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SILICON LABORATORIES
SILICON LABORATORIES INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 2002
TO THE STOCKHOLDERS OF SILICON LABORATORIES INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Silicon Laboratories Inc., a Delaware corporation, will be held on April 24,
2002, at 10:00 a.m. Central Time at the Lady Bird Johnson Wildflower Center,
4801 La Crosse Avenue, Austin, Texas 78739, for the following purposes, as more
fully described in the Proxy Statement accompanying this Notice:
1. To elect two Class I directors to serve on the Board of Directors
until our 2005 annual meeting of stockholders, or until their
successors are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 28, 2002; and
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on February 25,
2002 are entitled to notice of and to vote at the Annual Meeting. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection at our executive offices.
All stockholders are cordially invited to attend the meeting in
person. Whether or not you plan to attend, please sign and return the Proxy in
the envelope enclosed for your convenience, or vote your shares by telephone or
internet as promptly as possible. Should you receive more than one Proxy because
your shares are registered in different names and addresses, each Proxy should
be signed and returned, or voted by telephone or internet to assure that all
your shares will be voted. You may revoke your Proxy at any time prior to the
Annual Meeting. If you attend the Annual Meeting and vote by ballot, your Proxy
will be revoked automatically and only your vote at the Annual Meeting will be
counted.
Sincerely,
/s/ Navdeep S. Sooch
---------------------------
Navdeep S. Sooch
CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
Austin, Texas
March 20, 2002
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
SILICON LABORATORIES INC.
4635 BOSTON LANE
AUSTIN, TEXAS 78735
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 2002
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Silicon Laboratories Inc., a Delaware corporation, for use at the Annual Meeting
of Stockholders to be held on April 24, 2002 at 10:00 a.m. Central Time at the
Lady Bird Johnson Wildflower Center, 4801 La Crosse Avenue, Austin, Texas 78739.
These proxy solicitation materials were mailed on or about March 20, 2002, to
all stockholders entitled to vote at the Annual Meeting.
VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying notice and are described in more
detail in this Proxy Statement. On February 25, 2002, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were 48,706,836 shares of our common stock outstanding and no
shares of our preferred stock were outstanding. Each stockholder is entitled to
one vote for each share of common stock held by such stockholder on February 25,
2002. The presence, in person or by proxy, of the holders of a majority of our
shares entitled to vote is necessary to constitute a quorum at this Annual
Meeting. Stockholders may not cumulate votes in the election of directors. The
vote of a plurality of the shares of our common stock present in person or
represented by proxy at this meeting and entitled to vote on the election of
directors is necessary for the election of a director. The nominees receiving
the greatest number of votes at this meeting will be elected to our Board of
Directors, even if they receive less than a majority of such shares.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes (i.e. a Proxy submitted by a broker or nominee
specifically indicating the lack of discretionary authority to vote on the
matter). Abstentions and broker non-votes will be counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining whether each
proposal has been approved.
PROXIES
If the enclosed form of Proxy is properly signed and returned or you
properly follow the instructions for telephone or internet voting, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the Proxy does not specify how the shares
represented thereby are to be voted, the Proxy will be voted FOR the election of
the directors proposed by the Board of Directors unless the authority to vote
for the election of such directors is withheld and, if no contrary instructions
are given, the Proxy will be voted FOR the approval of the selection of Ernst &
Young LLP as our independent public auditors. You may revoke or change your
Proxy at any time before the Annual Meeting by filing with our Chief Financial
Officer at our principal executive offices at 4635 Boston Lane, Austin, Texas
78735, a notice of revocation or another signed Proxy with a later date. You may
also revoke your Proxy by attending the Annual Meeting and voting in person.
SOLICITATION
We will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to the stockholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, we may reimburse such persons for their costs in forwarding the
solicitation materials to such beneficial owners. The original solicitation of
proxies by mail may be supplemented by a solicitation by telephone or other
means by directors, officers or employees. No additional compensation will be
paid to these individuals for any such services. Except as described above, we
do not presently intend to solicit Proxies other than by mail.
DEADLINE FOR RECEIPT OF FUTURE STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
stockholder proposals to be presented at our 2003 Annual Meeting of Stockholders
and in our proxy statement and form of proxy relating to that meeting must be
received by us at our principal executive offices in Austin, Texas, addressed to
our Chief Financial Officer, not later than November 20, 2002, the date which is
120 days prior to March 20, 2003. These proposals must comply with applicable
Delaware law, the rules and regulations promulgated by the Securities and
Exchange Commission and the procedures set forth in our bylaws. Unless we
receive notice in the manner specified in the previous sentence, the Proxy
holders shall have discretionary authority to vote against any proposal
presented at our 2003 Annual Meeting of Stockholders.
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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
The Board of Directors is divided into three classes, designated Class
I, Class II and Class III. Each class is as nearly equal in size as practicable,
with staggered three-year terms. The term of office of the Class I directors,
Navdeep S. Sooch and William P. Wood, expires at this Annual Meeting. Mr. Sooch
and Mr. Wood have been nominated to continue as Class I Directors. The two
directors elected as Class I Directors at the Annual Meeting will serve for a
term of three years expiring at the 2005 annual meeting of stockholders, or
until their successor(s) have been duly elected and qualified or until their
earlier death, resignation or removal.
Each nominee for election has agreed to serve if elected, and
management has no reason to believe that the nominees will be unavailable to
serve. In the event a nominee is unable or declines to serve as a director at
the time of the Annual Meeting, the Proxies will be voted for any nominee who
may be designated by our present Board of Directors to fill the vacancy. Unless
otherwise instructed, the Proxy holders will vote the Proxies received by them
FOR the nominees named below.
NOMINEES FOR CLASS I DIRECTORS WITH TERMS EXPIRING IN 2005
Navdeep S. Sooch, 39 ....... co-founded Silicon Laboratories in August 1996 and
has served as our Chief Executive Officer and
Chairman of the Board since our inception. From
March 1985 until founding Silicon Laboratories,
Mr. Sooch held various positions at Crystal
Semiconductor/Cirrus Logic, a designer and
manufacturer of integrated circuits, including
Vice President of Engineering, as well as Product
Planning Manager of Strategic Marketing and Design
Engineer. From May 1982 to March 1985, Mr. Sooch
was a Design Engineer with AT&T Bell Labs, a
communications company. Mr. Sooch holds a B.S. in
electrical engineering from the University of
Michigan and a M.S. in electrical engineering from
Stanford University.
