account, subject to credit limits the Company may impose, and the receivables are subject to the risk of being uncollectible.

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A summary of net external sales by region follows. The Company does not track customer sales by region for each individual reporting segment.

Sales by Region (% of net sales)

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Domestic	19	%	24	%	20	%	23	%
Asia-Pacific	66	%	63	%	65	%	64	%
Europe	15	%	13	%	15	%	13	%
Total	100	%	100	%	100	%	100	%

Long-lived assets located within the United States as of July 29, 2007 and January 28, 2007 were approximately $21.4 million and $31.6 million, respectively. The reduction in long-lived assets was impacted primarily by the disposal of undeveloped land located in San Diego, California. Long-lived assets located outside the United States as of July 29, 2007 and January 28, 2007 was approximately $15.3 million and $17.2 million, respectively. Some of these assets are at locations owned or operated by the Company’s suppliers. The Company has consigned certain equipment to a foundry and a packaging and test subcontractor based in China to support its specialized processes run at the foundry and to ensure a specified level of capacity over the next few years. The provision of these assets to the wafer foundry is factored into the Company’s long-term pricing arrangement with the foundry for any reserved wafers it may purchase. The Company has also installed its own test equipment at some of its packaging and testing subcontractors in order to ensure a certain level of capacity, assuming the subcontractor has ample employees to operate the equipment.

The Company relies on a limited number of outside subcontractors and suppliers for the production of silicon wafers, packaging and certain other tasks. Disruption or termination of supply sources or subcontractors, due to natural disasters or other causes, could delay shipments and could have a material adverse effect on the Company. Although there are generally alternate sources for these materials and services, qualification of the alternate sources could cause delays sufficient to have a material adverse effect on the Company. Several of the Company’s outside subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in foreign countries, including China, Taiwan, Malaysia, the Philippines, Germany, Israel and Canada. The Company’s largest source of silicon wafers is an outside foundry located in China and a significant amount of the Company’s assembly and test operations are conducted by third-party contractors in Malaysia, the Philippines and China.

Note 16: Matters Related to Historical Stock Option Practices

During the second quarters of fiscal year 2008 and 2007, the Company incurred approximately $875,000 and $2.3 million, respectively, of expenses for legal, accounting, tax and other professional services in connection with the government inquiries, the preparation of the restated financial statements, the related derivative litigation, and other matters associated with or stemming from the restatement and its underlying circumstances. These expenses in the second quarters of fiscal year 2008 and 2007 include approximately $314,000 and $12,000, respectively, for claims for advancement of legal expenses to current and former directors, officers and executives under pre-existing indemnification agreements and to other current and former employees under the California Labor Code and a resolution of the Board authorizing such advances. These advances are subject to an undertaking to repay the funds to the Company in certain circumstances. See Note 13 for additional information regarding indemnification.

The Company expects these expenses to continue for some time and is unable to predict the outcome of the government inquiries, the derivative litigation or any of the other matters associated with or stemming from the restatement and its underlying circumstances. These matters have occupied and will continue to occupy the time and attention of management, could negatively impact the Company’s business and could have a material adverse impact on the Company’s financial condition, results of operations, and cash flow.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations together with the consolidated condensed financial statements and the notes to the consolidated condensed financial statements included elsewhere in this Form 10-Q.

This discussion contains forward-looking statements. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as our future financial performance, future operational performance and our plans, objectives and expectations. Some forward-looking statements may be identified by use of terms such as “expects,” “anticipates,” “intends,” “estimates,” “believes,” “projects,” “should,” “will,” “plans” and similar words. In light of the risks and uncertainties inherent in all such projected matters, forward-looking statements should not be regarded as a representation by the Company or any other person that our objectives or plans will be achieved or that any of our operating expectations or financial forecasts will be realized. Results could differ materially from those projected in forward-looking statements, due to factors including, but not limited to, those set forth in the “Risk Factors” and “Quantitative and Qualitative Disclosure About Market Risk” sections of this Form 10-Q and the “Risk Factors” section of our annual report on Form 10-K for the year ended January 28, 2007. We undertake no duty to update any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition to regarding forward-looking statements with caution, you should consider that the preparation of financial statements requires us to draw conclusions and make interpretations, judgments, assumptions and estimates with respect to factual, legal, and accounting matters. Different conclusions, interpretations, judgments, assumptions, or estimates could result in materially different results. See Note 1 to the financial statements included in this Form 10-Q.

Overview

We design, produce and market a broad range of products that are sold principally to customers in the computer, communications and industrial markets for a wide variety of end applications. Computer end market applications include notebook and desktop computers, computer graphics, and personal digital assistants (PDAs). Products within the communications market include products for set-top boxes, local area networks, metro and wide area networks, cellular phones and base stations. Industrial and other applications include automated test equipment (ATE), power supplies, hearing aids and other medical devices, and meter reading and factory automation systems. Our end-customers are primarily original equipment manufacturers and their suppliers, including Alcatel, Apple, Cisco, Compal Electronics, Dell, Hewlett Packard, IBM, Intel, LG Electronics, Motorola, Phonak, Quanta Computer, Samsung, Siemens, Sony and Unisys.

We recognize product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable. Product design and engineering revenue is recognized during the period in which services are performed. We defer revenue recognition on shipment of certain products to distributors where return privileges exist until the products are sold through to end-users.

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Most of our sales to customers are made on the basis of individual customer purchase orders. Many customers include liberal cancellation provisions in their purchase orders. Trends within the industry toward shorter lead-times and “just-in-time” deliveries have resulted in our reduced ability to predict future shipments. As a result, we rely on orders received and shipped within the same quarter for a significant portion of our sales. Sales made directly to original equipment manufacturers during the second quarter of fiscal year 2008 were 36% of net sales. The remaining 64% of net sales were made through independent distributors.

We operate our business based on two reportable segments: Standard Semiconductor Products and Rectifier, Assembly and Other Products. We evaluate segment performance based on net sales and operating income of each segment. We do not track segment data or evaluate segment performance on additional financial information. We do not track balance sheet items by individual reportable segments. As such, there are no separately identifiable segment assets nor are there any separately identifiable statements of income data (below operating income). The Standard Semiconductor Products segment makes up the vast majority of overall sales and includes our power management, protection, test and measurement, advanced communications, wireless and sensing, and human input device product lines. The Rectifier, Assembly and Other Products segment includes our line of assembly and rectifier devices, which are the remaining products from our founding as a supplier into the military and aerospace market.

Our business involves reliance on foreign-based entities. Most of our outside subcontractors and suppliers, including third-party foundries that supply silicon wafers, are located in foreign countries, including China, Malaysia, Korea, the Philippines, Germany, Singapore and Thailand. During the second quarter of fiscal year 2008, approximately 40% of our silicon, in terms of cost of finished wafers purchased, was manufactured in China. Foreign sales for the second quarter of fiscal year 2008 constituted approximately 81% of our net sales. Approximately 81% of foreign sales are to customers located in the Asia-Pacific region. The remaining foreign sales were primarily to customers in Europe, Canada, and Mexico.

Critical Accounting Policies and Estimates

During the second quarter of fiscal year 2008, other than the adoption of FIN 48 noted below, there have been no significant changes to our critical accounting policies as compared to the previous disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year 2007 that ended on January 28, 2007.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, we evaluate and discuss with our audit committee our estimates, including, but not limited to, those related to our allowance for doubtful accounts and sales returns, inventory reserves, asset impairments and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, which together form the basis for making judgments about the carrying values of assets and liabilities. Our critical accounting policies and estimates do not vary between our two reportable segments. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, among others, affect the significant judgments and estimates we use in the preparation of our consolidated condensed financial statements:

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Accounting for Temporary and Long-Term Investments

Our temporary and long-term investments consist of government, bank and corporate obligations. Temporary investments mature within twelve months of the balance sheet date. Long-term investments have maturities in excess of one year from the date of the balance sheet. We classify our investments as “available for sale” because we expect to possibly sell some securities prior to maturity. We include any unrealized gain or loss, net of tax, in comprehensive income, as detailed in Note 5 (Comprehensive Income) to the unaudited financial statements included in this Form 10-Q.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a combination of factors. If we are aware of a customer’s inability to meet its financial obligations to us, we record an allowance to reduce the net receivable to the amount we reasonably believe we will be able to collect from the customer. For all other customer receivables, we recognize allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment, the size and number of certain large accounts and our historical experience. If the financial condition of our customers were to deteriorate or if economic conditions worsen, additional allowances may be required in the future.

Revenue Recognition

We recognize product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable. We defer revenue recognition on shipment of products to certain customers, principally distributors, where return privileges exist until these products are sold through to end-users or the return privilege lapses. The estimated deferred gross margins on these sales, where there are no outstanding receivables, are recorded on the balance sheet under the heading of “Deferred Revenue.” We record a provision for estimated sales returns in the same period as the related revenues are recorded. We base these estimates on historical sales returns and other known factors. Actual returns could be different from our estimates and current provisions for sales returns and allowances, resulting in future charges to earnings.

Inventory Valuation

Our inventories are stated at lower of cost or market and consist of materials, labor and overhead. We determine the cost of inventory by the first-in, first-out method. At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. This evaluation includes analyses of sales levels by product and projections of future demand. In order to state our inventory at lower of cost or market, we maintain reserves against our inventory. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of goods sold in the period the revision is made.

Contingencies and Litigation

We are involved in various disputes and litigation matters as both claimant and defendant. We record any amounts recovered in these matters when collection is certain. We record liabilities for claims against us when the losses are probable and estimable. Any amounts recorded are based on reviews by outside counsel, in-house counsel and management. Actual results may differ from estimates.

Stock-Based Compensation

In fiscal years 1997 through 2006, we included in the Notes to Consolidated Financial Statements in our Annual Reports a pro forma disclosure of the impact stock options would have on net income (loss) using the fair value stock option expense recognition method, as allowed under Statement of Financial Accounting Standards No. 123 and using an intrinsic value method, as prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”.

A revised standard, SFAS No. 123 (revised 2004), “Share Based Payment” (“SFAS 123(R)”), which requires all companies to measure compensation cost for all share-based payments (including stock options) at fair value, became effective for us beginning with the first quarter of fiscal year 2007, which

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began on January 30, 2006. The adoption of SFAS 123(R) requires us to apply a valuation model, which includes estimates and assumptions on the rate of forfeiture and expected life of options and stock price volatility, as detailed in Note 7 (Equity Incentive Plans) to the unaudited financial statements included in this Form 10-Q. If any of the assumptions used in the valuation model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period and actual results may differ from estimates.

Goodwill and Intangible Assets

We account for goodwill and other intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Goodwill is recorded at the time of an acquisition and is calculated as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired.

Accounting for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired, including in-process research and development (IPR&D). Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. The amounts and useful lives assigned to other intangible assets impact the amount and timing of future amortization, and the amount assigned to IPR&D is expensed immediately if the underlying project has not reached technological feasibility and no alternative future use exists. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required.

Impairment of Goodwill and Other Intangible Assets

In accordance with SFAS 142, we test goodwill for impairment on an annual basis or more frequently if we believe indicators of impairment exist. The value of our intangible assets, including goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology company stocks, including the valuation of our common stock, (iii) a significant slowdown in the worldwide economy and the semiconductor industry or (iv) any failure to meet the performance projections included in our forecasts of future operating results. We evaluate these assets, including purchased intangible assets deemed to have indefinite lives, on an annual basis or more frequently if indicators of impairment exist. In the process of our annual impairment review, we primarily use the income approach methodology of valuation that includes the discounted cash flow method, as well as other generally accepted valuation methodologies, to determine the fair value of the assets. Significant management judgment is required in the forecasts of future operating results that are used in the discounted cash flow method of valuation. The estimates we have used are consistent with the plans and estimates that we use to manage our business. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges in a future period.

The Company accounts for other purchased intangible assets, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment, such as reductions in demand or significant economic slowdowns in the semiconductor industry, are present. Reviews are performed to determine whether the carrying value of an asset is impaired, based on comparisons to undiscounted expected future cash flows. If this comparison indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using: (i) quoted market prices and/or (ii) discounted expected future cash flows utilizing a discount rate consistent with the guidance provided in FASB Concepts Statement No. 7, “Using Cash Flow Information and Present Value in Accounting Measurements.” Impairment is based on the excess of the carrying amount over the fair value of those assets.

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In-Process Research and Development

As a result of the acquisition of XEMICS, IPR&D expense totaled $4.0 million in fiscal year 2006. The amount allocated to IPR&D was determined through established valuation techniques used in the high technology industry and was expensed upon acquisition as it was determined that the underlying project had not reached technological feasibility and no alternative future uses existed. In accordance with SFAS No. 2, “Accounting for Research and Development Costs”, as clarified by FIN No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method”, an Interpretation of FASB Statement No. 2, amounts assigned to IPR&D meeting the above-stated criteria were charged to expense as part of the allocation of the purchase price.

The fair value of the acquired IPR&D was determined using the income approach. Under this approach, the expected future cash flows for the project under development are estimated and discounted to their net present value at an appropriate risk-adjusted rate of return. Significant factors considered in the calculation of the rate of return are the weighted-average cost of capital and return on assets, as well as the risks inherent in the development process, including the likelihood of achieving technological success and market acceptance. The unique technological innovations, the existence and reliance on core technology, the existence of any alternative future use or current technological feasibility and the complexity, cost and time to complete the remaining development were all considered. Future cash flows were estimated based on forecasted revenue and costs, taking into account product life-cycles, market penetration and growth rates.

The following table summarizes the key assumptions of the acquired IPR&D project as of the date of the XEMICS acquisition:

Development project	Wireless & sensing chips and protocols
Average estimated percent complete	23%
Average estimated time to complete	1.5 years
Estimated cost to complete (in millions)	$3.9
Risk adjusted discount rate	25%
IPR&D (in millions)	$4.0

As of the acquisition date, the cost to complete development was estimated to be $3.9 million and revenue related to the acquired IPR&D was projected to begin in the fourth quarter of fiscal year 2007. As a result of a shift in strategic market positioning, R&D priorities were revised and related resources were reallocated. This shift resulted in the cancellation of some development activities and a reduced allocation of development resources to others, resulting in a delay in projected release to market of certain IPR&D related products. Revenue related to the acquired IPR&D is now projected to begin late in fiscal year 2008. This shift in priorities is expected to reduce overall cash flow from IPR&D related projects by approximately $2.4 million over the next three years which will be partially offset by reduced development costs related to the cancelled development activities. The assumptions consist primarily of expected completion dates, estimated cost to complete and revenue and expense projections for the product once it enters the market.

Accounting for Income Taxes

We adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (FIN 48) in the first quarter of fiscal year 2008. See Note 14 (Taxes) to the unaudited financial statements included in this Form 10-Q for further discussion.

