SCHEDULE 14A INFORMATION
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===============================================================================
PMC-SIERRA, INC.
3975 Freedom Circle
Santa Clara, California 95054
(408) 239-8000
Notice of Annual Meeting of Stockholders
TIME 2:00 p.m. on Thursday, May 15, 2003
PLACE Executive Plaza Hotel 405 North Road Coquitlam,
British Columbia, Canada
ITEMS OF BUSINESS (1) To elect directors to serve until PMC's 2004
Annual Meeting of Stockholders. The nominees for the
Board of Directors are Robert Bailey, James Diller,
Alexandre Balkanski, Frank Marshall, Lewis Wilks and
William Kurtz.
(2) To ratify the appointment of Deloitte & Touche
LLP as PMC's independent auditors.
(3) To consider such other business as may properly
come before the annual meeting.
RECORD DATE You are entitled to vote if you were a stockholder
at the close of business on March 31, 2003.
ANNUAL MEETING ADMISSION All PMC stockholders are cordially invited to attend
the annual meeting in person. The annual meeting
will begin promptly at 2:00 p.m.
VOTING BY PROXY Please submit a proxy as soon as possible so that
your shares can be voted at the annual meeting in
accordance with your instructions. For specific
instructions on voting, please refer to the
instructions on the proxy card.
/s/ Robert Bailey
President and Chief Executive Officer
This proxy statement and accompanying proxy card are being distributed
on or about April 11, 2003.
================================================================================
PROPOSAL NO. 1
ELECTION OF DIRECTORS
PMC's bylaws currently provide for a board of six directors. Prior to
the annual meeting, the board intends to amend the bylaws to provide for seven
directors and to appoint William Kurtz as a director. A current member of the
board is not seeking re-election, and effective after the annual meeting PMC's
bylaws will provide for a board of six directors. PMC proposes to elect six
directors at the annual meeting. Unless otherwise instructed, the proxy holders
will vote the proxies received by them for the six nominees of the board named
below, all of whom are presently directors of PMC except for Mr. Kurtz. If for
any reason Mr. Kurtz does not join the board, PMC will seek an alternative
nominee for election. If no nominee is found, the bylaws will be amended to
provide for five directors.
The board is presently seeking a seventh member for PMC's board. When a
qualified candidate has been identified, PMC intends to amend its bylaws to
increase the number of directors and then appoint that person as a director.
This may occur shortly after the annual meeting or may take longer.
If any 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 designated by
the present board to fill the vacancy. PMC does not expect that any nominee will
be unable or will decline to serve as a director. The term of office of each
person elected as a director will continue until the next annual meeting of
stockholders or until the director's successor has been elected. The table below
sets forth information about each nominee as of March 31, 2003.
Recommendation
PMC's Board of Directors recommends a vote FOR the nominees listed
below:
Director
Name of Nominee Age Principal Occupation Since
____________________________ _____ ___________________________________________________________________ _________
Robert Bailey 45 President and Chief Executive Officer, PMC 1996
James Diller 67 Retired 1983
Alexandre Balkanski 42 General Partner, Benchmark Capital 1993
Frank Marshall 56 Private Investor and Management Consultant 1996
Lewis Wilks 49 Management Consultant 2001
William Kurtz 45 Chief Operating Officer and Chief Financial Officer, 3PARdata, Inc. ---
Robert Bailey
Mr. Bailey has been a director of PMC since October 1996. Mr. Bailey
has served as PMC's President and Chief Executive Officer since July 1997. He
also served as Chairman of the Board of Directors from February 2000 until
February 2003. Mr. Bailey served as President, Chief Executive Officer and
director of PMC-Sierra, Ltd., PMC's Canadian operating subsidiary ("LTD") since
December 1993. Mr. Bailey was employed by AT&T-Microelectronics (now known as
Agere Systems) from August 1989 to November 1993 where he served as Vice
President and General Manager, and at Texas Instruments in various management
positions from June 1979 to August 1989. He is a director of Crystal Decisions,
Inc.