William P. Wood, 46......... has served as a director of Silicon Laboratories
since March 1997. Since 1984, Mr. Wood has been a
general partner, and for certain funds created
since 1996, a special limited partner, of various
funds associated with Austin Ventures, a venture
capital firm located in Austin, Texas. Since 1996,
Mr. Wood has also served as the sole general
partner of Silverton Partners, an investment
partnership located in Austin, Texas. Mr. Wood
serves on the Board of Directors of Crossroads
Systems, a provider of storage routers for storage
area networks, and several private companies.
Mr.Wood holds a B.A. in history from Brown
University and a M.B.A. from Harvard University.
OTHER DIRECTORS
Set forth below is information concerning our other directors whose
term of office continues after this Annual Meeting.
CONTINUING CLASS II DIRECTORS WITH TERMS EXPIRING IN 2003
David R. Welland, 46 ....... co-founded Silicon Laboratories in August 1996 and
has served as a Vice President and as a director
since our inception. From November 1991 until
founding Silicon Laboratories, Mr. Welland held
various positions at Crystal Semiconductor/Cirrus
Logic, including Senior Design Engineer. Mr.
Welland holds a B.S. in electrical engineering
from the Massachusetts Institute of Technology.
H. Berry Cash, 63 .......... has served as a director of Silicon Laboratories
since June 1997. Mr. Cash has served as general
partner of InterWest Partners, a venture capital
firm, since 1986. Mr. Cash currently serves on the
Board of Directors of the following public
companies: Microtune, a designer and manufacturer
of RF silicon and systems "gateway" solutions for
the broadband communications and consumers
electronics markets; i2 Technologies, a provider
of intelligent e-business and marketplace
solutions; Ciena Corporation, a designer and
manufacturer of dense wavelength division
3
multiplexing systems for fiber optic networks;
Airspan, a provider of broadband fixed wireless
access communication systems; and Liberte
Investors Inc., an investment company. In
addition, Mr. Cash is a director of several
privately held companies. Mr. Cash holds a B.S. in
electrical engineering from Texas A&M University
and a M.B.A. from Western Michigan University.
CONTINUING CLASS III DIRECTORS WITH TERMS EXPIRING IN 2004
Jeffrey W. Scott, 40 ....... co-founded Silicon Laboratories in August 1996 and
has served as a Vice President and as a director
since our inception. From October 1989 until
founding Silicon Laboratories, Mr. Scott held
various positions at Crystal Semiconductor/Cirrus
Logic, including Vice President of Engineering
(Computer Products), Design Manager and Design
Engineer. From 1985 until 1989, Mr. Scott served
as a Design Engineer with AT&T Bell Labs. Mr.
Scott holds a B.S. in electrical engineering from
Lehigh University and a M.S. in electrical
engineering from the Massachusetts Institute of
Technology.
William G. Bock, 51 ........ has served as a director of Silicon Laboratories
since March 2000. Since April 2001, Mr. Bock has
been a partner in Verity Ventures, a venture
capital partnership focused on companies in Austin
and Dallas. From June 1999 to March 2001, Mr. Bock
served as a Vice President and General Manager of
the Hewlett-Packard Company. Mr. Bock held the
position of President and Chief Executive Officer
of Dazel Corporation, a developer of information
delivery software solutions, from February 1997
until Dazel became a wholly-owned subsidiary of
the Hewlett-Packard Company in June 1999. From
October 1994 to February 1997, Mr. Bock served as
Chief Operating Officer of Tivoli Systems, a
client server software company. Tivoli became a
wholly-owned subsidiary of IBM in March 1996. Mr.
Bock holds a B.S. in Computer Science from Iowa
State University and a M.S. in Industrial
Administration from Carnegie Mellon University.
BOARD COMMITTEES AND MEETINGS
During fiscal 2001, our Board of Directors held eight meetings and
acted by unanimous written consent two times. The Board of Directors has an
Audit Committee, a Compensation Committee and a Special Stock Option Committee.
Each director attended or participated in 75% or more of the aggregate of (i)
the total number of meetings of the Board of Directors and (ii) the total number
of meetings held by all committees of the Board of Directors on which such
director served during fiscal 2001.
AUDIT COMMITTEE. The Audit Committee reports to the Board of Directors
with regard to the selection of our independent auditors, the scope of the
annual audits, the fees to be paid to the independent auditors, the performance
of our independent auditors, compliance with our accounting and financial
policies, and management's procedures and policies relative to the adequacy of
our internal accounting controls. The members of the Audit Committee are Messrs.
Wood, Cash and Bock. The Audit Committee held five meetings during fiscal 2001.
COMPENSATION COMMITTEE. The Compensation Committee reviews and makes
recommendations to the Board of Directors regarding our compensation policies
and all forms of compensation to be provided to our executive officers and other
employees. In addition, the Compensation Committee has authority to administer
our stock option and stock purchase plans. The members of the Compensation
Committee are Messrs. Wood, Cash and Bock. The Compensation Committee held two
meetings and acted by unanimous written consent two times during fiscal 2001.
SPECIAL STOCK OPTION COMMITTEE. The Special Stock Option Committee,
which is composed of Mr. Sooch, approves grants of options from our 2000 Stock
Incentive Plan to non-executive officers and employees. The Special Stock Option
Committee acted 22 times by written consent at regular intervals during fiscal
2001.
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DIRECTOR COMPENSATION AND INDEMNIFICATION ARRANGEMENTS
Non-employee directors receive option grants at periodic intervals
under the automatic option grant program of our 2000 Stock Incentive Plan. Under
the automatic option grant program, each individual who first becomes a
non-employee director receives an option grant to purchase 30,000 shares of
common stock on the date such individual joins the board. In addition, on the
date of each annual stockholders meeting, each non-employee director who
continues to serve as a non-employee director is automatically granted an option
to purchase 5,000 shares of common stock, provided such individual has served as
a non-employee director for at least six months. Under this program, on the date
of our 2001 annual meeting of stockholders, Messrs. Bock, Cash and Wood each
received an option grant to purchase 5,000 shares of common stock at an exercise
price per share of $23.70. In addition, directors are eligible to receive option
grants under the discretionary option grant program of the 2000 Stock Incentive
Plan. During fiscal 2001, Messrs. Bock, Cash and Wood also each received an
option grant to purchase 5,000 shares of common stock at an exercise price per
share of $22.63 under the discretionary option grant program. The automatic
grants and discretionary grants each vest on the first anniversary of the date
of grant and have exercise prices equal to fair market value as of the grant
date. No directors' fees were paid during fiscal 2001. We reimburse directors
for all reasonable out-of-pocket expenses incurred in attending board and
committee meetings.