As part of the process of preparing our consolidated condensed financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax liability together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated condensed balance sheet. We must assess the

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likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. Generally, to the extent we change the valuation allowance in a period, the change is recorded through the tax provision in the statement of operations. If a valuation allowance relates to benefits from stock option exercise activity, any adjustment to the valuation allowance would be recorded to paid-in-capital in the period of the adjustment. Any release of a valuation allowance established against a pre-acquisition XEMICS net operating loss carryforward will be recorded to goodwill. Management periodically evaluates our deferred tax assets to assess whether it is likely that the deferred tax assets will be realized.

We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant management estimates are required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax impact is uncertain. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax laws. As a result of the adoption of FIN 48 in the first quarter of fiscal year 2008, we recognize liabilities for uncertain tax positions based on the two-step process prescribed within the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. Should additional taxes be assessed as a result of an audit or litigation, a material effect on our income tax provision and net income in the period or periods for which that determination is made could result.

Under SFAS 123(R), the income tax effects of share-based payments are recognized for financial reporting purposes only if such awards are expected to result in a tax deduction. SFAS 123(R) prohibits recognition of a deferred tax asset for an excess tax benefit (that is, a tax benefit that exceeds the amount of compensation cost recognized for the award for financial reporting purposes) that has not been realized. In determining when an excess tax benefit is realized, we have elected to follow the ordering provision of the tax law.

In addition to the risks to the effective tax rate discussed above, the effective tax rate reflected in forward-looking statements is based on current enacted tax law. Significant changes in enacted tax law could materially affect these estimates.

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Results of Operations

The following table sets forth, for the periods indicated, our statements of operations data expressed as a percentage of revenues.

	Three Months Ended				Six Months Ended
	July 29 2007		July 30 2006		July 29 2007		July 30 2006
Net Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of Sales	44.8	%	45.5	%	45.0	%	44.0	%
Gross Profit	55.2	%	54.5	%	55.0	%	56.0	%
Operating costs and expenses:
Selling, general & administrative	26.8	%	27.0	%	28.3	%	24.9	%
Product development & engineering	15.8	%	15.7	%	16.1	%	16.0	%
Acquisition related write-offs and amortization	0.4	%	0.4	%	0.4	%	0.5	%
Insurance related legal expenses/(settlements)	0.5	%	0.2	%	0.4	%	0.2	%
Total operating costs and expenses	43.4	%	43.3	%	45.3	%	41.6	%
Operating income	11.7	%	11.2	%	9.8	%	14.4	%
Interest and other income, net	5.3	%	4.9	%	7.3	%	4.6	%
Income before taxes	17.0	%	16.1	%	17.1	%	19.0	%
Provision for taxes	3.6	%	3.1	%	3.8	%	3.6	%
Net income	13.5	%	13.0	%	13.3	%	15.4	%

Comparison of the Three Months Ended July 29, 2007 and July 30, 2006

We report on the basis of 52 and 53 week periods and end our fiscal year on the last Sunday in January. All quarters consist of 13 weeks, except for one 14-week quarter in 53-week years. The second quarters of fiscal years 2008 and 2007 were each made up of 13 weeks.

Net Sales. Net sales for the second quarter of fiscal year 2008 were $67.0 million, an increase of 3% compared to $64.9 million for the second quarter of fiscal year 2007. Revenue growth was driven by end application demand for our power products sold into cellular phone and mobile computing applications, continued strength in protection device sales into a diverse section of end markets and robust discrete device sales into the industrial and military market segment. This strength was offset by weak sales into the ATE end-market.

Our estimates of sales by major end-markets are detailed below:

End-Market

(% of net sales)

	Three Months Ended
	July 29 2007		July 30 2006
Computer	22	%	24	%
Communications	36	%	38	%
Industrial/Other	42	%	38	%
Total	100	%	100	%

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Standard Semiconductor Products represented 91% of net sales in the second quarter of fiscal year 2008, while 9% were represented by the Rectifier, Assembly and Other Products segment. Sales of our Standard Semiconductor Products segment were 94% of net sales in the second quarter of fiscal year 2007 and Rectifier, Assembly and Other Products’ sales were 6%. Sales of Standard Semiconductor Products remained flat in the second quarter of fiscal year 2008 as compared to the prior year period. Sales of Rectifier, Assembly and Other Products, which are mostly sold into military and industrial applications (part of the end-market of “industrial/other”), increased 56% in the second quarter of fiscal year 2008, as compared to the prior year period, due to continued surge in demand from specific industrial and military customers. These products are older technology products and have a very limited customer base.

Net Sales by Reportable Segment

(in thousands)

	Three Months Ended				Three Months Ended
	July 29 2007				July 30 2006				Change
Standard Semiconductor Products	$	60,861	91	%	$	60,955	94	%	0	%
Rectifier, Assembly and Other Products	$	6,187	9	%	$	3,966	6	%	56	%
Net sales	$	67,048	100	%	$	64,921	100	%	3	%

Gross Profit. Gross profit for the second quarter of fiscal year 2008 was $37.0 million, compared to $35.4 million for the prior year period. The increase in gross profit was driven by a 3% increase in sales and an increase in overall gross margins from 54% in the prior year’s second quarter to 55% in the second quarter of fiscal year 2008.

The improvement in gross margins was largely related to the increase in total sales for the corporation coupled with lower inventory reserve requirements in the second quarter of fiscal year 2008 for excess and obsolete inventories relating to power management products. The higher levels of reserves for excess and obsolete inventories in prior periods related to inventory builds in support of customer platforms, primarily within the power management group, that never materialized. In the second quarter of fiscal year 2008, inventory levels were better aligned with customer demand, resulting in a significantly lower charge to reserves.

Operating Costs and Expenses. Operating costs and expenses were $29.1 million, or 43% of net sales in the second quarter of fiscal year 2008. Operating costs and expenses for the second quarter of fiscal year 2007 were $28.1 million, or 43% of net sales. Operating costs and expenses in the second quarters of fiscal year 2008 and fiscal year 2007 were impacted by $3.9 million and $4.2 million of pre-tax expense, respectively, associated with stock-based compensation.

Operating Costs and Expenses

(in thousands)

	Three Months Ended				Three Months Ended
	July 29 2007				July 30 2006				Change
Selling, general and administrative	$	17,943	62	%	$	17,512	62	%	2	%
Product development and engineering		10,581	36	%		10,189	36	%	4	%
Acquisition related costs		275	1	%		275	1	%	0	%
Insurance related legal costs		324	1	%		106	1	%	206	%
Total operating costs and expenses	$	29,123	100	%	$	28,082	100	%	4	%

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Operating Income. Operating income was $7.9 million in the second quarter of fiscal year 2008, compared to $7.3 million in the second quarter of fiscal year 2007. Operating income was unfavorably impacted by relatively flat gross margins on higher net sales and a 4% increase in operating expenses.

We evaluate segment performance based on net sales and operating income of each segment. Detailed below is operating income by reportable segment.

Operating Income by Reportable Segment

(in thousands)

	Three Months Ended				Three Months Ended
	July 29 2007				July 30 2006				Change
Standard Semiconductor Products	$	5,370	68	%	$	6,041	83	%	-11	%
Rectifier, Assembly and Other Products	$	2,497	32	%	$	1,240	17	%	101	%
Total operating income	$	7,867	100	%	$	7,281	100	%	8	%

Operating income in the second quarter of fiscal year 2008 for the Standard Semiconductor Products segment declined from the second quarter of fiscal year 2007 as a result of flat net sales, flat gross margins and slightly higher operating expenses. In the second quarter of fiscal year 2008, the Rectifier, Assembly and Other Products segment realized operating margins in excess of our corporate average as a result of substantially higher net sales, improved gross margins driven by better absorption of fixed manufacturing expenses, and greater leverage on operating expenses.

Interest and Other Income, Net. Net interest and other income was $3.5 million in the second quarter of fiscal year 2008. Interest and other income, net includes interest income from investments and other items. It also includes the impact of changes in the value of foreign currencies held. Net interest and other income in the second quarter of fiscal year 2007 was $3.2 million. The increase is primarily attributable to interest income increasing from $3.2 million in the second quarter of fiscal year 2007 to $3.3 million in the second quarter of fiscal year 2008.

Provision for Taxes. Provision for income taxes was $2.4 million for the second quarter of fiscal year 2008, compared to $2.0 million in the second quarter of fiscal year 2007. The effective tax rate for the second quarter of fiscal year 2008 was 21% and for the second quarter of fiscal year 2007 was 20%. There are several factors that can cause our effective tax rate to vary either higher or lower, including variations in income, the source of that income, exchange rates, the geographical sales mix and other factors. In the second quarter of fiscal year 2008, the increase in the effective tax rate was impacted mostly by a substantial increase in earnings subject to taxation in both the U.S. and a foreign jurisdiction.

Comparison of the Six Months Ended July 29, 2007 and July 30, 2006

We report on the basis of 52 and 53 week periods and end our fiscal year on the last Sunday in January. All quarters consist of 13 weeks, except for one 14-week quarter in 53-week years. The first six months of fiscal years 2008 and 2007 were each made up of 26 weeks.

Net Sales. Net sales for the first six months of fiscal year 2008 were $127.6 million, a decrease of 2% compared to $130.9 million for the first six months of fiscal year 2007. The decrease in sales in the comparable period was driven by an overall decline in power management sales largely into computer and cell phone applications in addition to weakness of sales into the ATE end-market. Offsetting some of these declines was a modest recovery of power management sales into the cellular phone and mobile computing applications, sales in protection devices sold into a diverse cross section of end markets and discrete devices servicing the industrial and military market segments.

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Our estimate of sales by major end-markets is detailed below:

End-Market

(% of net sales)

	Six Months Ended
	July 29 2007		July 30 2006
Computer	21	%	24	%
Communications	39	%	39	%
Industrial/Other	40	%	37	%
Total	100	%	100	%

Standard Semiconductor Products represented 91% of net sales in the first six months of fiscal year 2008, while 9% were represented by the Rectifier, Assembly and Other Products segment. Sales of our Standard Semiconductor Products segment were 94% of net sales in the first six months of fiscal year 2007 and Rectifier, Assembly and Other Products’ sales were 6%. Sales of Standard Semiconductor Products decreased 6% in the first six months of fiscal year 2008 as compared to the prior year period. Sales of Rectifier, Assembly and Other Products increased 50% in the first six months of fiscal year 2008 as compared to the prior year period.

Net Sales by Reportable Segment

(in thousands)

	Six Months Ended				Six Months Ended
	July 29 2007				July 30 2006				Change
Standard Semiconductor Products	$	116,359	91	%	$	123,362	94	%	-6	%
Rectifier, Assembly and Other Products	$	11,255	9	%	$	7,502	6	%	50	%
Net sales	$	127,614	100	%	$	130,864	100	%	-2	%

Gross profit for the first six months of fiscal year 2008 was $70.2 million, compared to $73.3 million for the fist six months of fiscal year 2007. The decline in gross profit was negatively impacted by lower sales and declines in the average selling prices of our parts in the comparable periods. This was somewhat offset by a reduction in reserves taken in the first six months of fiscal year 2008 for excess and obsolete inventory for power management products. The higher levels of reserves for excess and obsolete inventories in prior periods related to inventory builds in support of customer platforms that never materialized. In the second quarter of fiscal year 2008, inventory levels were better aligned with customer demand, resulting in a significantly lower charge to reserves.

We have experienced long-term price reductions in our manufacturing costs, in part due to our outsourcing of most manufacturing functions. However, declines in the average selling prices of our parts, which are typical in the semiconductor industry, tend to offset much of the manufacturing cost savings. Our gross margin is most impacted by the mix of products used in our customer’s particular end-applications.

Operating Costs and Expenses. Operating costs and expenses for the first six months of fiscal year 2008 were $57.8 million or 45% of net sales compared to $54.4 million or 42% of net sales for the first six months of fiscal year 2007. Operating costs and expenses for the first six months of fiscal year 2008 and fiscal year 2007 were impacted by $6.4 million of pre-tax expense and $8.1 million of pre-tax expense, respectively, associated with stock-based compensation.

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Operating Costs and Expenses

(in thousands)

	Six Months Ended				Six Months Ended
	July 29 2007				July 30 2006				Change
Selling, general and administrative	$	36,124	62	%	$	32,636	60	%	11	%
Product development and engineering		20,586	36	%		20,891	38	%	-1	%
Acquisition related costs		551	1	%		640	1	%	-14	%
Insurance related legal costs		499	1	%		266	1	%	88	%
Total operating costs and expenses	$	57,760	100	%	$	54,433	100	%	6	%

Operating Income. Operating income was $12.5 million in the first six months of fiscal year 2008, down from operating income of $18.8 million in the first six months of fiscal year 2007. Operating income was unfavorably impacted by a 2% decrease in net sales and an unfavorable increase of 6% in operating expenses.

We evaluate segment performance based on net sales and operating income of each segment. Detailed below is operating income by reportable segment.

Operating Income by Reportable Segment

(in thousands)

	Six Months Ended				Six Months Ended
	July 29 2007				July 30 2006				Change
Standard Semiconductor Products	$	8,574	69	%	$	16,681	89	%	-49	%
Rectifier, Assembly and Other Products	$	3,909	31	%	$	2,160	11	%	81	%
Total operating income	$	12,483	100	%	$	18,841	100	%	-34	%

For the first six months of fiscal year 2008, operating income for the Standard Semiconductor Products segment declined due to lower sales, lower gross margins and higher operating expenses.

Interest and Other Income, Net. Net interest and other income was $9.3 million in the first six months of fiscal year 2008. Net interest and other income in the first six months of fiscal year 2007 was $6.1 million.

Interest and other income, net includes interest income from investments and other items. It also includes the impact of changes in the value of foreign currencies held. The increase in net interest and other income in the first six months of fiscal year 2008 resulted mostly from higher interest income due to higher rates of return on investments and gains on sale of fixed assets.

Provision for Taxes. Provision for income taxes was $4.8 million for the first six months of fiscal year 2008, compared to $4.7 million in the first six months of fiscal year 2007. The effective tax rate for the first six months of fiscal year 2008 was 22% and for the first six months of fiscal year 2007 was 19%. There are several factors which can cause our effective tax rate to vary either higher or lower, including variations in income, the source of that income, exchange rates, the geographical sales mix and other factors.

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Liquidity and Capital Resources

We evaluate segment performance based on net sales and operating income of each segment. We do not track segment data or evaluate segment performance on additional financial information. As such, there are not separately identifiable segment assets and liabilities.

As of July 29, 2007, we had working capital of $238.9 million, compared with $325.4 million as of January 28, 2007. The ratio of current assets to current liabilities as of July 29, 2007 was 8.5 to 1 compared to 11.7 to 1 as of January 28, 2007.