James Diller
Mr. Diller, a founder of PMC, was PMC's Chief Executive Officer from
1983 to July 1997 and President from 1983 to July 1993. Mr. Diller has been a
director of PMC since its formation in 1983. Mr. Diller was Chairman of PMC's
Board of Directors from July 1993 until February 2000, when he became Vice
Chairman. Mr. Diller also served as Chief Financial Officer of PMC from its
formation until July 1987. He is a director of Intersil Corporation, a publicly
traded semiconductor manufacturer, a director of Sierra Wireless, Inc., a
publicly traded maker of wireless communication devices, and Chairman of the
Board of Directors of Summit Microelectronics, a private semiconductor company.
2
Alexandre Balkanski
Dr. Balkanski has been a director of PMC since August 1993 and was
appointed Chairman of the Board of Directors in February 2003. Since May 2000,
Dr. Balkanski has been a General Partner at Benchmark Capital, a venture capital
fund management company. In July 1988, Dr. Balkanski co-founded C-Cube
Microsystems, Inc., a developer of integrated circuits and software. Dr.
Balkanski held a variety of senior management positions with C-Cube, and served
as its President and Chief Executive Officer until May 2000.
Frank Marshall
Mr. Marshall has been a director of PMC since April 1996. He is a
private investor and management consultant to early stage high technology
companies. Mr. Marshall now serves as Chairman of the Board of Directors of
Netscreen Technologies, Inc. Mr. Marshall served as interim Chief Executive
Officer of Covad Communications Group from November 2000 until July 2001 and
also served as Vice Chairman and a member of the Board of Directors of Covad
Communications Group. He also serves on the Board of Directors of and as an
advisor to several private companies. Previously, Mr. Marshall was Vice
President of Engineering and General Manager of Cisco Systems Inc.'s Core
Products Business Unit. Mr. Marshall has also served as Vice President of
Engineering for Cisco Systems Inc.
Lewis Wilks
Mr. Wilks has been a director of PMC since August 2001. Since September
2001, he has been a management consultant and advisor. Mr. Wilks served as
Executive Vice President, Internet Business Development and Chief Strategy
Officer of Qwest Communications International, Inc., a telecommunications
company, from October 2000 to September 2001. From February 1998 to October
2000, Mr. Wilks served as President, Internet and Multimedia Markets of Qwest
Communications and from October 1997 to February 1998, he served as President,
Business Markets of Qwest Communications. Before joining Qwest Communications,
Mr. Wilks served as President of GTE Communications from June 1996 to September
1997. Mr. Wilks served on the Board of Directors of Portal Software, Inc. from
February 2001 until January 2003. He is the Chairman Emeritus of the Special
Olympics of Colorado and serves as co-chairman of the Colorado Commission of
Science and Technology.
William Kurtz
PMC expects to appoint Mr. Kurtz to PMC's Board of Directors prior to
the annual meeting. Since July 2001, Mr. Kurtz has been Chief Operating Officer
and Chief Financial Officer of 3PARdata, Inc., a data storage company. From
August 1998 to June 2001, Mr. Kurtz served as Executive Vice President and Chief
Financial Officer of Scient Corporation, a provider of professional services.
Before joining Scient, Mr. Kurtz served in various capacities at AT&T from July
1983 to August 1998, including Vice President of Cost Management and Chief
Financial Officer of AT&T's Business Markets Division. Prior to joining AT&T, he
worked at Price Waterhouse, now PricewaterhouseCoopers LLP. Mr. Kurtz is a
certified public accountant. He also is a director of Redback Networks, Inc.
Vote Required
The six nominees for director receiving the highest number of
affirmative votes of shares entitled to be voted for them shall be elected as
directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under Delaware law.
BOARD STRUCTURE
Meetings
During the 2002 fiscal year, the board held seven meetings. Each
director attended at least 75% of all board and applicable committee meetings.