Our certificate of incorporation limits the personal liability of our
board members for breaches by the directors of their fiduciary duties. Our
bylaws require us to indemnify our directors to the fullest extent permitted by
Delaware law. We have also entered into indemnification agreements with all of
our directors and have purchased directors' and officers' liability insurance.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES FOR CLASS I DIRECTORS LISTED ABOVE.
5
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
Our Board of Directors appointed the firm of Ernst & Young LLP as our
independent public auditors for fiscal 2001 and to serve in the same capacity
for the fiscal year ending December 28, 2002. Ernst & Young LLP has audited our
financial statements since our inception in 1996. A representative of Ernst &
Young LLP is expected to be present at the Annual Meeting, will have an
opportunity to make a statement if he or she so desires and will be available to
respond to appropriate questions.
Audit fees billed to us by Ernst & Young LLP during our 2001 fiscal
year for review of our annual financial statement and those financial statements
included in our quarterly reports on Form 10-Q totaled $130,500. All other fees
were $70,700, including audit related services of $3,500 and non-audit services
of $67,200. We did not engage Ernst & Young LLP to provide advice regarding
financial information systems design and implementation during fiscal 2001.
Stockholder ratification of the appointment of Ernst & Young LLP as our
independent public auditors is not required by our bylaws or other applicable
legal requirement. However, the Board is submitting the appointment of Ernst &
Young LLP to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the appointment, the Audit
Committee and the Board will reconsider whether or not to retain the firm. Even
if the appointment is ratified, the Board at its discretion may direct the
appointment of a different independent accounting firm at any time during the
year if it determines that such a change would be in the best interests of the
company and its stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP TO SERVE AS OUR INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 28, 2002.
OTHER MATTERS
We know of no other matters that will be presented for consideration
at the Annual Meeting. If any other matters properly come before the Annual
Meeting, it is the intention of the persons named in the enclosed form of Proxy
to vote the shares they represent as the Board of Directors may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
6
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to us with
respect to the beneficial ownership of our common stock as of January 31, 2002
by (i) all persons who are beneficial owners of five percent or more of our
common stock, (ii) each director and nominee for director, (iii) the executive
officers named in the Summary Compensation Table of the Executive Compensation
section of this Proxy Statement and (iv) all current directors and executive
officers as a group. Unless otherwise indicated, each of the stockholders has
sole voting and investment power with respect to the shares beneficially owned,
subject to community property laws, where applicable.
PERCENTAGES
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER(1) OWNED OWNED(2)
- ------------------------------------------- ------------ ------------
Navdeep S. Sooch(3) ....................... 7,040,795 14.4%
David R. Welland .......................... 5,790,131 11.9%
Jeffrey W. Scott(4) ....................... 3,912,331 8.0%
Bradley J. Fluke(5) ....................... 384,702 *
John W. McGovern(6) ....................... 254,598 *
Gary R. Gay(7) ............................ 237,766 *
Daniel A. Artusi........................... 150,000 *
William P. Wood(8) ........................ 3,626,419 7.4%
H. Berry Cash(9) .......................... 529,346 1.1%
William G. Bock(10)........................ 61,987 *
Entities deemed to be affiliated with FMR
Corp. ("Fidelity")(11)................... 4,899,830 10.1%
Entities deemed to be affiliated with
Putnam Investments, LLC.(12) ............ 3,178,364 6.5%
Entities deemed to be affiliated with
Austin Ventures(13) ..................... 2,824,762 5.8%
All directors and executive officers as a
group (12 persons)(14) .................. 22,669,673 46.1%
- -----------------
* Represents beneficial ownership of less than one percent.
(1) Unless otherwise indicated in the footnotes, the address for the beneficial
owners named above is 4635 Boston Lane, Austin, Texas 78735.
(2) Percentage of ownership is based on 48,704,104 shares of common stock
outstanding on January 31, 2002. Shares of common stock subject to stock
options which are currently exercisable or will become exercisable within
60 days after January 31, 2002 are deemed outstanding for computing the
percentage of the person or group holding such options, but are not deemed
outstanding for computing the percentage of any other person or group.
(3) Includes 229,500 shares held in trusts for the benefit of Mr. Sooch's
children, 250,000 shares held in a family limited partnership, and 58,000
shares issuable upon the exercise of stock options. Mr. Sooch shares voting
and investment power with respect to the 229,500 shares held in trusts for
the benefit of his children and the 250,000 shares held in the family
limited partnership.
(4) Includes 43,000 shares issuable upon the exercise of stock options.
7
(5) Includes 66,666 shares issuable upon the exercise of stock options and
8,520 shares held in trusts. Mr. Fluke has shared voting and investment
power with respect to the 8,520 shares held in the trusts.
(6) Includes 69,998 shares issuable upon exercise of stock options and 80,000
shares held in a family limited partnership. Mr. McGovern shares voting and
investment power with respect to the 80,000 shares held in the family
limited partnership.
(7) Includes 34,666 shares issuable upon exercise of stock options.
(8) Includes 2,815,854 shares indicated as owned by Mr. Wood due to his
affiliation with certain funds affiliated with Austin Ventures. Mr. Wood is
a general partner of AV Partners IV, L.P., the general partner of Austin
Ventures IV-A, L.P. and Austin Ventures IV-B, L.P. and a special limited
partner of AV Partners V, L.P., the general partner of Austin Ventures V,
L.P. and Austin Ventures V Affiliates Fund, L.P. Mr. Wood disclaims
beneficial ownership of the shares held by such entities, except to the
extent of his pecuniary interest in such shares. Also includes 150,422
shares held by Silverton Partners, L.P., of which Mr. Wood is the general
partner, 384,391 shares held directly by Mr. Wood, 235,752 shares held by
Mr. Wood as custodian for certain family members and 40,000 shares issuable
upon exercise of stock options. Mr. Wood's address is c/o Austin Ventures,
701 Brazos Street, Suite 1400, Austin, Texas 78701.
(9) Includes 129,346 shares held in two trusts for the benefit of Mr. Cash's
family members and 10,000 shares issuable upon the exercise of stock
options. Mr. Cash has sole voting and investment power over the 129,346
shares held in the trusts.