The combined amounts of cash and cash equivalents, temporary investments and long-term investments were $234.4 million as of July 29, 2007, down from $338.5 million as of January 28, 2007. We have no long-term debt and had $7.7 million of other long-term liabilities as of July 29, 2007. The combined amount of cash and cash equivalents, temporary investments and long-term investments would generally be available for any capital or liquidity needs.

Operating Cash Flows. Cash provided by operating activities was $26.1 million for the first six months of fiscal year 2008 compared to $39.1 million for the first six months of fiscal year 2007. Net operating cash flows were impacted by non-cash charges for depreciation and amortization of $5.5 million and $5.7 million in the first six months of fiscal years 2008 and 2007, respectively.

In addition to depreciation and amortization, operating cash flows in the first six months of fiscal year 2008 were positively impacted by net income of $17.0 million, the depreciation and amortization noted above, stock-based compensation of $6.6 million, the tax benefit of stock-based compensation of $2.9 million, offset by $2.9 million of excess tax benefits, $1.5 million of gain on sale of property, plant and equipment, and $2.0 million due to changes in assets and liabilities, the largest being an increase in accounts receivable of $3.6 million.

Operating cash flows in the first six months of fiscal year 2007 were positively impacted primarily by net income of $20.2 million, the depreciation and amortization noted above, stock-based compensation of $8.5 million, and the tax benefit on stock-based compensation of $5.8 million. The positive impact of these items was offset by various changes in assets and liabilities, the largest being increases in inventories and receivables.

Cash Flows Related to Investing Activities. Investing activities provided $130.1 million in the first six months of fiscal year 2008 compared to $5.7 million provided in the prior year period. Major investing activities for both periods consist of changes in investments and the purchase and sale of property, plant, and equipment. Purchases of property, plant, and equipment for the first six months of fiscal years 2008 and 2007 were $1.3 million and $1.6 million, respectively. The Company received $10.0 million in cash proceeds from the sale of property, plant and equipment in the first six months of fiscal year 2008. The netting of the purchases of available-for-sale investments and the proceeds from the sale and maturities of available-for-sale investments reflect net cash provided of $121.5 million and $6.2 million for the first six months of 2008 and 2007, respectively.

Cash Flows Related to Financing Activities. Financing activities used $139.2 million during the first six months of fiscal year 2008 and $9.6 million in the prior year period. Cash provided by financing activities for the first six months of fiscal year 2008 include $7.1 million from the exercise of stock options and $2.9 million from the excess tax benefit received on stock options partially offset by shares surrendered by an employee to settle tax withholding obligations. The Company used $150.0 million to purchase common stock and received $ 874,000 for issuance of treasury stock. Cash used by financing activities for the first six months of fiscal year 2007 reflect $3.1 million of proceeds from stock option exercises and the re-issuance of treasury stock, $1.5 million from the excess tax benefit received on stock options, offset by $14.2 million used to repurchase stock pursuant to a stock buyback program.

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In order to develop, design, and manufacture new products, we have spent significant funds for this purpose during the past five years. We expect to continue to spend significant funds aimed at developing new products including the hiring of design and applications engineers and the purchase of test equipment. We intend to invest in those areas that have shown potential to be viable and profitable market opportunities. Certain of these expenditures, particularly the hiring of design engineers, do not generate significant financial returns in the short term. We plan to finance these expenditures with cash generated by operations.

A significant amount of our capital resources, and the related liquidity they represent, are held by our foreign subsidiaries. As of July 29, 2007, approximately $131.0 million of cash, cash equivalents, and short-term investments were held in Switzerland, compared to $108.7 million held in Switzerland as of January 28, 2007. Repatriation of these funds for use in domestic operations could have negative tax consequences.

Purchases of new capital equipment were made to expand our test capacity and support other engineering functions, including product design and qualification. These expenditures were funded from cash provided by operations and cash reserves.

In May 2007, we entered into an accelerated stock repurchase agreement with Goldman Sachs whereby we paid approximately $150 million dollars from domestic cash in exchange for approximately 9.8 million shares of our common stock See Note 8 (Stock Repurchase Program and Accelerated Stock Buyback Program; Treasury Shares) to the unaudited financial statements included in this Form 10-Q.

We believe that operating cash flows together with cash reserves are sufficient to fund operations and capital expenditures for the foreseeable future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as those arrangements are defined by the SEC, that are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We do not have any unconsolidated subsidiaries or affiliated entities. We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity or market or credit risk support, engage in leasing, hedging, research and development services, or other relationships that expose us to liability that is not reflected on the face of the financial statements.

Contractual Obligations

There were no material changes during the second quarter of fiscal year 2008. However, refer to Note 8 (Stock Repurchase Program and Accelerated Stock Buyback Program; Treasury Shares) to the unaudited financial statements included in this Form 10-Q for a discussion regarding the $150 million accelerated stock repurchase agreement that was entered into in May 2007 under which the Company could have an obligation to pay a purchase price adjustment in cash or in shares of its common stock.

Inflation

Inflationary factors have not had a significant effect on our performance over the past several years. A significant increase in inflation would affect our future performance.

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Available Information

General information about us can be found on our website at www.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 Form 10-Q and should not be considered part of this or any other report filed with the Securities and Exchange Commission (“SEC”).

We make available free of charge, either by direct access on our website or by a link to the SEC website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 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, 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.

Financial statements and the related reports of our independent public accountants, earnings press releases, and similar communications issued prior to July 20, 2006 should no longer be relied upon and have been superseded by the information contained in the Form 10-K/A for fiscal year 2006 filed on March 29, 2007 (“Form 10-K/A”) and reports filed with the SEC concurrently with and subsequent to the Form 10-K/A.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to a variety of market risks, such as the foreign exchange and interest rate risks that are detailed below. Many of the factors that can have an impact on our market risk are external to the company, and so we are unable to fully predict them.

For additional quantitative and qualitative disclosures about market risk affecting us, see item 7A of the Company’s Form 10K for fiscal year 2007 that ended on January 30, 2007.

Foreign Currency Risk

As a global enterprise, we face exposure to adverse movements in foreign currency exchange rates and we could experience currency gains or losses. Because of the relatively small size of each individual currency exposure, we generally do not use forward contracts to mitigate foreign currency exposures. Our foreign currency exposures may change over time as the level of activity in foreign markets grows and could have an adverse impact upon our financial results.

Certain of our assets, including certain bank accounts and accounts receivable, exist or have existed, in non U.S. dollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations. The non U.S. dollar-denominated currencies are principally the Euro, Swiss Francs and British Pounds Sterling. Additionally, certain of our current and long-term liabilities are denominated principally in Swiss Francs and British Pounds Sterling currency, which are also sensitive to foreign currency exchange rate fluctuations.

Substantially all of our foreign sales are denominated in United States dollars. Currency exchange fluctuations in countries where we do business could harm our business by resulting in pricing that is not competitive with prices denominated in local currencies.

Interest Rate and Market Risk

As of July 29, 2007, we had no long-term debt outstanding. We do not currently hedge any potential interest rate exposure.

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Interest rates affect our return on excess cash and investments. As of July 29, 2007, we had $179.7 million of cash and cash equivalents and $54.7 million of temporary and long-term investments. A majority of our cash and cash equivalents and investments generate interest income based on prevailing interest rates. A significant change in interest rates would impact the amount of interest income generated from our excess cash and investments. It would also impact the market value of our investments.

Our investments are subject to market risk, primarily interest rate and credit risk. Our investments are managed by a limited number of outside professional managers subject to investment guidelines set by us. Such guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting our investments to high quality debt instruments with relatively short-term maturities.

Commodity Risk

We are subject to risk from fluctuating market prices of certain commodity raw materials, particularly gold, that are incorporated into our end products or used by our suppliers to process our end products. Increased commodity prices are passed on to us in the form of higher prices from our suppliers, either in the form of general price increases or commodity surcharges. Although we generally deal with our suppliers on a purchase order basis rather than on a long-term contract basis, we generally attempt to obtain firm pricing for volumes consistent with planned production. Our gross margins may decline if we are not able to increase selling prices of our products or obtain manufacturing efficiencies to offset the increased cost. We do not enter into formal hedging arrangements to mitigate against commodity risk.

Stock Market Risks

In May 2007, we entered into an accelerated stock repurchase agreement with Goldman Sachs whereby we paid approximately $150 million dollars to Goldman Sachs in exchange for 9,836,066 shares of our common stock. See Note 8 (Stock Repurchase Program and Accelerated Stock Buyback Program; Treasury Shares) to the unaudited financial statements included in this Form 10-Q for additional information regarding the agreement under which we could have an obligation to pay a purchase price adjustment based on changes in the stock price during the program and regarding the steps taken to mitigate a portion of this risk.

ITEM 4. Controls and Procedures

Disclosure Controls

We carried out, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective to ensure (a) that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.

Changes in Internal Controls

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) occurred during the fiscal quarter ended July 29, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

Information about legal proceedings is set forth under Note 13 (Legal Matters) to the unaudited financial statements included in this Form 10-Q.

ITEM 1A. Risk Factors

During the period covered by this quarterly report, the risk factors associated with our business have not significantly changed as compared to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2007. Also see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for a discussion of certain factors that may affect our future performance.

You should carefully consider and evaluate all of the information in this Form 10-Q and the risk factors set forth in our Form 10-K for the fiscal year ended January 28, 2007. The risks in the Form 10-K are not the only ones facing our Company. Additional risks not now known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occur, our business could be materially harmed. If our business is harmed, the trading price of our common stock could decline.

This Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as our future financial performance, future operational performance, and our plans, objectives and expectations. Some forward-looking statements may be identified by use of terms such as “expects,” “anticipates,” “intends,” “estimates,” “believes,” “projects,” “should,” “will,” “plans” and similar words. In light of the risks and uncertainties inherent in all such projected matters, forward-looking statements should not be regarded as a representation by the Company or any other person that our objectives or plans will be achieved or that any of our operating expectations or financial forecasts will be realized. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described in our most recently filed Form 10-K, in our other filings with the SEC, and in material incorporated herein and therein by reference. We undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

The Company did not make any sales of unregistered securities during the second quarter of fiscal year 2008.

Issuer Purchase of Equity Securities

This table provides information with respect to purchases by the Company of shares of common stock during the second quarter of fiscal year 2008.

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Issuer Purchases of Equity Securities

Fiscal Month/Year	Total Number of Shares Purchased (2)/(3)	Average Price Paid per Share (3)	Total Number of Shares Purchased as Part of Publicly Announced Program (3)	Approximate Dollar Value of Shares That May Yet Be Purchased Under The Program (1)/(3)
May 2007 (04/29/07-05/27/07)	—	—	—	50.3 million
June 2007 (05/28/07-06/29/07)	9,836,066	N/A	9,836,066	50.3 million
July 2007 (06/30/07-07/29/07)	—	—	—	50.3 million
Total second quarter	9,836,066	—	9,836,066

(1) In the first quarter of fiscal year 2005, the Company announced that the Board of Directors authorized the repurchase of up to $50 million of the Company’s common stock from time to time through negotiated or open market transactions (the “2004 Program”). In the second quarter of fiscal year 2006, the Company announced that it had exhausted the initial authorization and that its Board of Directors had approved an additional $50.0 million for the 2004 Program. In the second quarter of fiscal year 2007, the Company announced that its Board of Directors again had authorized increasing the existing buyback program by an additional $50.0 million, bringing the total authorized under the program to $150 million. The 2004 Program does not have an expiration date. No publicly announced plan or program of the Company for the purchase of shares expired during the period covered by the table.

(2) The table does not include shares surrendered to the Company in connection with the cashless exercise of stock options by employees and directors or shares surrendered to the Company to cover tax withholding upon vesting of restricted stock.

(3) In May 2007, we entered into an accelerated stock repurchase agreement whereby we paid approximately $150 million dollars to Goldman Sachs in exchange for approximately 9.8 million shares of our common stock. Average Price Paid per Share information will be available once the Goldman Sachs program ends. See Note 8 (Stock Repurchase Program and Accelerated Stock Buyback Program; Treasury Shares) to the unaudited financial statements included in this Form 10-Q. The Goldman Sachs program is in addition to the 2004 Program. During the second quarter of fiscal year 2008 there were no purchases under the 2004 Program.

ITEM 3. Defaults Upon Senior Securities

None

ITEM 4. Submission of Matters to a Vote of Security Holders

As contemplated by the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on May 21, 2007 (“Proxy Statement”), an Annual Meeting of Shareholders was held on June 14, 2007.

Proxies for the meeting were solicited pursuant to Regulation 14A under the Exchange Act of 1934; there was no solicitation in opposition to the management’s nominees as listed in the Proxy Statement; and all such nominees were elected.

At the June 14, 2007 Annual Meeting, the shareholders of the Company voted on two matters:

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First, the shareholders elected the following individuals to the Board of Directors to serve until the next annual meeting of shareholders or until their successors are elected and duly qualified:

	Votes Cast For	Votes Withheld
Glen M. Antle	55,631,739	10,843,236
W. Dean Baker	65,754,375	720,600
James P. Burra	26,453,022	40,021,953
Bruce C. Edwards	65,801,757	673,218
Rockell N. Hankin	26,620,187	39,854,788
James T. Lindstrom	55,146,033	11,328,942
Mohan R. Maheswaran	63,951,649	2,523,326
John L. Piotrowski	58,947,010	7,527,965
James T. Schraith	23,902,667	42,572,308

Also, the shareholders approved the appointment of Ernst & Young LLP as the Company’s independent registered public accountant for fiscal year 2008. The appointment was ratified by a vote of 66,090,551 shares, with 245,737 votes against, 138,687 abstentions and no non-votes.

ITEM 5. Other Information

None

ITEM 6. Exhibits

Documents that are not physically filed with this report are incorporated herein by reference to the location indicated.