3
Audit Committee
The Audit Committee currently consists of Dr. Balkanski, Mr. Beaumont
and Mr. Wilks and held five meetings in the 2002 fiscal year. Each of the Audit
Committee members satisfies the definition of independent director as
established in the Nasdaq listing standards. Mr. Marshall also served on the
Audit Committee until October 2002. Prior to the annual meeting and upon his
appointment as a director, Mr. Kurtz will join the Audit Committee.
The Audit Committee appoints, compensates and oversees the independent
auditors. The Audit Committee approves the independent auditors fees and
approves in advance any audit and non-audit services to be provided by the
independent auditors. The Audit Committee monitors the independence of the
auditors. The Audit Committee meets independently with PMC's independent
auditors and senior management to review the general scope of PMC's accounting,
financial reporting, annual audit and internal audit programs, matters relating
to internal control systems and results of the annual audit.
Compensation Committee
The Compensation Committee currently consists of Mr. Diller and Mr.
Wilks and held three meetings in fiscal 2002. Dr. Balkanski served on the
Compensation Committee until April 2003 when Mr. Wilks joined the committee. The
Compensation Committee reviews and makes recommendations to the board concerning
PMC's executive compensation policy, bonus plans and equity incentive plans. The
Compensation Committee has authority to administer, amend and interpret PMC's
equity incentive plans and to grant options under those plans.
Nominating and Corporate Governance Committee
During the 2002 fiscal year, the Nominating and Corporate Governance
Committee was responsible for proposing nominees for election by PMC's
stockholders at each annual meeting and searching for candidates to fill
vacancies. In 2003, the committee received additional responsibility for
monitoring PMC's compliance with corporate governance aspects of the
Sarbanes-Oxley Act and related SEC and Nasdaq rules. The Nominating and
Corporate Governance Committee currently consists of Mr. Diller and Mr. Marshall
and did not hold any meetings in the 2002 fiscal year in relation to proposing
director nominees. Mr. Beaumont served on the Nominating and Corporate
Governance Committee until October 2002 when Mr. Marshall joined the committee.
Other Committees
The board has also authorized committees consisting of Mr. Bailey and
any other director to (i) administer and amend any non-equity benefit plan of
PMC or any PMC subsidiary, (ii) grant stock options to purchase up to 25,000
shares of PMC's common stock to individuals not subject to Section 16 of the
Exchange Act and (iii) approve capital expenditures.
DIRECTOR COMPENSATION
During 2002 PMC began reviewing non-employee director compensation in
light of the Sarbanes-Oxley Act, SEC and Nasdaq corporate governance proposals,
cash and stock compensation by comparable companies, the workload and schedule
required of PMC's directors, levels of market demand for directors, and PMC's
lack of an economic retention incentive through past stock option grants. In
September 2002, each outside director received an option to purchase 50,000
shares of PMC's common stock exercisable at $4.00 per share, vested immediately
as to 25,000 shares and vesting as to the other 25,000 shares monthly over two
years. In February 2003, the Compensation Committee and the board as a whole
reviewed PMC's compensation of non-employee directors. PMC had engaged two
compensation consultants to survey compensation practices of both comparable
companies and a broader range of technology companies, and to recommend changes
in PMC's board compensation. Based on these surveys and other factors, the board
changed compensation of non-employee directors, effective after the annual
meeting, as shown below. Directors employed by PMC (currently only Mr. Bailey)
do not receive any compensation for their board activities.
4
Compensation Item Before 2003 Annual Meeting After 2003 Annual Meeting
Annual Cash Retainer................ $ 12,000................ $16,000
Per Meeting Cash Payment............ $ 1,000................ $1,000
Initial Stock Option................ 40,000 shares........... 40,000 shares
Annual Stock Option................. 10,000 shares........... 40,000 shares
Audit and Compensation Committee
Chair Stock Option.................. None.................... 5,000 shares each
PMC grants a stock option for 40,000 shares to a director when a
director joins the board. This stock option vests 1/24 per month over two years.