(10) Includes 41,875 shares issuable upon exercise of stock options.
(11) Pursuant to a Schedule 13G dated January 10, 2002 filed with the Securities
and Exchange Commission, FMR Corp. reported that, as of December 31, 2001,
it had sole voting power over 261,050 shares and sole dispositive power
over 4,899,830 shares and that its address is 82 Devonshire Street, Boston,
MA 02109.
(12) Pursuant to a Schedule 13G/A dated February 5, 2002 filed with the
Securities and Exchange Commission, Putnam Investments, LLC reported that,
as of December 31, 2001, it and certain related entities had shared voting
power over 537,137 shares and shared dispositive power over 3,178,364
shares and that its address is One Post Office Square, Boston, MA 02109.
(13) Includes:
o 11,854 shares held by AV Partners IV, L.P.
o 315,688 shares held by Austin Ventures IV-A, L.P.
o 662,312 shares held by Austin Ventures IV-B, L.P.
o 1,651,000 shares held by Austin Ventures V, L.P.
o 175,000 shares held by Austin Ventures V Affiliates Fund, L.P.
o 8,908 shares held by AVP Management Services, Inc.
These entities may be deemed to beneficially own each other's shares
because the principals of these entities are affiliated. Each entity,
however, disclaims beneficial ownership of the other's shares. The address
of Austin Ventures is 701 Brazos Street, Suite 1400, Austin, Texas 78701.
(14) Includes 466,205 shares issuable upon exercise of stock options.
8
CERTAIN TRANSACTIONS
REGISTRATION RIGHTS. According to the terms of the investors' rights
agreement among us, investors who purchased shares of our preferred stock and
Messrs. Sooch, Scott, Welland and McGovern, at any time after March 21, 2002,
investors in our preferred stock holding an aggregate of at least two-thirds of
the shares of common stock issued upon conversion of the preferred stock will be
entitled to demand that we file a registration statement with respect to the
registration of their shares under the Securities Act of 1933, provided that
those investors request that such registration statement register the resale of
at least half of the outstanding shares held by them. We are not required to
effect more than two such registrations or more than one such registration
during any 365 day period.
In addition, certain holders of shares of our common stock, including
Messrs. Sooch, Scott, Welland, McGovern, and Cash, Silverton Partners and
entities affiliated with Austin Ventures and other stockholders have piggyback
registration rights with respect to the future registration of shares of our
common stock under the Securities Act. If we propose to register any shares of
our common stock under the Securities Act, the holders of shares having
piggyback registration rights are entitled to receive notice of such
registration and are entitled to include their shares in the registration.
At any time after we become eligible to file a registration statement
on Form S-3, holders of registration rights may require us to file up to three
registration statements on Form S-3 under the Securities Act with respect to
their shares of common stock.
These registration rights are subject to conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares of common stock to be included in the registration. We are generally
required to bear all of the expenses of all registrations under the investors'
rights agreement, except underwriting discounts and commissions. The investors'
rights agreement also contains our commitment to indemnify holders of
registration rights for certain losses they may incur in connection with
registrations under the agreement. Registration of any of the shares of common
stock held by security holders with registration rights would result in those
shares becoming freely tradable without restriction under the Securities Act.
LOANS TO EXECUTIVE OFFICERS. In June 1998, we loaned $56,500 to Edmund
G. Healy,Vice President, to allow him to purchase shares of our common stock.
Mr. Healy delivered a full-recourse promissory note to us with respect to his
loan which is secured by the purchased shares and accrues interest at a rate of
2.46% per annum, compounded semi-annually. As of January 31, 2002, the aggregate
indebtedness under such note was $37,147. The largest aggregate amount of
indebtedness that was outstanding under the note through such date occurred in
December 2001, when the balance on the note was $67,580. This promissory note
becomes due in June 2003.
STOCK OPTIONS GRANTED TO DIRECTORS AND EXECUTIVE OFFICERS. For more
information regarding the grant of stock options to executive officers and
directors, please see "Director Compensation and Indemnification Arrangements"
above and "Stock Options" below.
INDEMNIFICATION, INSURANCE AND LIMITATION OF LIABILITY. Our bylaws
require us to indemnify our directors and executive officers to the fullest
extent permitted by Delaware law. We have entered into indemnification
agreements with all of our directors and executive officers and have purchased
directors' and officers' liability insurance. In addition, our certificate of
incorporation limits the personal liability of the members of our Board of
Directors for breaches by the directors of their fiduciary duties.
9
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee with respect to the
audit of our fiscal 2001 audited consolidated financial statements:
Management is responsible for the company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and to issue a report thereon. The Committee's responsibility is
to monitor and oversee these processes.
In this context, the Committee has met and held discussions with
management and the independent auditors. Management represented to the Committee
that the company's consolidated financial statements in the Annual Report were
prepared in accordance with accounting principles generally accepted in the
United States, and the Committee has reviewed and discussed the consolidated
financial statements in the Annual Report with management and the independent
auditors. The Committee discussed with the independent auditors matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
The company's independent auditors also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditors that firm's independence. The Audit Committee
reviewed nonaudit services provided by its independent auditors for the last
fiscal year, and determined that those services are not incompatible with
maintaining the auditors' independence.
Based upon the Committee's discussion with management and the
independent auditors and the Committee's review of the representation of
management and the report of the independent auditors to the Committee, the
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the company's Annual Report on Form 10-K
for the year ended December 29, 2001 filed with the Securities and Exchange
Commission.
Submitted by the Audit Committee of the Board of Directors:
William P. Wood
H. Berry Cash
William G. Bock
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EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is information regarding the executive officers and
directors of Silicon Laboratories as of January 31, 2002.