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Exhibit No.	Description	Location
10.1	Master Confirmation dated May 30, 2007 between Semtech Corporation and Goldman, Sachs & Co.	Exhibit 10.1 to the Company’s current report on Form 8-K filed on June 1, 2007
10.2	Supplementatl Confirmation dated May 30, 2007 between Semtech Corporation and Goldman, Sachs & Co.	Exhibit 10.2 to the Company’s current report on Form 8-K filed on June 1, 2007
10.3	Information Regarding Compensatory Arrangements of Certain Officers and Directors	Form 8-K filed on June 12, 2007
10.4	Semtech Corporation Bonus Plan	Exhibit 10.1 to the Company’s current report on Form 8-K filed on June 12, 2007
10.5	Form of Long-Term Stock Incentive Plan Option Award Certificate	Exhibit 10.2 to the Company’s current report on Form 8-K filed on June 12, 2007
10.6	Form of Long-Term Stock Incentive Plan Restricted Stock Award Certificate	Exhibit 10.3 to the Company’s current report on Form 8-K filed on June 12, 2007
10.7	Form of Long-Term Incentive Plan Performance Unit Award Certificate	Exhibit 10.4 to the Company’s current report on Form 8-K filed on June 12, 2007
10.8	Form of Long-Term Incentive Plan Option Award Certificate (Non-Employee Directors)	Exhibit 10.5 to the Company’s current report on Form 8-K filed on June 12, 2007
10.9	Form of Long-Term Stock Incentive Plan Non-Employee Director Stock Unit Award Certificate	Exhibit 10.1 to the Company’s current report on Form 8-K filed on June 19, 2007
10.10	Policy Regarding Director Compensation
10.11	Adoption Agreement adopting The Executive Nonqualified “Excess” Plan (known as the Semtech Executive Compensation Plan) as amended and restated effective January 1, 2005
10.12	Amended and Restated Plan Document for The Executive Nonqualified “Excess” Plan (known as the Semtech Executive Compensation Plan), effective January 1, 2005
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934 as amended.
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934 as amended.
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (As set forth in Exhibit 32.1 hereof, Exhibit 32.1 is being furnished and shall not be deemed “filed”.)
32.2	Certification of the Chief Financial Officer Pursuant 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (As set forth in Exhibit 32.2 hereof, Exhibit 32.2 is being furnished and shall not be deemed “filed”.)

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SIGNATURES

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, thereunto duly authorized.

	SEMTECH CORPORATION
	Registrant
Date: September 7, 2007	/s/ Mohan R. Maheswaran
	Mohan R. Maheswaran
	Chief Executive Officer
Date: September 7, 2007	/s/ Emeka N. Chukwu
	Emeka N. Chukwu
	Vice President Finance, Chief Financial Officer

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EX-10.10

Exhibit 10.10

POLICY REGARDING DIRECTOR COMPENSATION

Directors of Semtech Corporation (the “Company”) that are not employed by the Company or one of its subsidiaries receive compensation for their services to the Board of Directors and related committees as set forth below.

Cash Retainer Fees. Effective for the quarter beginning July 1, 2007, the retainer fees for non-employee directors of the Company will be as follows:

Description	Annual Amount
Annual Retainer	$45,000
Additional Retainer for Chairman of the Board	$50,000
Committee Chair Retainer (Standing Committees)	Audit Committee - $20,000 Compensation Committee - $15,000 Nominating/Governance Committee - $10,000 Finance Committee - $10,000
Committee Retainer1 (Standing Committees)	Audit Committee - $10,000 Compensation Committee - $7,500 Nominating/Governance Committee - $5,000 Finance Committee - $5,000

These retainer fees are paid to the director on a quarterly basis, with each installment being equal to one-fourth of the annualized amount set forth above and being paid in advance in cash at the beginning of each quarter.

For the period commencing July 1, 2007 and ending June 30, 2008, the retainer fees payable to certain non-employee directors of the Company will be reduced by the amount of retainer fees attributable to the director’s services for this period that has previously been foregone by the director in exchange for the grant of a stock option. For Rockell N. Hankin, the amount of the foregone retainer is $30,000, and, accordingly, each of Mr. Hankin’s quarterly payments during this period will be reduced by $7,500. For each of Glen M. Antle, James P. Burra, James T. Lindstrom, John L. Piotrowski and James T. Schraith, the amount of the foregone retainer is $20,000, and, accordingly, each of the director’s payments during this period will be reduced by $5,000.

Non-employee directors of the Company are also reimbursed for their reasonable expenses to attend meetings of the Board of Directors and related committees and otherwise attend to Company business.

Equity Award Grants. The following equity award grant policies are adopted effective immediately. The equity awards set forth herein will be made from the Company’s Long Term Stock Incentive Plan or any successor plan designated by the Board (“Plan”):

Initial Option Grant². Each non-employee director who first joins the Board after June 14, 2007 (who was not immediately prior to joining the Board an employee of the Company or one of its subsidiaries) will

¹ The Committee Retainer shall be payable to each member of the respective Committee who is not also the Chair of that Committee. The Chair of a particular Committee shall be entitled to receive only the Committee Chair Retainer for that particular committee.

² The share numbers set forth herein for equity awards shall not be adjusted for stock splits or the like without further action of the Board, provided however that equity awards that have been granted prior to a split or similar event will be subject to adjustment pursuant to the Plan.

receive an option to purchase 20,000 shares of the Company’s common stock upon his or her initial election or appointment to the Board of Directors. These options will have an exercise price equal to the closing price of the Company’s common stock on the grant date (or as of the next succeeding business day if the grant date is not a trading date) and will vest in annual installments over the four-year period following the grant date beginning on the first anniversary of the grant date. Each option grant will be evidenced by, and subject to the terms and conditions of, an award agreement in the form approved by the Board of Directors to evidence such type of grant pursuant to this policy.

Semi-Annual Option Grants². On each January 1 and July 1, each non-employee director then in office will receive an option to purchase 5,000 shares of the Company’s common stock. These options will have an exercise price equal to the closing price of the Company’s common stock on the grant date (or as of the next succeeding business day if the grant date is not a trading date) and will vest in annual installments over the four-year period following the grant date, beginning on the first anniversary of the grant date. Each option grant will be evidenced by, and subject to the terms and conditions of, an award agreement in the form approved by the Board of Directors to evidence such type of grant pursuant to this policy.

Annual Stock Unit Grant. On each July 1, each non-employee director then in office will also receive an award of restricted stock units. The number of restricted stock units will be determined by dividing $70,000 by the closing price of the Company’s common stock on the grant date (or as of the next succeeding business day if the grant date is not a trading date), rounded down to the nearest whole share. The restricted stock units will vest over the one -year period following the grant date. Vested restricted stock units will be paid in cash upon the termination of the director’s service with the Company. Each restricted stock unit grant will be evidenced by, and subject to the terms and conditions of, an award agreement in the form approved by the Board of Directors to evidence such type of grant pursuant to this policy.

The Board of Directors may amend or terminate this policy at any time, provided, however, that equity awards under this policy will cease without any action of the Compensation Committee or Board if the Company’s Long Term Stock Incentive Plan expires prior to the Board designating a successor plan under which the equity awards are to be made.

EX-10.11

Exhibit 10.11

Principal Life Insurance Company Raleigh, NC 27612 1-800-999-4031 A member of the Principal Financial Group^® THE EXECUTIVE NONQUALIFIED “EXCESS” PLAN^SM

ADOPTION AGREEMENT

THIS AGREEMENT is the adoption by Semtech Corporation (the “Employer”) of the Executive Nonqualified Excess Plan (“Plan”).

W I T N E S S E T H:

WHEREAS, the Employer desires to adopt the Plan as an unfunded, nonqualified deferred compensation plan; and

WHEREAS, the provisions of the Plan are intended to comply with the requirements of Section 409A of the Code and the regulations thereunder, and shall apply to amounts deferred after January 1, 2005, and to amounts deferred under the terms of any predecessor plan which are not earned and vested before January 1, 2005; and

WHEREAS, the Employer has been advised by Principal Life Insurance Company to obtain legal and tax advice from its professional advisors before adopting the Plan, and Principal Life Insurance Company disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement;

NOW, THEREFORE, the Employer hereby adopts the Plan in accordance with the terms and conditions set forth in this Adoption Agreement:

ARTICLE I

Terms used in this Adoption Agreement shall have the same meaning as in the Plan, unless some other meaning is expressly herein set forth. The Employer hereby represents and warrants that the Plan has been adopted by the Employer upon proper authorization and the Employer hereby elects to adopt the Plan for the benefit of its Participants as referred to in the Plan. By the execution of this Adoption Agreement, the Employer hereby agrees to be bound by the terms of the Plan.

ARTICLE II

The Employer hereby makes the following designations or elections for the purpose of the Plan:

2.6 Committee: The duties of the Committee set forth in the Plan shall be satisfied by:

XX	(a	)	The administrative committee of at least three individuals appointed by the Board to serve at the pleasure of the Board.
	(b	)	Employer.
	(c	)	Other (specify):                                 .

2.7 Compensation: The “Compensation” of a Participant shall mean all of a Participant’s:

XX	(a	)	Base salary.
XX	(b	)	Service Bonus.
XX	(c	)	Performance-Based Compensation earned in a period of 12 months or more.
XX	(d	)	Commissions.
	(e	)	Compensation received as an Independent Contractor reportable on Form 1099.
XX	(f	)	Other: Royalty Payments.

2.8 Crediting Date: The Deferred Compensation Account of a Participant shall be credited with the amount of any Participant Deferral to such account at the time designated below:

	(a	)	The last business day of each Plan Year.
	(b	)	The last business day of each calendar quarter during the Plan Year.
	(c	)	The last business day of each month during the Plan Year.
XX	(d	)	The last business day of each payroll period during the Plan Year.
	(e	)	Each pay day as reported by the Employer.
	(f	)	Any business day on which Participant Deferrals are received by the Provider.
	(g	)	Other:                                                              .

2

2.12 Effective Date:

	(a	)	This is a newly-established Plan, and the Effective Date of the Plan is             .
XX	(b	)	This is an amendment and restatement of a plan named Semtech Executive Compensation Plan with an effective date of January 1, 2004. The Effective Date of this amended and restated Plan is January 1, 2005. This is amendment number 1.

2.18 Normal Retirement Age: The Normal Retirement Age of a Participant shall be:

	(a	)	Age         .
	(b	)	The later of age          or the              anniversary of the participation commencement date. The participation commencement date is the first day of the first Plan Year in which the Participant commenced participation in the Plan.
XX	(c	)	Other: Completion of 10 Years of Plan participation.
XX	(d	)	Other: Completion of 5 Years of Plan participation and attainment of age 59.

2.22 Participating Employer(s): As of the Effective Date, the following Participating Employer(s) are parties to the Plan:

Name of Employer	Address	Telephone No.	EIN
Semtech Corporation	200 Flynn Road	(805) 389-2703	95-2119684
	Camarillo, CA 93012
Semtech Corpus Christi	200 Flynn Road	(805) 389-2703	74-2580516
Corporation	Camarillo, CA 93012
Semtech San Diego Corporation	10021 Willow Creek Road	(858) 695-1808	33-0606952
	San Diego, CA 92131

2.24 Plan: The name of the Plan as applied to the Employer is Semtech Executive Compensation Plan.

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2.25 Plan Administrator: The Plan Administrator shall be:

	(a	)	Committee.
	(b	)	Employer.
XX	(c	)	Other: Vice President, Human Resources.

2.27 Plan Year: The Plan Year shall end each year on the last day of the month of December.

2.35 Trust:

XX	(a	)	The Employer does desire to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan.
	(b	)	The Employer does not desire to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan.
	(c	)	The Employer desires to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan upon the occurrence of a Change in Control.

4.1 Participant Deferral Credits: Subject to the limitations in Section 4.1 of the Plan, a Participant may elect to have his Compensation (as selected in Section 2.7 of this Adoption Agreement) deferred within the annual limits below by the following percentage or amount as designated in writing to the Committee:

[Complete the following blanks only if a minimum or maximum deferral is desired:]
XX	(a	)	Base salary:
			minimum deferral: $                     or                     %
			maximum deferral: $                     or                     %
XX	(b	)	Service Bonus:
			minimum deferral: $                     or                     %
			maximum deferral: $                     or                     %
XX	(c	)	Performance-Based Compensation:
			minimum deferral: $                     or                     %
			maximum deferral: $                     or                     %

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XX	(d	)	Other: Commissions and Royalty Payments:
			minimum deferral: $                     or                     %
			maximum deferral: $                     or                     %
	(e	)	Participant deferrals not allowed.

4.2 Employer Credits: The Employer will make Employer Credits in the following manner:

XX	(a)	Employer Discretionary Credits: The Employer may make discretionary credits to the Deferred Compensation Account of each Participant in an amount determined as follows:
	XX	(i)	An amount determined each Plan Year by the Employer.
		(ii)	Other:                                                              .
XX	(b)	Employer Profit Sharing Credits: The Employer may make profit sharing credits to the Deferred Compensation Account of each Active Participant in an amount determined as follows:
	XX	(i)	An amount determined each Plan Year by the Employer.
		(ii)	Other:                                                              .
	(c)	Other:                                                                                   .
	(d)	Employer Credits not allowed.

5.3 Death of a Participant: If the Participant dies while in Service, the Employer shall pay a benefit to the Beneficiary in an amount equal to the vested balance in the Deferred Compensation Account of the Participant determined as of the date payments to the Beneficiary commence, plus:

XX	(a)	An amount to be determined by the Committee.
	(b)	Other:                                                                                   .
	(c)	No additional benefits.

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5.4 In-Service Distributions: In-service accounts are permitted under the Plan:

XX	(a	)	Yes, with respect to:
				XX	Participant Deferral Credits only.
					Employer Credits only.
					Participant Deferral and Employer Credits.
			In-service distributions may be made in the following manner:
				XX	Single lump sum payment.
				XX	Annual installment payments over no more than 20 years.
			If applicable, amounts not vested at the specified time of distribution will be:
					Forfeited
					Distributed annually when vested
	(b	)		No in-service distributions permitted.

5.5 Education Distributions: Education accounts are permitted under the Plan:

XX	(a	)	Yes, with respect to:
				XX	Participant Deferral Credits only.
					Employer Credits only.
					Participant Deferral and Employer Credits.
			Education distributions may be made in the following manner:
					Single lump sum payment.
				XX	Annual installment payments over no more than 6 years.
			If applicable, amounts not vested at the specified time of distribution will be:
					Forfeited
					Distributed annually when vested
	(b	)	No education distributions permitted.

5.6 Change in Control: Participant may elect to receive distributions under the Plan upon a Change in Control:

XX	(a	)	Yes, Participants may elect upon initial enrollment to have accounts distributed upon a Change in Control.
	(b	)	Participants may not elect to have accounts distributed upon a Change in Control.

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6.1 Payment Options: Any benefit payable under the Plan upon a Qualifying Distribution Event may be made to the Participant or his Beneficiary (as applicable) in any of the following payment forms, as selected by the Participant in the Participant Deferral Agreement:

1.	Separation from Service other than Retirement (Retirement is defined by the Employer)
	XX	(a)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
	XX	(b)	Approximately equal annual installments over a term certain as elected by the Participant upon his entry into the Plan not to exceed 20 years.
	XX	(c)	Other: [check desired option]:
			(i)	Lump Sum: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
			(ii)	Annual Installments for              years: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
2.	Separation from Service due to Retirement
	XX	(a)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
	XX	(b)	Approximately equal annual installments over a term certain as elected by the Participant upon his entry into the Plan not to exceed 20 years.
	XX	(c)	Other: [check desired option]:
			(i)	Lump Sum: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .

7

			(ii)	Annual Installments for              years: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
3.	Death
	XX	(a)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
	XX	(b)	Approximately equal annual installments over a term certain as elected by the Participant upon his entry into the Plan not to exceed 20 years.
	XX	(c)	Other: [check desired option]:
			(i)	Lump Sum: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
			(ii)	Annual Installments for              years: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
4.	Disability
	XX	(a)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
	XX	(b)	Approximately equal annual installments over a term certain as elected by the Participant upon his entry into the Plan not to exceed 20 years.
	XX	(c)	Other: [check desired option]:
			(i)	Lump Sum: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .

8

			(ii)	Annual Installments for              years: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
5.	Changein Control
	XX	(a)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
	XX	(b)	Approximately equal annual installments over a term certain as elected by the Participant upon his entry into the Plan not to exceed 20 years.
	XX	(c)	Other: [check desired option]:
			(i)	Lump Sum: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
			(ii)	Annual Installments for              years: the later of:
				Separation From Service
				Specified Date:             /            /             or
				Attainment of Age             .
		(d)	Not applicable.

6.2 De Minimis Amounts. Notwithstanding any payment election made by the Participant, the vested balance in the Deferred Compensation Account of the Participant will be distributed in a single lump sum payment if the payment accompanies the termination of the Participant’s entire interest in the Plan and the amount of such payment does not exceed $ 50,000.

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7. Vesting: An Active Participant shall be fully vested in the Employer Credits made to the Deferred Compensation Account upon the first to occur of the following events:

XX	(a)	Normal Retirement Age.
XX	(b)	Death.
XX	(c)	Disability.
	(d)	Change in Control
XX	(e)	Other: Upon involuntary termination of employment if such termination occurs within (18) months of the effective date of a Change in Control.
XX	(f)	Satisfaction of the vesting requirement specified below:
	XX	Employer Discretionary Credits:
			(i)	Immediate 100% vesting.
			(ii)	100% vesting after              Years of Service.
			(iii)	100% vesting at age             .
		XX	(iv)	Number of Years of Service		Vested Percentage
				Less than	1	0%
					1	25%
					2	50%
					3	75%
					4 or more	100%
		For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
			(1)	First Day of Service.
			(2)	Effective Date of the Plan Participation.
		XX	(3)	Each Crediting Date. Under this option (3), each Employer Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Discretionary Credit is made to his or her Deferred Compensation Account. Notwithstanding the vesting schedule elected above, all Employer Discretionary Credits to the Deferred Compensation Account shall be 100% vested upon the following event(s): Termination of Plan.

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XX	Employer Profit Sharing Credits:
		(i)	Immediate 100% vesting.
		(ii)	100% vesting after              Years of Service.
		(iii)	100% vesting at age             .
	XX	(iv)	Number of Years of Service		Vested Percentage
			Less than	1	0%
				1	25%
				2	50%
				3	75%
				4 or more	100%
	For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
		(1)	First Day of Service.
		(2)	Effective Date of the Plan Participation.
	XX	(3)	Each Crediting Date. Under this option (3), each Employer Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Profit Sharing Credit is made to his or her Deferred Compensation Account. Notwithstanding the vesting schedule elected above, all Employer Profit Sharing Credits to the Deferred Compensation Account shall be 100% vested upon the following event(s): Termination of Plan.

11

Other Employer Credits:
	(i)	Immediate 100% vesting.
	(ii)	100% vesting after              Years of Service.
	(iii)	100% vesting at age             .
	(iv)	Number of Years of Service		Vested Percentage
		Less than	1	%
			1	%
			2	%
			3	%
			4	%
			5	%
			6	%
			7	%
			8	%
			9	%
			10 or more	%
For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
	(1)	First Day of Service.
	(2)	Effective Date of the Plan Participation.
	(3)	Each Crediting Date. Under this option (3), each Employer Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account. Notwithstanding the vesting schedule elected above, all other Employer Credits to the Deferred Compensation Account shall be 100% vested upon the following event(s):                                         .

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14. Amendment and Termination of Plan: Notwithstanding any provision in this Adoption Agreement or the Plan to the contrary, Section      of the Plan shall be amended to read as provided in attached Exhibit     .

XX There are no amendments to the Plan.

17.9 Construction: The provisions of the Plan and Trust (if any) shall be construed and enforced according to the laws of the State of Delaware, except to the extent that such laws are superseded by ERISA and the applicable provisions of the Code.

IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above stated.

Semtech Corporation
Name of Employer
By:	/s/ Emeka Chukwu
	Authorized Person
Date:	5/17/07

The Plan is adopted by the following Participating Employers:

Semtech Corpus Christi Corporation
Name of Employer
By:	/s/ Emeka Chukwu
	Authorized Person
Date:	5/17/07

Semtech San Diego Corporation
Name of Employer
By:	/s/ Emeka Chukwu
	Authorized Person
Date:	5/17/07

NOTE: Execution of this Adoption Agreement creates a legal liability of the Employer with significant tax consequences to the Employer and Participants. The Employer should obtain legal and tax advice from its professional advisors before adopting the Plan. Principal Life Insurance Company disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement.

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EX-10.12

Exhibit 10.12

THE EXECUTIVE NONQUALIFIED EXCESS PLAN^SM

PLAN DOCUMENT

TABLE OF CONTENTS

THE EXECUTIVE NONQUALIFIED EXCESS PLAN^SM

		Page
Section 1.	Purpose:	1
Section 2.	Definitions:	1
2.1	“Active Participant”	1
2.2	“Adoption Agreement”	2
2.3	“Beneficiary”	2
2.4	“Board”	2
2.5	“Change in Control”	2
2.6	“Committee”	3
2.7	“Compensation”	3
2.8	“Crediting Date”	4
2.9	“Deferred Compensation Account”	4
2.10	“Disabled”	4
2.11	“Education Account”	4
2.12	“Effective Date”	4
2.13	“Employee”	5
2.14	“Employer”	5
2.15	“Employer Credits”	5
2.16	“Independent Contractor”	5
2.17	“In-Service Account”	5
2.18	“Normal Retirement Age”	6
2.19	“Participant”	6
2.20	“Participant Deferral Agreement”	6
2.21	“Participant Deferral Credits”	6
2.22	“Participating Employer”	6
2.23	“Performance-Based Compensation”	6
2.24	“Plan”	7
2.25	“Plan Administrator”	7
2.26	“Plan-Approved Domestic Relations Order”	7
2.27	“Plan Year”	9
2.28	“Qualifying Distribution Event”	9
2.29	“Retirement Account”	9
2.30	“Service”	9
2.31	“Service Bonus”	9
2.32	“Specified Employee”	10
2.33	“Spouse” or “Surviving Spouse”	10
2.34	“Student”	10
2.35	“Trust”	10
2.36	“Trustee”	10
2.37	“Unforeseeable Emergency”	10
2.38	“Years of Service”	11

Section 3.	Participation:	11
Section 4.	Credits to Deferred Compensation Account:	11
4.1	Participant Deferral Credits.	11
4.2	Employer Credits.	13
4.3	Deferred Compensation Account.	13
Section 5.	Qualifying Distribution Events:	14
5.1	Separation from Service.	14
5.2	Disability.	14
5.3	Death.	14
5.4	In-Service Distributions.	14
5.5	Education Distributions.	15
5.6	Change in Control.	16
5.7	Unforeseeable Emergency.	16
Section 6.	Qualifying Distribution Events Payment Options:	17
6.1	Payment Options.	17
6.2	De Minimis Amounts.	18
6.3	Subsequent Elections.	19
6.4	Acceleration Prohibited.	19
Section 7.	Vesting:	20
Section 8.	Accounts; Deemed Investment; Adjustments to Account:	20
8.1	Accounts.	20
8.2	Deemed Investments.	20
8.3	Adjustments to Deferred Compensation Account.	21
Section 9.	Administration by Committee:	21
9.1	Membership of Committee.	21
9.2	Committee Officers; Subcommittee.	21
9.3	Committee Meetings.	22
9.4	Transaction of Business.	22
9.5	Committee Records.	22
9.6	Establishment of Rules.	22
9.7	Conflicts of Interest.	22
9.8	Correction of Errors.	23
9.9	Authority to Interpret Plan.	23
9.10	Third Party Advisors.	23
9.11	Compensation of Members.	23
9.12	Expense Reimbursement.	24
9.13	Indemnification.	24

ii

Section 10.	Contractual Liability; Trust:	24
10.1	Contractual Liability.	24
10.2	Trust.	25
Section 11.	Allocation of Responsibilities:	25
11.1	Board.	25
11.2	Committee.	25
11.3	Plan Administrator.	25
Section 12.	Benefits Not Assignable; Facility of Payments:	26
12.1	Benefits Not Assignable.	26
12.2	Plan-Approved Domestic Relations Orders.	26
12.3	Payments to Minors and Others.	27
Section 13.	Beneficiary:	27
Section 14.	Amendment and Termination of Plan:	28
14.1	Termination in the Discretion of the Employer.	28
14.2	Termination Upon Change in Control.	29
14.3	Termination On or Before December 31, 2005.	29
14.4	No Financial Triggers.	29
Section 15.	Communication to Participants:	29
Section 16.	Claims Procedure:	29
16.1	Filing of a Claim for Benefits.	29
16.2	Notification to Claimant of Decision.	30
16.3	Procedure for Review.	30
16.4	Decision on Review.	31
16.5	Action by Authorized Representative of Claimant.	31
Section 17.	Miscellaneous Provisions:	31
17.1	Set off.	31
17.2	Notices.	31
17.3	Lost Distributees.	32
17.4	Reliance on Data.	32
17.5	Receipt and Release for Payments.	32
17.6	Headings.	33
17.7	Continuation of Employment.	33
17.8	Merger or Consolidation; Assumption of Plan.	33
17.9	Construction.	33

iii

THE EXECUTIVE NONQUALIFIED EXCESS PLAN^SM

Section 1. Purpose:

By execution of the Adoption Agreement, the Employer has adopted the Plan set forth herein to provide a means by which certain management Employees or Independent Contractors of the Employer may elect to defer receipt of current Compensation from the Employer in order to provide retirement and other benefits on behalf of such Employees or Independent Contractors of the Employer, as selected in the Adoption Agreement. The Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code (the “Code”). The Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees under Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 and independent contractors.

Section 2. Definitions:

As used in the Plan, including this Section 2, references to one gender shall include the other and, unless otherwise indicated by the context:

2.1 “Active Participant” means, with respect to any day or date, a Participant who is in Service on such day or date; provided, that a Participant shall cease to be an Active Participant immediately upon a determination by the Committee that the Participant has ceased to be an Employee or Independent Contractor, or that the Participant no longer meets the eligibility requirements of the Plan.

2.2 “Adoption Agreement” means the written agreement pursuant to which the Employer adopts the Plan. The Adoption Agreement is a part of the Plan as applied to the Employer.

2.3 “Beneficiary” means the person, persons, entity or entities designated or determined pursuant to the provisions of Section 13 of the Plan.

2.4 “Board” means the Board of Directors of the Employer, if the Employer is a corporation. If the Employer is not a corporation, “Board” shall mean the Employer.

2.5 “Change in Control” of a corporation (or, to the extent permitted in this Section 2.5, a partnership or other entity) shall occur on the earliest of the following events:

2.5.1 Change in Ownership: A change in ownership of a corporation occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the corporation, excluding the acquisition of additional stock by a person or more than one person acting as a group who is considered to own more than 50% of the total fair market value or total voting power of the stock of the corporation.

2.5.2 Change in Effective Control: A change in effective control of a corporation occurs on the date that either:

(i) Any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing 35% or more of the total voting power of the stock of the corporation; or

(ii) A majority of the members of the board of directors of the corporation is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of the appointment or election; provided, that this paragraph (ii) shall apply only to a corporation for which no other corporation is a majority shareholder.

2.5.3 Change in Ownership of Substantial Assets: A change in the ownership of a substantial portion of a corporation’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent

2

acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than 40% of the total gross fair market value of the assets of the corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For this purpose, the Change in Control must relate to (i) a corporation that is the Employer of the Participant; (ii) a corporation that is liable for the payment of benefits under this Plan; (iii) a corporation that is a majority shareholder of the corporation described in (i) or (ii); or (iv) any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending with the corporation described in (i) or (ii). To the extent provided in regulations and administrative guidance promulgated under Section 409A of the Code, the provisions of this Section 2.5 may be applied to changes in the ownership of a partnership and changes in the ownership of a substantial portion of the assets of a partnership. A Change in Control shall not be deemed to have occurred until a majority of the members of the Board receive written certification from the Committee that one of the events set forth in this Section 2.5 has occurred. The occurrence of an event described in this Section 2.5 must be objectively determinable by the Committee and, if made in good faith on the basis of information available at the time, such determination shall be conclusive and binding on the Committee, the Employer, the Participants and their Beneficiaries for all purposes of the Plan.

2.6 “Committee” means the person designated in the Adoption Agreement. If the Committee designated in the Adoption Agreement is unable to serve, the Employer shall satisfy the duties of the Committee provided for in Section 9.

2.7 “Compensation” shall have the meaning designated in the Adoption Agreement.

3

2.8 “Crediting Date” means the date designated in the Adoption Agreement for crediting the amount of any Participant Deferral Credits to the Deferred Compensation Account of a Participant. Employer Credits may be credited to the Deferred Compensation Account of a Participant on any day that securities are traded on a national securities exchange.

2.9 “Deferred Compensation Account” means the account maintained with respect to each Participant under the Plan. The Deferred Compensation Account shall be credited with Participant Deferral Credits and Employer Credits, credited or debited for deemed investment gains or losses, and adjusted for payments in accordance with the rules and elections in effect under Section 8. The Deferred Compensation Account of a Participant shall include any In-Service Account or Education Account of the Participant, if applicable.

2.10 “Disabled” means a Participant who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering Employees of the Employer.

2.11 “Education Account” means a separate account to be kept for each Participant that has elected to take education distributions as described in Section 5.5. The Education Account shall be adjusted in the same manner and at the same time as the Deferred Compensation Account under Section 8 and in accordance with the rules and elections in effect under Section 8.

2.12 “Effective Date” shall be the date designated in the Adoption Agreement as of which the Plan first becomes effective. Notwithstanding the foregoing, any amounts

4

credited to the account of a Participant pursuant to the terms of a predecessor plan of the Employer which are not earned and vested before January 1, 2005, shall be subject to the terms of this Plan.

2.13 “Employee” means an individual in the Service of the Employer if the relationship between the individual and the Employer is the legal relationship of employer and employee and if the individual is a highly compensated or management employee of the Employer. An individual shall cease to be an Employee upon the Employee’s termination of Service.