Thereafter, other than in the calendar year a director is first appointed to the
board, upon reelection to the board at each annual meeting each board member
receives four stock options for 10,000 shares - one on reelection and one every
90 days thereafter. These stock options are unvested on their grant date and
vest evenly every month until they are fully vested two years after the board
member's reelection to the board. PMC grants Committee Chair stock options upon
reelection of the board member at each annual stockholder meeting and the
options vest monthly over two years from the grant date. Directors may elect
annually not to receive the annual cash retainer and instead to receive a fully
vested option, exercisable at fair market value on the date of grant, to
purchase a number of shares equal to $48,000 divided by the per share market
value on the date of grant.
In the past, PMC granted a stock option for 40,000 shares to a director
when a director joined the board. This option vested over 4 years (25% after one
year and 1/48 per month thereafter). Thereafter 10,000 stock options were
granted on the board member's reelection to the board at each successive annual
meeting and vested monthly over 4 years. In May 2002, each outside director
received an annual stock option to purchase 10,000 shares of PMC's common stock.
PMC has agreed to indemnify each director and officer against certain
claims and expenses for which the director might be held liable in connection
with past or future services to PMC and its subsidiaries. PMC maintains
insurance policies insuring its officers and directors against such liabilities.
EXECUTIVE OFFICERS
The following information about our executive officers is as of March
31, 2003.
Name of Officer Age Position
_______________________________ _____ ____________________________________________________
Robert Bailey 45 President, Chief Executive Officer and Director
Gregory Aasen 47 Chief Operating Officer
Alan Krock 42 Vice President, Finance and Chief Financial Officer
Haresh Patel 41 Vice President of Worldwide Sales
Steffen Perna 45 Vice President and General Manager
Thomas Riordan 46 Vice President and General Manager
Tom Sun 40 Vice President, Asia-Pacific Operations
Mr. Bailey has been a director of PMC since October 1996 and has served
as PMC's President and Chief Executive Officer since July 1997. Mr. Bailey was
Chairman of the Board of Directors from February 2000 until February 2003. Mr.
Bailey has served as President, Chief Executive Officer and director of
PMC-Sierra, Ltd. (PMC's Canadian subsidiary, referred to as "LTD" below) since
December 1993. Mr. Bailey was employed by AT&T-Microelectronics (now known as
Agere Systems) from August 1989 to November 1993, last as Vice President and
General Manager, and at Texas Instruments in various management assignments from
June 1979 to August 1989. He is a director of Crystal Decisions, Inc.
Mr. Aasen has served as Chief Operating Officer of PMC since February
1997. Mr. Aasen is a founder of LTD and served as its Chief Operating Officer
and Secretary since its formation in June 1992. He has been a director of LTD
since August 1994 and currently serves on the Board of Directors of Sierra
Wireless, Inc. Before joining LTD, Mr. Aasen was a General Manager of the
Pacific Microelectronics Center, a division of MPR Teltech, Ltd.
5
Mr. Krock joined PMC in November 2002 as Vice President, Finance and
Chief Financial Officer. He was Vice President and Chief Financial Officer of
Integrated Device Technology, Inc. from January 1998 until November 2002, a Vice
President from July 1997 until January 1998 and its Corporate Controller from
February 1996 to July 1997. Previously Mr. Krock held management positions at
Rohm Corporation and Price Waterhouse, now PricewaterhouseCoopers LLP.
Mr. Patel has served as Vice President of Worldwide Sales at PMC since
February 1997. Mr. Patel was Vice President of Sales and Marketing at Odeum
Microsystems Inc. from September 1996 through January 1997. From October 1994 to
August 1996, Mr. Patel was Director of Sales at Sierra Semiconductor
Corporation. Prior to this he served as ASIC Marketing Manager at Fujitsu
Semiconductor and spent 10 years at Texas Instruments as Regional Sales Manager
and ASIC Specialist.
Mr. Perna has served as Vice President and General Manager at PMC since
September 1998. Mr. Perna joined PMC in March 1995 as Vice President of
Marketing and Business Development. Prior to joining PMC, Mr. Perna was employed
for 15 years at Texas Instruments where he was a Director of Marketing in the
Semiconductor Group.