NAME AGE POSITION
- ---- --- --------
Navdeep S. Sooch........................... 39 Chief Executive Officer and Chairman of the Board
Daniel A. Artusi........................... 47 Chief Operating Officer
John W. McGovern........................... 46 Chief Financial Officer
Jeffrey W. Scott........................... 40 Vice President and Director
David R. Welland........................... 46 Vice President and Director
Gary R. Gay................................ 51 Vice President
Bradley J. Fluke........................... 40 Vice President
Jonathan D. Ivester........................ 46 Vice President
Edmund G. Healy............................ 47 Vice President
William P. Wood............................ 46 Director
H. Berry Cash.............................. 63 Director
William G. Bock............................ 51 Director
Navdeep S. Sooch ........... co-founded Silicon Laboratories in August 1996 and
has served as our Chief Executive Officer and
Chairman of the Board since our inception. From
March 1985 until founding Silicon Laboratories,
Mr. Sooch held various positions at Crystal
Semiconductor/Cirrus Logic, a designer and
manufacturer of integrated circuits, including
Vice President of Engineering, as well as Product
Planning Manager of Strategic Marketing and Design
Engineer. From May 1982 to March 1985, Mr. Sooch
was a Design Engineer with AT&T Bell Labs, a
communications company. Mr. Sooch holds a B.S. in
electrical engineering from the University of
Michigan and a M.S. in electrical engineering from
Stanford University.
Daniel A. Artusi............ joined Silicon Laboratories in August 2001 as our
Chief Operating Officer. Prior to joining Silicon
Laboratories, Mr. Artusi held various positions at
Motorola. From August 1999 to August 2001, Mr.
Artusi served as Corporate Vice President and
General Manager of Motorola's Networking and
Computing Systems Group. Mr. Artusi served as Vice
President and General Manager of Motorola's
Wireless Infrastructure Systems Division from May
1997 to August 1999 and as General Manager of
Motorola's RF Products Division from April 1996 to
May 1997. Mr. Artusi attended the Instituto
Tecnologico de Buenos Aires, Argentina from 1972
through 1976.
John W. McGovern ........... joined Silicon Laboratories in December 1996 as
our Chief Financial Officer. From February 1985 to
September 1996, Mr. McGovern held various
positions at Crystal Semiconductor/Cirrus Logic
including Vice President of Finance and Division
Controller. Mr. McGovern holds a B.B.A. in
accounting from the University of Texas and is a
licensed Certified Public Accountant.
Jeffrey W. Scott ........... co-founded Silicon Laboratories in August 1996 and
has served as a Vice President and as a director
since our inception. From October 1989 until
founding Silicon Laboratories, Mr. Scott held
various positions at Crystal Semiconductor/Cirrus
Logic, including Vice President of Engineering
(Computer Products), Design Manager and Design
Engineer. From 1985 until 1989, Mr. Scott served
as a Design Engineer with AT&T Bell Labs. Mr.
Scott holds a B.S. in electrical engineering from
Lehigh University and a M.S. in electrical
engineering from the Massachusetts Institute of
Technology.
11
David R. Welland ........... co-founded Silicon Laboratories in August 1996 and
has served as a Vice President and as a director
since our inception. From November 1991 until
founding Silicon Laboratories, Mr. Welland held
various positions at Crystal Semiconductor/Cirrus
Logic, including Senior Design Engineer. Mr.
Welland holds a B.S. in electrical engineering
from the Massachusetts Institute of Technology.
Gary R. Gay ................ joined Silicon Laboratories in October 1997 as
Vice President. Previously, Mr. Gay was with
Crystal Semiconductor/Cirrus Logic from 1985 to
September 1997 where he most recently served as
Vice President of North American Sales. From 1979
to 1985, Mr. Gay was International Sales Manager
and Asia Pacific Sales Manager with Burr-Brown
Corporation, a designer and manufacturer of
semiconductor components. Mr. Gay holds a B.S. in
electrical engineering from the Rochester
Institute of Technology.
Bradley J. Fluke ........... has served as a Vice President since April 1997.
Previously, he served as the Director of Marketing
of the Computer Products Division of Crystal
Semiconductor/Cirrus Logic from June 1990 to April
1997. From 1984 to 1990, Mr. Fluke held various
marketing positions in the Data Converter Group
for Analog Devices, a designer and manufacturer of
integrated circuits. Mr. Fluke holds a B.S. in
electrical engineering from Rochester Institute of
Technology.
Jonathan D. Ivester ........ joined Silicon Laboratories in September 1997 as
Vice President. From May 1984 to September 1997,
Mr. Ivester was with Applied Materials and served
as Director of Manufacturing and Director of U.S.
Procurement in addition to various engineering
management positions. Mr. Ivester was a scientist
at Bechtel Corporation, an engineering and
construction company, from 1980 to 1982 and at
Abcor, Inc., an ultrafication company and
subsidiary of Koch Industries, from 1978 to 1980.
Mr Ivester holds a B.S. in chemistry from the
Massachusetts Institute of Technology and a M.B.A.
from Stanford University.
Edmund G. Healy ............ has served as Vice President since June 1998. From
September 1992 to June 1998, Mr. Healy worked as
General Manager of the Magnetic Storage Division
at Crystal Semiconductor/Cirrus Logic. Mr. Healy
held various Senior Marketing and Product Planning
positions for Zilog, a designer and manufacturer
of application specific standard products, and GEC
Plessey Semiconductor, from 1987 to 1992. From
1983 to 1987, Mr. Healy was an Assistant Professor
of Electrical Engineering at the United States
Military Academy after serving as an Infantry
Officer from 1976 to 1981. Mr. Healy holds a B.S.
in electrical engineering from the United States
Military Academy, a M.S. in electrical engineering
from Georgia Institute of Technology and a M.S. in
management from Stanford University.
For information on directors, see Proposal One.