2.14 “Employer” means the Employer identified in the Adoption Agreement, and any Participating Employer which adopts this Plan. The Employer may be a corporation, a limited liability company, a partnership or sole proprietorship. All references herein to the Employer shall include each trade or business (whether or not incorporated) that is required to be aggregated with the Employer under rules similar to subsections (b) and (c) of Section 414 of the Code.

2.15 “Employer Credits” means the amounts credited to the Participant’s Deferred Compensation Account by the Employer pursuant to the provisions of Section 4.2.

2.16 “Independent Contractor” means an individual in the Service of the Employer if the relationship between the individual and the Employer is not the legal relationship of employer and employee. An individual shall cease to be an Independent Contractor upon the termination of the Independent Contractor’s Service. An Independent Contractor shall include a director of the Employer who is not an Employee.

2.17 “In-Service Account” means a separate account to be kept for each Participant that has elected to take in-service distributions as described in Section 5.4. The In-Service Account shall be adjusted in the same manner and at the same time as the Deferred Compensation Account under Section 8 and in accordance with the rules and elections in effect under Section 8.

5

2.18 “Normal Retirement Age” of a Participant means the age designated in the Adoption Agreement.

2.19 “Participant” means with respect to any Plan Year an Employee or Independent Contractor who has been designated by the Committee as a Participant and who has entered the Plan or who has a Deferred Compensation Account under the Plan.

2.20 “Participant Deferral Agreement” means a written agreement entered into between a Participant and the Employer pursuant to the provisions of Section 4.1

2.21 “Participant Deferral Credits” means the amounts credited to the Participant’s Deferred Compensation Account by the Employer pursuant to the provisions of Section 4.1.

2.22 “Participating Employer” means any trade or business (whether or not incorporated) which adopts this Plan with the consent of the Employer identified in the Adoption Agreement.

2.23 “Performance-Based Compensation” means compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve months in which the service provider performs services. Organizational or individual performance criteria are considered preestablished if established in writing at least 90 days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-based compensation may include payments based upon subjective performance criteria in accordance as provided in regulations and administrative guidance promulgated under Section 409A of the Code.

6

2.24 “Plan” means The Executive Nonqualified Excess Plan, as herein set out or as duly amended. The name of the Plan as applied to the Employer shall be designated in the Adoption Agreement.

2.25 “Plan Administrator” means the person designated in the Adoption Agreement. If the Plan Administrator designated in the Adoption Agreement is unable to serve, the Employer shall be the Plan Administrator.

2.26 “Plan-Approved Domestic Relations Order” shall mean a court order that is lawfully directed to this Plan and that is served upon the Plan Administrator before the Participant receives a distribution of his benefit that pursuant to a state domestic relations law creates or recognizes the existence of the right of an alternate payee to receive all or a portion of a Participant’s benefit and that meets all of the following requirements. An order shall not be a Plan-Approved Domestic Relations Order unless the Plan Administrator determines that the court order on its face and without reference to any other document states all of the following:

(a) The court order expressly states that it relates to the provision of child support, alimony, or marital property rights to a spouse, former spouse, or child of a Participant and is made pursuant to State domestic relations law.

(b) The court order clearly and unambiguously specifies that it refers to this Plan.

(c) The court order clearly and unambiguously specifies the name of the Participant’s Employer.

(d) The court order clearly specifies: the name, mailing address, and social security number of the Participant; and the name, mailing address, and social security number of each alternate payee.

(e) The court order clearly specifies the amount or percentage, or the manner in which the amount or percentage is to be determined, of the Participant’s benefit to be paid to or segregated for the separate account of the alternate payee.

7

(f) The court order expressly states that the alternate payee’s segregated account shall bear all fees and expenses as though the alternate payee were a Participant.

(g) The court order clearly specifies that any distribution to the alternate payee becomes payable only after a Qualifying Distribution Event of the Participant and only upon the alternate payee’s written claim made to the Administrator.

(h) The court order clearly specifies that any distribution to any alternate payee shall be payable only as a lump sum.

(i) The court order expressly states that it does not require this Plan to provide any type or form of benefit or any option not otherwise provided under this Plan.

(j) The court order expressly states that the order does not require this Plan to provide increased benefits.

(k) The court order expressly states that any provision of it that would have the effect of requiring any distribution to an alternate payee of deferred compensation that is required to be paid to another person under any court order is void.

(l) The court order expressly states that nothing in the order shall have any effect concerning any party’s tax treatment, and that nothing in the order shall direct any person’s tax reporting or withholding.

An order shall not be a Plan-approved Domestic Relations Order if it includes any provision that does not relate to this Plan. Without limiting the comprehensive effect of the preceding sentence, an order shall not be a Plan-Approved Domestic Relations Order if the order includes any provision relating to any pension plan, retirement plan, deferred compensation plan, health plan, welfare benefit plan, or employee benefit plan other than this Plan. An order shall not be a Plan-Approved Domestic Relations Order unless the order provides for only one alternate payee. An order shall not be a Plan-Approved Domestic Relations Order if the order includes any provision that would permit the alternate payee to designate any beneficiary for any purpose. However, an order does not fail to qualify as a Plan-approved Domestic Relations Order because it provides that any rights not paid before the alternate payee’s death shall be payable to the duly appointed and then-currently serving personal representative of the alternate payee’s estate. The Plan Administrator may assume that the alternate payee named by the court order is a proper payee and need not inquire into whether the person named is a spouse or former spouse or child of the Participant.

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2.27 “Plan Year” means the twelve-month period ending on the last day of the month designated in the Adoption Agreement; provided, that the initial Plan Year may have fewer than twelve months.

2.28 “Qualifying Distribution Event” means (i) the separation from Service of the Participant, (ii) the date the Participant becomes Disabled, (iii) the death of the Participant, (iv) the time specified by the Participant for an in-service or education distribution, (v) a Change in Control, or (vi) an Unforeseeable Emergency, each to the extent provided in Section 5.

2.29 “Retirement Account” means the portion of the Deferred Compensation Account of a Participant, excluding any In-Service Account or any Education Account. The Retirement Account shall be adjusted in the same manner and at the same time as the Deferred Compensation Account under Section 8 and in accordance with the rules and regulations in effect under Section 8.

2.30 “Service” means employment by the Employer as an Employee. For purposes of the Plan, the employment relationship is treated as continuing intact while the Employee is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Employee’s right to reemployment is provided either by statue or contract. If the Participant is an Independent Contractor, “Service” shall mean the period during which the contractual relationship exists between the Employer and the Participant. The contractual relationship is not terminated if the Participant anticipates a renewal of the contract or becomes an Employee.

2.31 “Service Bonus” means any bonus paid to a Participant by the Employer which is not Performance-Based Compensation.

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2.32 “Specified Employee” means an employee who meets the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and without regard to Section 416(i)(5) of the Code) at any time during the twelve-month period ending on December 31 of each year (the “identification date”). If the person is a key employee as of any identification date, the person is treated as a Specified Employee for the twelve-month period beginning on the first day of the fourth month following the identification date.

2.33 “Spouse” or “Surviving Spouse” means, except as otherwise provided in the Plan, a person who is the legally married spouse or surviving spouse of a Participant.

2.34 “Student” means the individual designated by the Participant in the Participant Deferral Agreement with respect to whom the Participant will create an Education Account.

2.35 “Trust” means the trust fund established pursuant to Section 10.2, if designated by the Employer in the Adoption Agreement.

2.36 “Trustee” means the trustee, if any, named in the agreement establishing the Trust and such successor or additional trustee as may be named pursuant to the terms of the agreement establishing the Trust.

2.37 “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from a sudden or unexpected illness or accident of the Participant, the Participant’s Spouse or dependent (as defined in Section 152(a) of the Code), loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

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2.38 “Years of Service” means each Plan Year of Service completed by the Participant. For vesting purposes, Years of Service shall be calculated from the date designated in the Adoption Agreement.

Section 3. Participation:

The Committee in its discretion shall designate each Employee or Independent Contractor who is eligible to participate in the Plan. An Employee or Independent Contractor designated by the Committee as a Participant who has not otherwise entered the Plan shall enter the Plan and become a Participant as of the date determined by the Committee. A Participant who separates from Service with the Employer and who later returns to Service will not be an Active Participant under the Plan except upon satisfaction of such terms and conditions as the Committee shall establish upon the Participant’s return to Service, whether or not the Participant shall have a balance remaining in the Deferred Compensation Account under the Plan on the date of the return to Service.

Section 4. Credits to Deferred Compensation Account:

4.1 Participant Deferral Credits. To the extent provided in the Adoption Agreement, each Active Participant may elect, by entering into a Participant Deferral Agreement with the Employer, to defer the receipt of Compensation from the Employer by a dollar amount or percentage specified in the Participant Deferral Agreement. The amount of the Participant Deferral Credit shall be credited by the Employer to the Deferred Compensation Account maintained for the Participant pursuant to Section 8. The following special provisions shall apply with respect to the Participant Deferral Credits of a Participant:

4.1.1 The Employer shall credit to the Participant’s Deferred Compensation Account on each Crediting Date an amount equal to the total Participant Deferral Credit for the period ending on such Crediting Date.

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4.1.2 An election pursuant to this Section 4.1 shall be made by the Participant by executing and delivering a Participant Deferral Agreement to the Committee. Except as otherwise provided in this Section 4.1, the Participant Deferral Agreement shall become effective with respect to such Participant as of the first day of January following the date such Participant Deferral Agreement is received by the Committee. A Participant’s election may be changed at any time prior to the last permissible date for making the election as permitted in this Section 4.1, and shall thereafter be irrevocable. The election of a Participant shall continue in effect for subsequent years until modified by the Participant as permitted in this Section 4.1, or until the earlier of the date the Participant separates from Service or ceases to be an Active Participant under the Plan.

4.1.3 In the case of the first year in which the Participant becomes eligible to participate in the Plan, the Participant may execute and deliver a Participant Deferral Agreement to the Committee within 30 days after the date the Participant enters the Plan to be effective as of the first payroll period next following the date the Participant Deferral Agreement is received by the Committee. For Compensation that is earned based upon a specified performance period (for example, an annual bonus), where a deferral election is made in the first year of eligibility but after the beginning of the service period, the election will be deemed to apply to Compensation paid for services subsequent to the election if the election applies to the portion of the Compensation equal to the total amount of the Compensation for the service period multiplied by the ratio of the number of days remaining in the performance period after the election over the total number of days in the performance period.

4.1.4 A Participant may unilaterally modify a Participant Deferral Agreement (either to terminate, increase or decrease the portion of his future Compensation which is subject to deferral within the percentage limits set forth in Section 4.1 of the Adoption Agreement) by providing a written modification of the Participant Deferral Agreement to the Employer. The modification shall become effective as of the first day of January following the date such written modification is received by the Committee. Notwithstanding the foregoing, at any time during the calendar year 2005, a Participant may terminate a Participant Deferral Agreement, or modify a Participant Deferral Agreement to reduce the amount of Compensation subject to the deferral election, so long as the Compensation subject to the terminated or modified Participant Deferral Agreement is includible in the income of the Participant in calendar year 2005 or, if later, in the taxable year in which the amounts are earned and vested.

4.1.5 If the Participant performed services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date upon which the Participant makes an initial deferral election, a Participant Deferral Agreement relating to the deferral of Performance-Based Compensation may be executed and delivered to the Committee no later than the date which is 6 months prior to the end of the performance period, provided that in no event may an election to defer Performance-Based Compensation be made after such Compensation has become both substantially certain to be paid and readily ascertainable.

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4.1.6 If the Employer has a fiscal year other than the calendar year, Compensation relating to service in the fiscal year of the Employer (such as a bonus based on the fiscal year of the Employer), of which no amount is paid or payable during the fiscal year, may be deferred at the Participant’s election only if the election to defer is made not later than the close of the Employer’s fiscal year next preceding the first fiscal year in which the Participant performs any services for which such Compensation is payable.

4.1.7 Compensation payable after the last day of the Participant’s taxable year solely for services provided during the final payroll period containing the last day of the Participant’s taxable year (i.e., December 31) is treated for purposes of this Section 4.1 as Compensation for services performed in the subsequent taxable year.

4.1.8 The Committee may from time to time establish policies or rules consistent with the requirements of Section 409A of the Code to govern the manner in which Participant Deferral Credits may be made.

4.1.9 The requirements of Section 4.1.2 relating to the timing of the Participant Deferral Agreement shall not apply to any deferral elections made on or before March 15, 2005, provided that (a) the amounts to which the deferral election relate have not been paid or become payable at the time of the election, (b) the Plan was in existence on or before December 31, 2004, (c) the election to defer compensation is made in accordance with the terms of the Plan as in effect on December 31, 2005 (other than a requirement to make a deferral election after March 15, 2005), (d) the Plan is otherwise operated in accordance with the requirements of Section 409A of the Code, and (e) the Plan is amended to comply with Section 409A in accordance with Q&A 19 of Notice 2005-1.

4.2 Employer Credits. If designated by the Employer in the Adoption Agreement, the Employer shall cause the Committee to credit to the Deferred Compensation Account of each Active Participant an Employer Credit as determined in accordance with the Adoption Agreement.

4.3 Deferred Compensation Account. All Participant Deferral Credits and Employer Credits shall be credited to the Deferred Compensation Account of the Participant.

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Section 5. Qualifying Distribution Events:

5.1 Separation from Service. If the Participant separates from Service with the Employer, the vested balance in the Deferred Compensation Account shall be paid to the Participant by the Employer as provided in Section 6. Notwithstanding the foregoing, no distribution shall be made earlier than six months after the date of separation from Service (or, if earlier, the date of death) with respect to a Participant who is a Specified Employee of a corporation the stock in which is traded on an established securities market or otherwise. Any payments to which a Specified Employee would be entitled during the first six months following the date of separation from Service shall be accumulated and paid on the first day of the seventh month following the date of separation from service.

5.2 Disability. If the Participant becomes Disabled while in Service, the vested balance in the Deferred Compensation Account shall be paid to the Participant by the Employer as provided in Section 6.

5.3 Death. If the Participant dies while in Service, the Employer shall pay a benefit to the Participant’s Beneficiary in the amount designated in the Adoption Agreement. Payment of such benefit shall be made by the Employer as provided in Section 6. If a Participant dies following his separation from Service for any reason, and before all payments under the Plan have been made, the vested balance in the Deferred Compensation Account shall be paid by the Employer to the Participant’s Beneficiary in a single lump sum.