Mr. Riordan joined PMC in August 2000 as Vice President and General
Manager. Mr. Riordan served as President and Chief Executive Officer of Quantum
Effect Devices from 1991 to 2000, when PMC acquired the company. Previously Mr.
Riordan served in various design and managerial roles most recently as director
of research and development at MIPS Computer Systems, Inc., a semiconductor
design company.
Mr. Sun has served as Vice President, Asia-Pacific Operations at PMC
since July 2002. Mr. Sun joined PMC in 1995 as a product line manager and was
promoted to director of marketing in 1999. Mr. Sun was appointed Vice President
and General Manager in 2001. Prior to joining PMC, Mr. Sun was the manager for
the Image Processing Group at MPR Teltech.
Stock Option Exchange
On September 26, 2002, holders of PMC stock options cancelled 19.3
million stock options with exercise prices at or above $8.00 per share, in
exchange for new options to be granted at least six months and one day after the
cancellation. Cancelled options with an exercise price of less than $60.00 were
to be replaced with an option to purchase the same number of shares. Cancelled
options with an exercise price of $60.00 or more were to be replaced with one
share for each four cancelled shares. In exchange for these cancelled options,
PMC granted 16.5 million new options on March 31, 2003 at an exercise price of
$5.95.
PMC's executive officers participated in the option exchange and
tendered the number of stock options listed below and received the same number
of new stock options. The new options vest as to 25% of the shares on grant and
as to the remaining shares monthly over four years from the date of grant. The
information in this proxy statement regarding stock ownership and in the
executive compensation tables excludes shares subject to the old options which
were cancelled in September 2002 and shares subject to the new options.
Number of Shares Subject to
Executive Officers Exchanged Options
__________________________________________ ______________________________
Robert Bailey 1,630,000
Gregory Aasen 825,000
Haresh Patel 500,000
Steffan Perna 600,000
Thomas Riordan 375,000
Tom Sun 249,000
6
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 29, 2002
concerning:
o beneficial ownership of PMC's common stock by all persons known to
PMC to be the beneficial owners of 5% or more of PMC's common stock;
o beneficial ownership of PMC's common stock by all directors,
nominees and executive officers named in the Summary Compensation
Table herein; and
o beneficial ownership of PMC's common stock by all directors and
executive officers as a group.
The number of shares beneficially owned by each entity, person,
director, nominee or executive officer is determined under the rules of the U.S.
Securities and Exchange Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual has the sole
or shared voting power or investment power and also any shares which the
individual has the right to acquire as of February 27, 2003, 60 days after
December 29, 2002, through the exercise of any stock option or other right.
Unless otherwise indicated, each person or entity has sole investment and voting
power, or shares such powers with his or her spouse, with respect to the shares
set forth in the following table.
Approximate
Percentage
Name Number of Shares Ownership
________________ ____________
Capital Group International, Inc.(1)(2)........................................ 24,740,080 14.6%
Oak Associates, Ltd.(1)(3)..................................................... 17,281,000 10.2%
Capital Research and Management Company(1)(4).................................. 15,277,680 9.0%
Robert Bailey(5)............................................................... 2,893,647 1.7%
James Diller(6)................................................................ 2,991,886 1.8%
Gregory Aasen(7)............................................................... 1,858,439 1.1%
Steffen Perna(8) .............................................................. 799,863 *
Thomas Riordan(9) ............................................................. 513,231 *
Haresh Patel(10) .............................................................. 292,992 *
Frank Marshall(11)............................................................. 331,039 *
Alexandre Balkanski(12)........................................................ 229,781 *
Colin Beaumont(13)............................................................. 142,747 *
Lewis Wilks(14)................................................................ 46,874 *
William Kurtz.................................................................. 0 *
All current directors and executive officers as a group(12 persons)(15)........ 10,130,610 5.8%
___________________
* Less than 1%
(1) Based on statements filed with the Securities and Exchange Commission
pursuant to Sections 13(d) or 13(g) of the Exchange Act. PMC has not
independently verified these statements or more current holdings of such
stockholders.