12
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
the compensation earned, by our Chief Executive Officer and each of the four
other most highly compensated executive officers whose salary and bonus for
fiscal 2001 was in excess of $100,000, for services rendered in all capacities
to us and our subsidiaries for the fiscal year ended December 29, 2001.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------ --------------------------
OTHER
ANNUAL RESTRICTED SECURITIES
NAME AND COMPENSATION STOCK UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) AWARDS ($) OPTIONS
- ------------------ ------ ------------ ----------- -------------- ------------ ------------
Navdeep S. Sooch(2) ........ 2001 $ 262,500 $37,500 -- 283,000
Chief Executive Officer 2000 243,846 33,995 $1,500 --
and Chairman of the Board 1999 170,000 43,932 -- --
Daniel A. Artusi(3) ........ 2001 96,923 100,000(4) -- $3,035,985(5) 400,000
Chief Operating Officer
John W. McGovern(6) 2001 166,346 25,000 1,500 60,000
Chief Financial Officer 2000 157,692 59,291 1,500 20,000
1999 130,000 26,780 -- 18,000
Gary R. Gay(7) ............. 2001 166,346 35,000 1,500 70,000
Vice President 2000 159,231 70,806 1,500 20,000
1999 150,000 46,019 -- 20,000
Bradley J. Fluke(8) ........ 2001 166,346 20,000 1,500 70,000
Vice President 2000 158,462 49,968 1,500 20,000
1999 140,000 29,000 -- 18,000
- ----------------------
(1) "Other Annual Compensation" represents contributions made by the Company to
match the first $1,500 of contributions made by the named executive officer
to his 401(k) plan.
(2) As of December 29, 2001, Mr. Sooch held 67,879 shares of unvested
restricted stock valued at $2,309,922, based on the $34.03 closing selling
price per share of our common stock on the Nasdaq National Market on such
day.
(3) Mr. Artusi joined us as our Chief Operating Officer in August 2001.
(4) Includes a $50,000 reporting bonus.
(5) On August 27, 2001, Daniel Artusi purchased 150,000 shares of restricted
stock at their par value of $0.0001 per share. The $3,035,985 represents
the fair market value of the stock on the date of purchase, $20.24 per
share. The shares vest in a series of seven equal annual installments
measured from the date of issuance. As of December 29, 2001, Mr. Artusi
held 150,000 shares of unvested restricted stock valued at $5,104,500,
based on the $34.03 closing selling price per share of our common stock on
the Nasdaq National Market on such day.
(6) As of December 29, 2001, Mr. McGovern held 6,909 shares of unvested
restricted stock valued at $235,113, based on the $34.03 closing selling
price per share of our common stock on the Nasdaq National Market on such
day.
(7) As of December 29, 2001, Mr. Gay held 33,334 shares of unvested restricted
stock valued at $1,134,356, based on the $34.03 closing selling price per
share of our common stock on the Nasdaq National Market on such day.
(8) As of December 29, 2001, Mr. Fluke held 33,334 shares of unvested
restricted stock valued at $1,134,356, based on the $34.03 closing selling
price per share of our common stock on the Nasdaq National Market on such
day.
13
STOCK OPTIONS
The following table contains information concerning the stock options
granted to our executive officers named in the Summary Compensation Table of the
Executive Compensation section of this Proxy Statement during the 2001 fiscal
year. All the grants were made under our 2000 Stock Incentive Plan. Unless
otherwise indicated, the exercise prices represent the fair market value of the
common stock on the grant date.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS MARKET PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE PRICE ON FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE DATE OF EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(2) ($/SH)(3) GRANT DATE 5% ($) 10% ($)
- ---- ------------- -------------- --------- -------- ---------- ----------- -----------
Navdeep S. Sooch ...... 33,000(4) 1.13% $15.10 $15.10 09/20/2011 $ 313,378 $ 794,162
250,000(5) 8.53% 15.10 15.10 09/20/2011 2,374,077 6,016,378
Daniel A. Artusi ...... 400,000(6) 13.65% 20.24 20.24 08/26/2011 5,091,531 12,902,939
John W. McGovern ...... 20,000(7) 0.68% 15.44 15.44 03/15/2011 194,121 492,018
20,000(8) 0.68% 22.63 22.63 07/17/2011 284,638 721,328
20,000(9) 0.68% 15.10 15.10 09/20/2011 189,926 481,310
Gary R. Gay............ 20,000(7) 0.68% 15.44 15.44 03/15/2011 194,121 492,018
20,000(8) 0.68% 22.63 22.63 07/17/2011 284,638 721,328
30,000(10) 1.02% 15.10 15.10 09/20/2011 284,889 721,965
Bradley J. Fluke....... 20,000(7) 0.68% 15.44 15.44 03/15/2011 194,121 492,018
20,000(8) 0.68% 22.63 22.63 07/17/2011 284,638 721,328
30,000(11) 1.02% 15.10 15.10 09/20/2011 284,889 721,965
- -----------------
(1) The potential realizable value is calculated from the closing price of
Common Stock on the dates of grants to executive officers. These amounts
represent certain assumed rates of appreciation only. There can be no
assurance provided to any executive officer or other holder of our
securities that the actual stock price appreciation over the ten-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of our common stock appreciates over
the option term, no value will be realized from those option grants which
were made to our executive officers named in the Summary Compensation Table
of the Executive Compensation section of this Proxy Statement with an
exercise price equal to the fair market value of the option shares on the
grant date.
(2) Percentage is based on 2,930,300 shares underlying options granted to
employees during the fiscal year ended December 29, 2001 from the 2000
Stock Incentive Plan.
(3) The exercise price may be paid in cash or in shares of our common stock
valued at fair market value on the exercise date. Alternatively, the option
may be exercised through a cashless exercise procedure pursuant to which
the optionee provides irrevocable instructions to a brokerage firm to sell
the purchased shares and to remit to us, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
The Compensation Committee may also assist an optionee in the exercise of
an option by (i) authorizing a loan from us in a principal amount not to
exceed the aggregate exercise price plus any tax liability incurred in
connection with the exercise or (ii) permitting the optionee to pay the
option price in installments over a period of years upon terms established
by the Compensation Committee. Outstanding options will become exercisable
on an accelerated basis if we are acquired and (i) such options are not
assumed or (ii) upon termination under certain circumstances within 18
months following an acquisition.
(4) Options were granted on September 21, 2001 and became fully exercisable on
the date of grant.
(5) Options were granted on September 21, 2001 and become exercisable in a
series of 60 successive equal monthly installments measured from the date
of grant.
(6) Options were granted on August 27, 2001 and become exercisable with respect
to (i) twenty percent (20%) of the option shares upon optionee's completion
of one year of service measured from the grant date and (ii) the balance of
the option shares in a series of 48 successive monthly installments over
the 48 month period measured from the first year anniversary of the grant
date.
(7) Options were granted on March 16, 2001 and become exercisable in a series
of 60 successive equal monthly installments measured from the date of
grant.
(8) Options were granted on July 18, 2001 and become exercisable in a series of
60 successive equal monthly installments measured from the date of grant.