5.4 In-Service Distributions. If the Employer designates in the Adoption Agreement that in-service distributions are permitted under the Plan, a Participant may designate in the Participant Deferral Agreement to have a specified amount credited to the Participant’s In-Service Account for in-service distributions at the later of the date specified by the Participant or as specified in the Adoption Agreement. In no event may an in-service distribution be made

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prior to two years following the establishment of the In-Service Account of the Participant. If the Participant elects to receive in-service distributions in annual installment payments, the payment of each annual installment shall be made on the anniversary of the date of the first installment payment, and the amount of the annual installment shall be adjusted on such anniversary for credits or debits to the Participant’s account pursuant to Section 8 of the Plan. Such adjustment shall be made by dividing the balance in the In-Service Account on such date by the number of annual installments remaining to be paid hereunder; provided that the last annual installment due under the Plan shall be the entire amount credited to the Participant’s In-Service Account on the date of payment. Notwithstanding the foregoing, if a Participant incurs a Qualifying Distribution Event prior to the date on which the entire balance in the In-Service Account has been distributed, then the balance in the In-Service Account on the date of the Qualifying Distribution Event shall be distributed to the Participant in the same manner and at the same time as the balance in the Deferred Compensation Account is distributed under Section 6 and in accordance with the rules and elections in effect under Section 6.

5.5 Education Distributions. If the Employer designates in the Adoption Agreement that education distributions are permitted under the Plan, a Participant may designate in the Participant Deferral Agreement to have a specified amount credited to the Participant’s Education Account for education distributions at the later of the date specified by the Participant or the date specified in the Adoption Agreement. If the Participant designates more than one Student, the Education Account will be divided into a separate Education Account for each Student, and the Participant may designate in the Participant Deferral Agreement the percentage or dollar amount to be credited to each Education Account. In the absence of a clear designation, all credits made to the Education Account shall be equally allocated to each Education Account. The Employer shall pay to the Participant the balance in the Education Account with respect to

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the Student at the time and in the manner designated by the Participant in the Participant Deferral Agreement. If the Participant elects to receive education distributions in annual installment payments, the payment of each annual installment shall be made on the anniversary of the date of the first installment payment, and the amount of the annual installment shall be adjusted on such anniversary for credits or debits to the Participant’s Education Account pursuant to Section 8 of the Plan. Such adjustment shall be made by dividing the balance in the Education Account on such date by the number of annual installments remaining to be paid hereunder; provided that the last annual installment due under the Plan shall be the entire amount credited to the Participant’s Education Account on the date of payment. Notwithstanding the foregoing, if the Participant incurs a Qualifying Distribution Event prior to the date on which the entire balance of the Education Account has been distributed, then the balance in the Education Account on the date of the Qualifying Distribution Event shall be distributed to the Participant in the same manner and at the same time as the Deferred Compensation Account is distributed under Section 6 and in accordance with the rules and elections in effect under Section 6.

5.6 Change in Control. If the Employer designates in the Adoption Agreement that distributions are permitted under the Plan in the event of a Change in Control, the Participant may designate in the Participant Deferral Agreement to have the vested balance in the Deferred Compensation Account paid to the Participant upon a Change in Control by the Employer as provided in Section 6.

5.7 Unforeseeable Emergency. A distribution from the Deferred Compensation Account may be made to a Participant in the event of an Unforeseeable Emergency, subject to the following provisions:

5.7.1 A Participant may, at any time prior to his separation from Service for any reason, make application to the Committee to receive a distribution in a lump sum of all or a portion of the vested balance in the Deferred Compensation

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Account (determined as of the date the distribution, if any, is made under this Section 5.7) because of an Unforeseeable Emergency. A distribution because of an Unforeseeable Emergency shall not exceed the amount required to satisfy the Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution, after taking into account the extent to which the Unforeseeable Emergency may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

5.7.2 The Participant’s request for a distribution on account of Unforeseeable Emergency must be made in writing to the Committee. The request must specify the nature of the financial hardship, the total amount requested to be distributed from the Deferred Compensation Account, and the total amount of the actual expense incurred or to be incurred on account of the Unforeseeable Emergency.

5.7.3 If a distribution under this Section 5.7 is approved by the Committee, such distribution will be made as soon as practicable following the date it is approved. The processing of the request shall be completed as soon as practicable from the date on which the Committee receives the properly completed written request for a distribution on account of an Unforeseeable Emergency. Any deferral election of the Participant in effect at the time of a distribution on account of an Unforeseeable Emergency may be cancelled upon the Participant’s request, and if so cancelled, any subsequent deferral by the Participant shall be made pursuant to a new Participant Deferral Agreement which shall become effective as of the first day of January following the date such Participant Deferral Agreement is received by the Committee. If a Participant’s separation from Service occurs after a request is approved in accordance with this Section 5.7.3, but prior to distribution of the full amount approved, the approval of the request shall be automatically null and void and the benefits which the Participant is entitled to receive under the Plan shall be distributed in accordance with the applicable distribution provisions of the Plan.

5.7.4 The Committee may from time to time adopt additional policies or rules consistent with the requirements of Section 409A of the Code to govern the manner in which such distributions may be made so that the Plan may be conveniently administered.

Section 6. Qualifying Distribution Events Payment Options:

6.1 Payment Options. The Employer shall designate in the Adoption Agreement the payment options which may be elected by the Participant. The Participant shall elect in the Participant Deferral Agreement the method under which the vested balance in the

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Deferred Compensation Account will be distributed from among the designated payment options. Payment shall be made in the manner elected by the Participant and shall commence upon the date of the Qualifying Distribution Event. A payment shall be treated as made upon the date of the Qualifying Distribution Event if it is made on such date or a later date within the same calendar year or, if later, by the 15^th day of the third calendar month following the Qualifying Distribution Event. A payment may be further delayed to the extent permitted in accordance with regulations and guidance under Section 409A of the Code. The Participant may elect a different method of payment for each Qualifying Distribution Event as specified in the Adoption Agreement. If the Participant elects the installment payment option, the payment of each annual installment shall be made on the anniversary of the date of the first installment payment, and the amount of the annual installment shall be adjusted on such anniversary for credits or debits to the Participant’s account pursuant to Section 8 of the Plan. Such adjustment shall be made by dividing the balance in the Deferred Compensation Account on such date by the number of annual installments remaining to be paid hereunder; provided that the last annual installment due under the Plan shall be the entire amount credited to the Participant’s account on the date of payment. In the event the Participant fails to make a valid election of the payment method, the distribution will be made in a single lump sum payment upon the Qualifying Distribution Event. Notwithstanding the provisions of Sections 6.3 or 6.4 of the Plan, a Participant may elect on or before December 31, 2006, the method of payment of amounts subject to Section 409A of the Code provided that such election applies only to amounts that would not otherwise be payable in 2006 and does not cause an amount to paid in 2006 that would not otherwise be payable in such year.

6.2 De Minimis Amounts. Notwithstanding any payment election made by the Participant, the vested balance in the Deferred Compensation Account of the Participant will

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be distributed in a single lump sum payment if the payment accompanies the termination of the Participant’s entire interest in the Plan and the amount of such payment does not exceed the amount designated by the Employer in the Adoption Agreement. Such payment shall be made on or before the later of (i) December 31 of the calendar year in which the Participant separates from Service from the Employer, or (ii) the date that is 2-1/2 months after the Participant separates from Service from the Employer.

6.3 Subsequent Elections. With the consent of the Committee, a Participant may delay or change the method of payment of the Deferred Compensation Account subject to the following requirements:

6.3.1 The new election may not take effect until at least 12 months after the date on which the new election is made.

6.3.2 If the new election relates to a payment for a Qualifying Distribution Event other than the death of the Participant, the Participant becoming Disabled, or an Unforeseeable Emergency, the new election must provide for the deferral of the first payment for a period of at least five years from the date such payment would otherwise have been made.

6.3.3 If the new election relates to a payment from the In-Service Account or Education Account, the new election must be made at least 12 months prior to the date of the first scheduled payment from such account.

For purposes of this Section 6.3 and Section 6.4, a payment is each separately identified amount to which the Participant is entitled under the Plan; provided, that entitlement to a series of installment payments is treated as the entitlement to a single payment.

6.4 Acceleration Prohibited. The acceleration of the time or schedule of any payment due under the Plan is prohibited except as provided in regulations and administrative guidance promulgated under Section 409A of the Code. It is not an acceleration of the time or schedule of payment if the Employer waives or accelerates the vesting requirements applicable to a benefit under the Plan.

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Section 7. Vesting:

A Participant shall be fully vested in the portion of his Deferred Compensation Account attributable to Participant Deferral Credits, and all income, gains and losses attributable thereto. A Participant shall become fully vested in the portion of his Deferred Compensation Account attributable to Employer Credits, and income, gains and losses attributable thereto, in accordance with the vesting schedule and provisions designated by the Employer in the Adoption Agreement. If a Participant’s Deferred Compensation Account is not fully vested upon separation from Service, the portion of the Deferred Compensation Account that is not fully vested shall thereupon be forfeited.

Section 8. Accounts; Deemed Investment; Adjustments to Account:

8.1 Accounts. The Committee shall establish a book reserve account, entitled the “Deferred Compensation Account,” on behalf of each Participant. The Committee shall also establish an In-Service Account and Education Account as a part of the Deferred Compensation Account of each Participant, if applicable. The amount credited to the Deferred Compensation Account shall be adjusted pursuant to the provisions of Section 8.3.

8.2 Deemed Investments. The Deferred Compensation Account of a Participant shall be credited with an investment return determined as if the account were invested in one or more investment funds made available by the Committee. The Participant shall elect the investment funds in which his Deferred Compensation Account shall be deemed to be invested. Such election shall be made in the manner prescribed by the Committee and shall take effect upon the entry of the Participant into the Plan. The investment election of the Participant shall remain in effect until a new election is made by the Participant. In the event the Participant fails for any reason to make an effective election of the investment return to be credited to his account, the investment return shall be determined by the Committee.

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8.3 Adjustments to Deferred Compensation Account. With respect to each Participant who has a Deferred Compensation Account under the Plan, the amount credited to such account shall be adjusted by the following debits and credits, at the times and in the order stated:

8.3.1 The Deferred Compensation Account shall be debited each business day with the total amount of any payments made from such account since the last preceding business day to him or for his benefit.

8.3.2 The Deferred Compensation Account shall be credited on each Crediting Date with the total amount of any Participant Deferral Credits and Employer Credits to such account since the last preceding Crediting Date.

8.3.3 The Deferred Compensation Account shall be credited or debited on each day securities are traded on a national stock exchange with the amount of deemed investment gain or loss resulting from the performance of the investment funds elected by the Participant in accordance with Section 8.2. The amount of such deemed investment gain or loss shall be determined by the Committee and such determination shall be final and conclusive upon all concerned.

Section 9. Administration by Committee:

9.1 Membership of Committee. If elected in the Adoption Agreement, the Committee shall consist of at least three individuals who shall be appointed by the Board to serve at the pleasure of the Board. Any member of the Committee may resign, and his successor, if any, shall be appointed by the Board. The Committee shall be responsible for the general administration and interpretation of the Plan and for carrying out its provisions, except to the extent all or any of such obligations are specifically imposed on the Board.

9.2 Committee Officers; Subcommittee. The members of the Committee may elect Chairman and may elect an acting Chairman. They may also elect a Secretary and may elect an acting Secretary, either of whom may be but need not be a member of the Committee. The Committee may appoint from its membership such subcommittees with such powers as the Committee shall determine, and may authorize one or more of its members or any agent to execute or deliver any instruments or to make any payment on behalf of the Committee.

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9.3 Committee Meetings. The Committee shall hold such meetings upon such notice, at such places and at such intervals as it may from time to time determine. Notice of meetings shall not be required if notice is waived in writing by all the members of the Committee at the time in office, or if all such members are present at the meeting.

9.4 Transaction of Business. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting shall be by vote of a majority of those present at any such meeting and entitled to vote. Resolutions may be adopted or other action taken without a meeting upon written consent thereto signed by all of the members of the Committee.

9.5 Committee Records. The Committee shall maintain full and complete records of its deliberations and decisions. The minutes of its proceedings shall be conclusive proof of the facts of the operation of the Plan.

9.6 Establishment of Rules. Subject to the limitations of the Plan, the Committee may from time to time establish rules or by-laws for the administration of the Plan and the transaction of its business.

9.7 Conflicts of Interest. No individual member of the Committee shall have any right to vote or decide upon any matter relating solely to himself or to any of his rights or benefits under the Plan (except that such member may sign unanimous written consent to resolutions adopted or other action taken without a meeting), except relating to the terms of his Participant Deferral Agreement.

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9.8 Correction of Errors. The Committee may correct errors and, so far as practicable, may adjust any benefit or credit or payment accordingly. The Committee may in its discretion waive any notice requirements in the Plan; provided, that a waiver of notice in one or more cases shall not be deemed to constitute a waiver of notice in any other case. With respect to any power or authority which the Committee has discretion to exercise under the Plan, such discretion shall be exercised in a nondiscriminatory manner.

9.9 Authority to Interpret Plan. Subject to the claims procedure set forth in Section 16 the Plan Administrator and the Committee shall have the duty and discretionary authority to interpret and construe the provisions of the Plan and to decide any dispute which may arise regarding the rights of Participants hereunder, including the discretionary authority to construe the Plan and to make determinations as to eligibility and benefits under the Plan. Determinations by the Plan Administrator and the Committee shall apply uniformly to all persons similarly situated and shall be binding and conclusive upon all interested persons.

9.10 Third Party Advisors. The Committee may engage an attorney, accountant, actuary or any other technical advisor on matters regarding the operation of the Plan and to perform such other duties as shall be required in connection therewith, and may employ such clerical and related personnel as the Committee shall deem requisite or desirable in carrying out the provisions of the Plan. The Committee shall from time to time, but no less frequently than annually, review the financial condition of the Plan and determine the financial and liquidity needs of the Plan. The Committee shall communicate such needs to the Employer so that its policies may be appropriately coordinated to meet such needs.

9.11 Compensation of Members. No fee or compensation shall be paid to any member of the Committee for his Service as such.

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9.12 Expense Reimbursement. The Committee shall be entitled to reimbursement by the Employer for its reasonable expenses properly and actually incurred in the performance of its duties in the administration of the Plan.

9.13 Indemnification. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by him or on his behalf as a member of the Committee nor for any mistake of judgment made in good faith, and the Employer shall indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums for which are paid from the Employer’s own assets), each member of the Committee and each other officer, employee, or director of the Employer to whom any duty or power relating to the administration or interpretation of the Plan may be delegated or allocated, against any unreimbursed or uninsured cost or expense (including any sum paid in settlement of a claim with the prior written approval of the Board) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud, bad faith, willful misconduct or gross negligence.