(2) Capital Group International, Inc. ("CGII") beneficially owns 24,740,080
shares of PMC common stock. The address of CGII is 11100 Santa Monica
Blvd., Los Angeles, CA 90025. According to the Schedule 13G/A filed on
February 14, 2003, CGII is the parent holding company of a group of
investment management companies, including Capital Guardian Trust Company,
and does not have voting power or investment power over any of these shares
and disclaims beneficial ownership of the shares. Includes 11,683,280
shares beneficially owned by Capital Guardian Trust Company which is 7.0%
of our outstanding shares. The address of Capital Guardian Trust Company is
11100 Santa Monica Boulevard, Los Angeles, California 90025.
(3) Oak Associates, Ltd. beneficially owns 17,281,000 shares of PMC common
stock. The address of Oak Associates, Ltd. is 3875 Embassy Parkway, Akron,
Ohio 44333.
(4) Capital Research and Management Company beneficially owns 15,277,680 shares
of PMC common stock. The address of Capital Research and Management Company
is 333 South Hope Street, Los Angeles, California 90071.
(5) Includes 1,510,043 shares subject to options exercisable within 60 days
after December 29, 2002, 1,428 shares issuable pursuant to PMC's 1991
Employee Stock Purchase Plan within 60 days after December 29, 2002 and
5,780 shares held by Mr. Bailey's two children. Also includes 1,181,807
shares issuable upon redemption of LTD Special Shares.
(6) Includes 1,044,774 shares subject to options exercisable within 60 days
after December 29, 2002, 300,000 shares held by the James V. Diller Annuity
Trust (GRAT) and 300,000 shares held by his wife's separate annuity trust.
(7) Includes 1,236,877 shares subject to options exercisable within 60 days
after December 29, 2002, 1,428 shares issuable pursuant to PMC's 1991
Employee Stock Purchase Plan within 60 days after December 29, 2002, and
23,600 shares held by Mr. Aasen's two sons. Also includes 331,922 shares
issuable upon redemption of LTD Special Shares, 101,534 shares issuable
upon redemption of LTD Special Shares held by Mr. Aasen's wife and 63,012
shares issuable upon redemption of LTD Special Shares held by Mr. Aasen's
two sons.
7
(8) Includes 797,534 shares subject to options exercisable within 60 days after
December 29, 2002 and 1,369 shares issuable pursuant to PMC's 1991 Employee
Stock Purchase Plan within 60 days after December 29, 2002.
(9) Includes 171,645 shares subject to options exercisable within 60 days after
December 29, 2002 and 1,428 shares issuable pursuant to PMC's 1991 Employee
Stock Purchase Plan within 60 days after December 29, 2002. Also includes
4,679 shares held by the Thomas J. Riordan 2000 Annuity Trust (GRAT).
(10) Includes 243,018 shares subject to options exercisable within 60 days after
December 29, 2002.
(11) Includes 168,747 shares subject to options exercisable within 60 days after
December 29, 2002. Also includes 123,328 shares held by Timark, L.P. Mr.
Marshall is a General Partner of Timark, L.P. and disclaims beneficial
ownership except to the extent of his pecuniary interest therein.
(12) Includes 69,789 shares subject to options exercisable within 60 days after
December 29, 2002.
(13) Includes 138,747 shares subject to options exercisable within 60 days after
December 29, 2002.
(14) Includes 46,874 shares subject to options exercisable within 60 days after
December 29, 2002.
(15) Includes 5,453,213 shares subject to options exercisable within 60 days
after December 29, 2002 and 6,699 shares issuable pursuant to PMC's 1991
Employee Stock Purchase Plan within 60 days after December 29, 2002 held by
the current executive officers and directors listed above and two officers
not listed above. Also includes 1,678,275 shares issuable upon redemption
of LTD Special Shares held by two officers listed above. See notes (6)
through (14) above.
8
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table provides fiscal 2002 compensation information for
the Chief Executive Officer and the four other executive officers of PMC who,
based on their salary and bonus compensation, were the most highly compensated
in fiscal 2002 year (the "Named Executive Officers").