(9) Options were granted on September 21, 2001 and become exercisable in a
series of 36 successive equal monthly installments beginning December 28,
2001.
14
(10) Options were granted on September 21, 2001 and become exercisable in a
series of 36 successive equal monthly installments beginning October 16,
2002.
(11) Options were granted on September 21, 2001 and become exercisable in a
series of 36 successive equal monthly installments beginning April 30,
2002.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information, with respect to our executive
officers named in the Summary Compensation Table of the Executive Compensation
section of this Proxy Statement, concerning the exercise of options during the
2001 fiscal year and unexercised options held by them at of the end of that
fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE ------------------------------ -------------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ------------- -------------- ------------- --------------- ------------- ---------------
Navdeep S. Sooch ........... -- -- 45,500 237,500 $ 861,315 $ 4,495,875
Daniel A. Artusi ........... -- -- -- 400,000 -- 5,516,000
John W. McGovern ........... -- -- 64,666 75,334 2,074,562 903,638
Gary R. Gay ................ -- -- 32,666 85,334 992,602 1,092,938
Bradley J. Fluke ........... -- -- 64,666 85,334 2,074,562 1,092,938
- -----------------------
(1) Based upon the closing selling price per share of our common stock on the
Nasdaq National Market on the last day of the 2001 fiscal year, which was
$34.03, less the option exercise price payable per share.
15
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Compensation Committee of the Board of Directors, as Plan Administrator
of the 2000 Stock Incentive Plan, has the authority to provide for accelerated
vesting of the shares of our common stock subject to any outstanding options
held by any executive officer or any unvested share issuances actually held by
such individual, in connection with certain changes in control of us or the
subsequent termination of the officer's employment following the change in
control event.
Our 2000 Stock Incentive Plan, which governs the options granted to the
named executive officers, includes the following change in control provisions
which may result in the accelerated vesting of outstanding option grants and
stock issuances:
o In the event that we are acquired, each outstanding option under the
discretionary option grant program will, unless assumed or replaced by
the successor or otherwise continued in effect, will immediately
become exercisable for all the option shares, and all outstanding
unvested shares will immediately vest, except to the extent our
repurchase rights with respect to those shares are assigned to the
successor or otherwise continued in effect.
o The plan administrator has the authority under the discretionary
option grant program to provide that those options will automatically
vest in full (i) upon an acquisition of the company, whether or not
those options are assumed or replaced, (ii) upon a hostile change in
control of the company effected through a tender offer for more than
50% of our outstanding voting stock or by proxy contest for the
election of board members, or (iii) in the event the individual's
service is terminated, whether involuntarily or for good reason,
within a designated period (not to exceed 18 months) following an
acquisition in which those options are assumed or replaced or a
hostile change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the Board of Directors
or Compensation Committee of any entity that has one or more of its executive
officers serving as a member of our Board of Directors or Compensation
Committee. No member of the Compensation Committee serves or has previously
served as one of our officers or employees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the duty of the Compensation Committee to review and determine the
salaries and bonuses of our executive officers, including the Chief Executive
Officer, and to establish the general compensation policies for such
individuals. The Compensation Committee also has the sole and exclusive
authority to make discretionary option grants to our executive officers under
our 2000 Stock Incentive Plan.
The Compensation Committee believes that the compensation programs for our
executive officers should reflect our performance and the value created for our
stockholders. In addition, the compensation programs should support our
short-term and long-term strategic goals and values and should reward individual
contribution to our success. We are engaged in a very competitive industry, and
our success depends upon our ability to attract and retain qualified executives
through the competitive compensation packages we offer to such individuals.
GENERAL COMPENSATION POLICY. The Compensation Committee's policy is to
provide our executive officers with compensation opportunities that are based
upon their personal performance, our financial performance and their
contribution to that performance and which are competitive enough to attract and
retain highly skilled individuals. Each executive officer's compensation package
is comprised of three elements: (i) base salary that is competitive with the
market and reflects individual performance, (ii) variable performance awards
payable in cash and tied to our achievement of financial performance goals and
individual accomplishments and (iii) long-term stock-based incentive awards
designed to strengthen the mutuality of interests between the executive officers
and our stockholders. As an officer's level of responsibility increases, a
greater proportion of his or her total compensation will be dependent upon our
financial performance and stock price appreciation rather than base salary.
FACTORS. The principal factors that were taken into account in establishing
each executive officer's compensation package for the 2001 fiscal year are
described below. However, the Compensation Committee may in its discretion apply
entirely different factors, such as different measures of financial performance,
for future fiscal years.
16
BASE SALARY. In setting base salaries, the Compensation Committee reviewed
published compensation survey data for its industry. The Committee also
identified a group of companies for comparative compensation purposes for which
it reviewed detailed compensation data incorporated into their proxy statements.
This group was comprised of approximately fifteen companies. The base salary for
each officer reflects the salary levels for comparable positions in the
published surveys and the comparative group of companies, as well as the
individual's personal performance. The relative weight given to each factor
varies with each individual in the sole discretion of the Compensation
Committee. Each executive officer's base salary is evaluated approximately
annually, subject to business conditions, on the basis of (i) the Compensation
Committee's evaluation of the officer's personal performance for the year and
(ii) the competitive marketplace for persons in comparable positions. Our
performance and profitability may also be a factor in determining the base
salaries of executive officers.
VARIABLE PERFORMANCE AWARDS. The variable performance awards have typically
been paid in cash quarterly payments based on the preceding quarterly results.
These payments, when the criteria are satisfied, are paid out shortly after the
release of the quarterly financial results. No payments were made with respect
to the first, second and third quarters of 2001. The cash awards are tied to a
blend of overall company financial performance metrics, individual financial
metrics driven by the performance of new product revenues and company-wide
sequential earnings growth. A personalized plan is styled for each executive
officer based on the metrics that best reflect their impact over the four
quarters of the year. Typically, the Compensation Committee reviews the plans in
conjunction with the fiscal year operating plan discussions. In addition to
these metric-driven award calculations, the Chief Executive Officer may cancel
or decrease a plan payout at his sole discretion for any or all executive
officers.
The company maintains for non-officer employees a variable cash
compensation plan that is typically paid quarterly to eligible individuals based
on the overall Company financial performance. The chief executive officer
selects the quarterly payment amount, which typically has been in the 10% range
of base salary for most employees. No payments were made with respect to the
first, second and third quarters of 2001.