Section 10. Contractual Liability; Trust:

10.1 Contractual Liability. The obligation of the Employer to make payments hereunder shall constitute a contractual liability of the Employer to the Participant. Such payments shall be made from the general funds of the Employer, and the Employer shall not be required to establish or maintain any special or separate fund, or otherwise to segregate assets to assure that such payments shall be made, and the Participant shall not have any interest in any particular assets of the Employer by reason of its obligations hereunder. To the extent that any person acquires a right to receive payment from the Employer, such right shall be no greater than the right of an unsecured creditor of the Employer.

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10.2 Trust. If so designated in the Adoption Agreement, the Employer may establish a Trust with the Trustee, pursuant to such terms and conditions as are set forth in the Trust Agreement. The Trust, if and when established, is intended to be treated as a grantor trust for purposes of the Code and all assets of the Trust shall be held in the United States. The establishment of the Trust is not intended to cause Participants to realize current income on amounts contributed thereto, and the Trust shall be so interpreted and administered.

Section 11. Allocation of Responsibilities:

The persons responsible for the Plan and the duties and responsibilities allocated to each are as follows:

11.1 Board.

(i) To amend the Plan;

(ii) To appoint and remove members of the Committee; and

(iii) To terminate the Plan as permitted in Section 14.

11.2 Committee.

(i) To designate Participants;

(ii) To interpret the provisions of the Plan and to determine the rights of the Participants under the Plan, except to the extent otherwise provided in Section 16 relating to claims procedure;

(iii) To administer the Plan in accordance with its terms, except to the extent powers to administer the Plan are specifically delegated to another person or persons as provided in the Plan;

(iv) To account for the amount credited to the Deferred Compensation Account of a Participant; and

(v) To direct the Employer in the payment of benefits.

11.3 Plan Administrator.

(i) To file such reports as may be required with the United States Department of Labor, the Internal Revenue Service and any other government agency to which reports may be required to be submitted from time to time; and

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(ii) To administer the claims procedure to the extent provided in Section 16.

Section 12. Benefits Not Assignable; Facility of Payments:

12.1 Benefits Not Assignable. No portion of any benefit credited or paid under the Plan with respect to any Participant shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void, nor shall any portion of such benefit be in any manner payable to any assignee, receiver or any one trustee, or be liable for his debts, contracts, liabilities, engagements or torts. Notwithstanding the foregoing, in the event that all or any portion of the benefit of a Participant is transferred to the former spouse of the Participant incident to a divorce, the Committee shall maintain such amount for the benefit of the former spouse until distributed in the manner required by an order of any court having jurisdiction over the divorce, and the former spouse shall be entitled to the same rights as the Participant with respect to such benefit.

12.2 Plan-Approved Domestic Relations Orders. The Plan Administrator shall establish written procedures for determining whether an order directed to the Plan is a Plan-Approved Domestic Relations Order.

12.2.1 Review by Plan Administrator: The Plan Administrator shall make a determination on each final court order directed to the Plan as to whether the order is a Plan-Approved Domestic Relations Order. The Plan Administrator may delay the commencement of its consideration of any order until the later of the date that is 30 days after the date of the order or the date that the Plan Administrator is satisfied that all rehearing and appeal rights with respect to the order have expired.

12.2.2 Payment to Alternate Payee: If the Plan Administrator determines that an order is a Plan-approved Domestic Relations Order, the Plan Administrator shall cause the payment of amounts pursuant to or segregate a separate account as provided by (and to prevent any payment or act which might be inconsistent with) the Plan-Approved Domestic Relations Order.

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12.2.3 Expenses: The Employer and the Plan Administrator shall not be obligated to incur any cost to defend against or set aside any judgment, decree, or order relating to the division, attachment, garnishment, or execution of or levy upon the Participant’s account or any distribution, including (but not limited to) any domestic relations proceeding. Notwithstanding the foregoing, if any such person is joined in any proceeding, the party may take such action as it considers necessary or appropriate to protect any and all of its legal rights, and the Participant (or Beneficiary) shall reimburse all actual fees of lawyers and legal assistants and expenses reasonably incurred by such party.

12.3 Payments to Minors and Others. If any individual entitled to receive a payment under the Plan shall be physically, mentally or legally incapable of receiving or acknowledging receipt of such payment, the Committee, upon the receipt of satisfactory evidence of his incapacity and satisfactory evidence that another person or institution is maintaining him and that no guardian or committee has been appointed for him, may cause any payment otherwise payable to him to be made to such person or institution so maintaining him. Payment to such person or institution shall be in full satisfaction of all claims by or through the Participant to the extent of the amount thereof.

Section 13. Beneficiary:

The Participant’s beneficiary shall be the person or persons designated by the Participant on the beneficiary designation form provided by and filed with the Committee or its designee. If the Participant does not designate a beneficiary, the beneficiary shall be his Surviving Spouse. If the Participant does not designate a beneficiary and has no Surviving Spouse, the beneficiary shall be the Participant’s estate. The designation of a beneficiary may be changed or revoked only by filing a new beneficiary designation form with the Committee or its designee. If a beneficiary (the “primary beneficiary”) is receiving or is entitled to receive payments under the Plan and dies before receiving all of the payments due him, the balance to which he is entitled shall be paid to the contingent beneficiary, if any, named in the Participant’s current beneficiary designation form. If there is no contingent beneficiary, the balance shall be

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paid to the estate of the primary beneficiary. Any beneficiary may disclaim all or any part of any benefit to which such beneficiary shall be entitled hereunder by filing a written disclaimer with the Committee before payment of such benefit is to be made. Such a disclaimer shall be made in a form satisfactory to the Committee and shall be irrevocable when filed. Any benefit disclaimed shall be payable from the Plan in the same manner as if the beneficiary who filed the disclaimer had predeceased the Participant.

Section 14. Amendment and Termination of Plan:

The Employer may amend any provision of the Plan or terminate the Plan at any time; provided, that in no event shall such amendment or termination reduce the balance in any Participant’s Deferred Compensation Account as of the date of such amendment or termination, nor shall any such amendment affect the terms of the Plan relating to the payment of such Deferred Compensation Account. Notwithstanding the foregoing, the following special provisions shall apply:

14.1 Termination in the Discretion of the Employer. Except as otherwise provided in Sections 14.2 or 14.3, the Employer in its discretion may terminate the Plan and distribute benefits to Participants subject to the following requirements:

14.1.1 All arrangements sponsored by the Employer that would be aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations are terminated.

14.1.2 No payments other than payments that would be payable under the terms of the Plan if the termination had not occurred are made within 12 months of the termination date.

14.1.3 All benefits under the Plan are paid within 24 months of the termination date.

14.1.4 The Employer does not adopt a new arrangement that would be aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations providing for the deferral of compensation at any time within five years following the date of termination of the Plan.

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14.2 Termination Upon Change in Control. If the Employer terminates the Plan within thirty days preceding or twelve months following a Change in Control, the Deferred Compensation Account of each Participant shall become fully vested and payable to the Participant in a lump sum within twelve months following the date of termination.

14.3 Termination On or Before December 31, 2005. The Employer may terminate the Plan on or before December 31, 2005, and distribute the vested balance in the Deferred Compensation Account to each Participant so long as all amounts deferred under the Plan are included in the income of the Participant in the taxable year in which the termination occurs.

14.4 No Financial Triggers. The Employer may not terminate the Plan and make distributions to a Participant due solely to a change in the financial health of the Employer. This provision shall apply to amounts earned and vested before, on or after December 31, 2004.

Section 15. Communication to Participants:

The Employer shall make a copy of the Plan available for inspection by Participants and their beneficiaries during reasonable hours at the principal office of the Employer.

Section 16. Claims Procedure:

The following claims procedure shall apply with respect to the Plan:

16.1 Filing of a Claim for Benefits. If a Participant or beneficiary (the “claimant”) believes that he is entitled to benefits under the Plan which are not being paid to him or which are not being accrued for his benefit, he shall file a written claim therefore with the Plan Administrator. In the event the Plan Administrator shall be the claimant, all actions which are required to be taken by the Plan Administrator pursuant to this Section 16 shall be taken instead by another member of the Committee designated by the Committee.

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16.2 Notification to Claimant of Decision. Within 90 days after receipt of a claim by the Plan Administrator (or within 180 days if special circumstances require an extension of time), the Plan Administrator shall notify the claimant of the decision with regard to the claim. In the event of such special circumstances requiring an extension of time, there shall be furnished to the claimant prior to expiration of the initial 90-day period written notice of the extension, which notice shall set forth the special circumstances and the date by which the decision shall be furnished. If such claim shall be wholly or partially denied, notice thereof shall be in writing and worded in a manner calculated to be understood by the claimant, and shall set forth: (i) the specific reason or reasons for the denial; (ii) specific reference to pertinent provisions of the Plan on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure for review of the denial and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA following an adverse benefit determination on review. Notwithstanding the forgoing, if the claim relates to a Participant who is Disabled, the Plan Administrator shall notify the claimant of the decision within 45 days (which may be extended for an additional 30 days if required by special circumstances).

16.3 Procedure for Review. Within 60 days following receipt by the claimant of notice denying his claim, in whole or in part, or, if such notice shall not be given, within 60 days following the latest date on which such notice could have been timely given, the claimant shall appeal denial of the claim by filing a written application for review with the Committee. Following such request for review, the Committee shall fully and fairly review the decision denying the claim. Prior to the decision of the Committee, the claimant shall be given an opportunity to review pertinent documents and to submit issues and comments in writing.

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16.4 Decision on Review. The decision on review of a claim denied in whole or in part by the Plan Administrator shall be made in the following manner:

16.4.1 Within 60 days following receipt by the Committee of the request for review (or within 120 days if special circumstances require an extension of time), the Committee shall notify the claimant in writing of its decision with regard to the claim. In the event of such special circumstances requiring an extension of time, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Notwithstanding the forgoing, if the claim relates to a Participant who is Disabled, the Committee shall notify the claimant of the decision within 45 days (which may be extended for an additional 45 days if required by special circumstances).

16.4.2 With respect to a claim that is denied in whole or in part, the decision on review shall set forth specific reasons for the decision, shall be written in a manner calculated to be understood by the claimant, and shall cite specific references to the pertinent Plan provisions on which the decision is based.

16.4.3 The decision of the Committee shall be final and conclusive.

16.5 Action by Authorized Representative of Claimant. All actions set forth in this Section 16 to be taken by the claimant may likewise be taken by a representative of the claimant duly authorized by him to act in his behalf on such matters. The Plan Administrator and the Committee may require such evidence as either may reasonably deem necessary or advisable of the authority to act of any such representative.

Section 17. Miscellaneous Provisions:

17.1 Set off. Notwithstanding any other provision of this Plan, the Employer may reduce the amount of any payment otherwise payable to or on behalf of a Participant hereunder (net of any required withholdings) by the amount of any loan, cash advance, extension of credit or other obligation of the Participant to the Employer that is then due and payable, and the Participant shall be deemed to have consented to such reduction.

17.2 Notices. Each Participant who is not in Service and each Beneficiary shall be responsible for furnishing the Committee or its designee with his current address for the

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mailing of notices and benefit payments. Any notice required or permitted to be given to such Participant or Beneficiary shall be deemed given if directed to such address and mailed by regular United States mail, first class, postage prepaid. If any check mailed to such address is returned as undeliverable to the addressee, mailing of checks will be suspended until the Participant or beneficiary furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification otherwise permitted to be given by posting or by other publication.

17.3 Lost Distributees. A benefit shall be deemed forfeited if the Plan Administrator is unable to locate the Participant or Beneficiary to whom payment is due on or before the fifth anniversary of the date payment is to be made or commence; provided, that the deemed investment rate of return pursuant to Section 8.2 shall cease to be applied to the Participant’s account following the first anniversary of such date; provided further, however, that such benefit shall be reinstated if a valid claim is made by or on behalf of the Participant or Beneficiary for all or part of the forfeited benefit.

17.4 Reliance on Data. The Employer, the Committee and the Plan Administrator shall have the right to rely on any data provided by the Participant or by any Beneficiary. Representations of such data shall be binding upon any party seeking to claim a benefit through a Participant, and the Employer, the Committee and the Plan Administrator shall have no obligation to inquire into the accuracy of any representation made at any time by a Participant or beneficiary.

17.5 Receipt and Release for Payments. Subject to the provisions of Section 17.1, any payment made from the Plan to or with respect to any Participant or Beneficiary, or pursuant to a disclaimer by a Beneficiary, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Plan and the Employer with respect to the Plan.

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The recipient of any payment from the Plan may be required by the Committee, as a condition precedent to such payment, to execute a receipt and release with respect thereto in such form as shall be acceptable to the Committee.

17.6 Headings. The headings and subheadings of the Plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.

17.7 Continuation of Employment. The establishment of the Plan shall not be construed as conferring any legal or other rights upon any Employee or any persons for continuation of employment, nor shall it interfere with the right of the Employer to discharge any Employee or to deal with him without regard to the effect thereof under the Plan.

17.8 Merger or Consolidation; Assumption of Plan. No Employer shall consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its assets to another corporation, partnership, trust or other entity (a “Successor Entity”) unless such Successor Entity shall assume the rights, obligations and liabilities of the Employer under the Plan and upon such assumption, the Successor Entity shall become obligated to perform the terms and conditions of the Plan. Nothing herein shall prohibit the assumption of the obligations and liabilities of the Employer under the Plan by any Successor Entity.

17.9 Construction. The Employer shall designate in the Adoption Agreement the state according to whose laws the provisions of the Plan shall be construed and enforced, except to the extent that such laws are superseded by ERISA and the applicable requirements of the Code.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mohan R. Maheswaran, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Semtech Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 7, 2007

/s/ Mohan R. Maheswaran

Mohan R. Maheswaran

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Emeka N. Chukwu, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Semtech Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 7, 2007

/s/ Emeka N. Chukwu

Emeka N. Chukwu

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 USC 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Semtech Corporation (the “Company”) on Form 10-Q for the period ended July 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mohan R. Maheswaran, Chief Executive Officer of the Company, hereby certify pursuant to 18 USC 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 7, 2007

/s/ Mohan R. Maheswaran

Mohan R. Maheswaran

Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Semtech Corporation and will be retained by Semtech Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The information contained in this Exhibit 32.1 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Exhibit 32.1 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to this Exhibit 32.1 in such filing

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 USC 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Semtech Corporation (the “Company”) on Form 10-Q for the period ended July 29, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Emeka N. Chukwu, Chief Financial Officer of the Company, hereby certify pursuant to 18 USC 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 7, 2007

/s/ Emeka N. Chukwu

Emeka N. Chukwu

Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Semtech Corporation and will be retained by Semtech Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The information contained in this Exhibit 32.2 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Exhibit 32.2 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to this Exhibit 32.2 in such filing.