Summary Compensation Table
Long-Term
Compensation(1)
______________
Annual Compensation Securities All Other
_______________________________________ Underlying Compensation
Name and Principal Position Year Total ($) Salary ($) Bonus ($) Options (#) ($)(2)
_______________________________________ ______ _____________ ____________ __________ ______________ ____________
Robert Bailey.......................... 2002 361,044 350,000 0 0 11,044(3)
President and Chief Executive 2001 371,137 350,000 0 1,150,000 21,137(3)
Officer 2000 918,078 259,348 651,870 0 6,860(3)
Gregory Aasen.......................... 2002 202,854 196,392 0 0 6,462(4)
Chief Operating Officer 2001 216,857 210,000 0 525,000 6,857(4)
2000 498,727 196,717 301,612 0 398
Thomas Riordan......................... 2002 227,267 200,000 0 0 27,267(5)
Vice President and General Manager 2001 205,808 200,000 0 375,000 5,808(5)
2000 319,026 200,000 113,260 0 5,766(5)
Steffen Perna.......................... 2002 190,825 188,000 0 0 2,825(6)
Vice President and General Manager 2001 190,883 188,000 0 470,000 2,883(6)
2000 402,287 149,876 221,344 0 31,067(6)
Haresh Patel........................... 2002 192,570 187,000 0 0 5,570(7)
Vice President of Worldwide Sales 2001 192,772 187,000 0 400,000 5,772(7)
2000 306,161 170,000 130,258 0 5,903(7)
_____________________
(1) PMC made no restricted stock awards during the period presented.
(2) Includes life insurance premiums.
(3) Also includes $10,403, $20,440 and $6,500 for tax preparation in 2002, 2001
and 2000.
(4) Also includes $6,037 and $6,445 for matching contributions made by PMC to
Mr. Aasen's retirement plan in 2002 and 2001.
(5) Also includes $5,250 for matching contributions made by PMC to Mr. Riordan's
retirement plan for each of 2002, 2001 and 2000, and $21,500 which must be
contributed to Mr. Riordan's retirement plan by PMC but was unpaid as of the
end of 2002.
(6) Also includes $2,666, $2,358 and $4,000 for tax preparation in 2002, 2001
and 2000, $8,253 for matching contributions made by PMC to its retirement
plan on behalf of Mr. Perna in 2000 and $18,157 for a relocation payment in
2000.
(7) Also includes $5,250 for matching contributions made by PMC to Mr. Patel's
retirement plan for each of 2002, 2001 and 2000.
9
Option Grants In Last Fiscal Year
PMC did not grant options to any of its Named Executive Officers in
fiscal 2002.
Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values
The following table shows aggregate exercises of options to purchase
PMC's common stock in fiscal 2002 by the Named Executive Officers.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-The-Money Options at
Shares Year-End (#)(3) Fiscal Year-End($)(4)
Acquired on Value ____________________________ ____________________________
Name Exercise(1) Realized(2) Exercisable Unexercisable Exercisable Unexercisable
___________________________ ___________ ___________ ___________ ______________ _____________ _______________
Robert Bailey.............. 195,970 $3,167,654 1,493,792 16,251 250,643 0
Gregory Aasen.............. 960 $ 2,079 1,226,043 10,834 677,541 0
Thomas Riordan............. 960 $ 2,079 170,041 3,209 687,899 0
Steffen Perna.............. 90,960 $ 484,479 793,783 3,751 1,250,413 0
Haresh Patel............... 414 $ 1,320 240,100 2,918 51,769 0
___________________________
(1) Shares acquired includes shares purchased pursuant to PMC's Employee Stock
Purchase Plan.
(2) Market value of underlying securities at exercise date, minus the exercise
price.
(3) Does not include outstanding LTD Special Shares redeemable for shares of
common stock of PMC. Includes options that are not "in-the-money" (the
exercise price equals or exceeds $5.81, the closing market price for a
share of PMC common stock on December 29, 2002). Excludes options promised
to be issued through the stock option exchange.