LONG TERM INCENTIVES. Generally, stock option grants are made from
time-to-time by the Compensation Committee to each of the company's executive
officers. Each grant is designed to align the interests of the executive officer
with those of the stockholders and provide each individual with a significant
incentive to manage the company from the perspective of an owner with an equity
stake in the business. Each grant allows the officer to acquire shares of the
company's common stock at a fixed price per share (the market price on the grant
date) over a specified period of time (up to ten years). Each option becomes
exercisable in a series of installments over a multi-year period, contingent
upon the officer's continued employment with the company. Accordingly, the
option will provide a return to the executive officer only if he or she remains
employed by the company during the vesting period, and then only if the market
price of the shares appreciates over the option term.
The size of the option grant to executive officers is set by the
Compensation Committee at a level that is intended to create a meaningful
opportunity for stock ownership based upon the individual's current position
with the company, the individual's personal performance in recent periods and
his or her potential for future responsibility and promotion over the option
term. The Compensation Committee also takes into account the number of unvested
options held by the executive officer in order to maintain an appropriate level
of equity incentive for that individual. The relevant weight given to each of
these factors varies from individual to individual. The Compensation Committee
has established certain guidelines with respect to the option grants made to the
executive officers but has the flexibility to make adjustments to those
guidelines at its discretion.
CEO COMPENSATION. In setting the total compensation payable to the
company's Chief Executive Officer for the 2001 fiscal year, the Compensation
Committee considered that compensation competitive with the compensation paid to
the chief executive officers of the companies in the surveyed group.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code disallows a tax deduction to publicly held companies for
compensation paid to certain of their executive officers to the extent that
compensation exceeds one million dollars per covered officer in any fiscal year.
The limitation applies only to compensation that is not considered to be
performance-based. In general, non performance-based compensation paid to the
company's executive officers for the 2001 fiscal year did not exceed the one
million dollar limit per officer. However, the compensation deemed paid to
Daniel A. Artusi on each annual vesting date in connection with the restricted
stock issuance of 150,000 shares of our common stock will be subject to the one
million dollar limitation; the restricted stock issuance was a one-time hiring
incentive for Mr. Artusi to accept employment as our Chief Operating Officer.
The Compensation Committee does not anticipate that the non performance-based
cash compensation to be paid to the company's executive officers for fiscal 2002
will exceed the one million dollar limit. The company's 2000 Stock Incentive
Plan has been structured so that any compensation
17
deemed paid in connection with the exercise of option grants made under that
plan with an exercise price equal to the fair market value of the option shares
on the grant date will qualify as performance-based compensation which will not
be subject to the one million dollar limitation. Because it is unlikely that the
cash compensation payable to any of the company's executive officers in the
foreseeable future will approach the one million dollar limit, the Compensation
Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to the company's executive
officers. The Compensation Committee will reconsider this decision should the
individual cash compensation of any executive officer ever approach the one
million dollar level.
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration program
to properly align the company's performance and the interests of the company's
stockholders through the use of competitive and equitable executive compensation
in a balanced and reasonable manner, for both the short and long-term.
Submitted by the Compensation Committee of the Board of Directors:
William P. Wood
H. Berry Cash
William G. Bock
18
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total stockholder
returns for an investment in Silicon Laboratories Inc. common stock, the NASDAQ
Stock Market (U.S.) Index and the NASDAQ Electronics Components Index.
COMPARISON OF 21-MONTH CUMULATIVE TOTAL RETURN*
AMONG SILICON LABORATORIES INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX
[PERFORMANCE GRAPH]
* $100 INVESTED ON 3/24/00 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS.
Cumulative Total Return 3/24/00 12/30/00 12/29/01
- -----------------------------------------------------------------------------
SILICON LABORATORIES INC. $ 100.00 $ 46.37 $ 109.77
NASDAQ STOCK MARKET (U.S.) 100.00 49.44 40.00
NASDAQ ELECTRONIC COMPONENTS 100.00 48.15 33.64
(1) The graph covers the period from March 24, 2000, the commencement of our
initial public offering of shares of our common stock, through December 29,
2001.
(2) The graph assumes that $100 was invested in our common stock on March 24,
2000 at our initial public offering price of $31.00 per share and in each
index at the market close on March 24, 2000, and that all dividends were
reinvested. No cash dividends have been declared on our common stock.
(3) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
NO INCORPORATION BY REFERENCE OF CERTAIN PORTIONS OF THIS PROXY STATEMENT
Notwithstanding anything to the contrary set forth in any of our previous
filings made under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings made by
us under those statutes, neither the preceding Stock Performance Graph, the
Audit Committee Report nor the Compensation Committee Report is to be
incorporated by reference into any such prior filings, nor shall such graph or
report be incorporated by reference into any future filings made by us under
those statutes.
19
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of our Board of Directors, the executive officers and persons
who hold more than 10% of our outstanding common stock are subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934
which require them to file reports with respect to their ownership of the common
stock and their transactions in such common stock. Based upon (i) the copies of
Section 16(a) reports which we received from such persons for their 2001 fiscal
year transactions in the common stock and their common stock holdings, and (ii)
the written representations received from one or more of such persons that no
annual Form 5 reports were required to be filed by them for the 2001 fiscal
year, we believe that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its directors, executive officers and
greater than ten percent beneficial owners, with the exception of one
transaction for Bradley J. Fluke. In August, Mr. Fluke reported a sale of 1,200
shares on a Form 4 when 1,300 shares were actually sold. In October, the
under-reported transaction was corrected with the filing of an amended Form 4.
ANNUAL REPORT
A copy of the annual report for the 2001 fiscal year has been mailed
concurrently with this Proxy Statement to all stockholders entitled to notice of
and to vote at the Annual Meeting. The annual report is not incorporated into
this Proxy Statement and is not considered proxy solicitation material.
FORM 10-K
We filed an annual report on Form 10-K with the Securities and Exchange
Commission on January 22, 2002. Stockholders may obtain a copy of this report,
without charge, by writing to our Chief Financial Officer, at our principal
executive offices located at 4635 Boston Lane, Austin, Texas 78735.
THE BOARD OF DIRECTORS OF SILICON LABORATORIES INC.
Dated: March 20, 2002
20