(4) Market value underlying securities at year-end, minus the exercise price.
At December 29, 2002 the closing market price for a share of PMC's common
stock was $5.81. Excludes options promised to be issued through the stock
option exchange.
10
Employment Agreements
PMC's executive officers each have entered into employment agreements
with PMC. Under the terms of the employment agreements, upon a termination
without cause as defined in the employment agreements (if no change of control
as defined in the employment agreements is reasonably expected within the next
60 days or has occurred in the past two years) the executive officers are
entitled to receive their base salary and accrued vacation through the date of
termination. If the officers are terminated without cause or constructively
terminated as defined in the employment agreements and a change of control is
reasonably expected to occur within 60 days of the termination or has occurred
within the past two years, then the officers are entitled to the following
benefits: (1) their base salary through the date of termination; (2) a lump-sum
payment equal to four percent of their current base salary for each full month
they were employed with PMC, provided that the total payment shall not exceed
two times their current base salary; (3) a lump-sum payment equal to two percent
of their prior year's bonus for each full month they were employed with PMC; and
(4) all accrued vacation through the date of termination. In addition, the
executive officers are entitled to execute consulting agreements with PMC that
would require them to provide service to PMC during each calendar quarter and
maintain the confidentiality of PMC's trade secrets. While they serve as
consultants to PMC, their stock options would continue to vest and be
exercisable until 30 days after all their options have vested. Each of Mr.
Bailey and Mr. Krock also has the right to receive the payments and benefits
under (1) and (4) above, if on the first anniversary of a change of control they
are still employed by PMC or its successor. In addition, each of Mr. Bailey and
Mr. Krock are entitled to terminate their employment and become a consultant to
PMC or its successor on these terms if on the first anniversary of a change of
control of PMC, he is an employee of PMC.
Under the terms of the employment agreements, "cause" means (i) gross
dereliction of duties which continues after at least two notices, each 30 days
apart, from the Chief Executive Officer (or in the case of the Chief Executive
Officer, from a director designated by a majority of the board), specifying in
reasonable detail the tasks which must be accomplished and a timeline for their
accomplishment to avoid termination for Cause; (ii) willful and gross misconduct
which injures PMC; (iii) willful and material violation of laws applicable to
PMC; or (iv) embezzlement or theft of PMC property. "Change of control" under
the employment agreements means the occurrence of any of the following events:
(1) any "person" or "group" as such terms are defined under Sections
13 and 14 of the Exchange Act (other than PMC, a subsidiary of
PMC, or a PMC employee benefit plan) is or becomes the "beneficial
owner" (as defined in Exchange Act Rule 13d-3), directly or
indirectly, of PMC securities representing 50% or more of the
combined voting power of PMC's then outstanding securities;
(2) the closing of (a) the sale of all or substantially all of the
assets of PMC if the holders of PMC securities representing all
voting power for the election of directors before the transaction
hold less than a majority of the total voting power for the
election of directors of all entities which acquire such assets,
or (b) the merger of PMC with or into another corporation if the
holders of PMC securities representing all voting power for the
election of directors before the transaction hold less than a
majority of the total voting power for the election of directors
of the surviving entity;
(3) the issuance of securities which would give a person or group
beneficial ownership of PMC securities representing 50% or more of
all voting power for the election of directors; or
(4) a change in the board such that the incumbent directors and
nominees of the incumbent directors are no longer a majority of
the total number of directors.
"Constructive termination" under the employment agreements means (i) a material
reduction in Executive's Base Salary, target bonus or benefits; (ii) a material
reduction in title, authority, status, obligations or responsibilities; or (iii)
the requirement that Executive relocate more than 100 miles from the current PMC
headquarters.
11
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Mr. Diller and Mr. Wilks. Mr.
Diller served as PMC's Chief Executive Officer from 1983 to 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires PMC's executive
officers and directors, and persons who own more than 10% of PMC's common stock,
to file reports regarding ownership of, and transactions in, PMC's securities
with the Securities and Exchange Commission and to provide PMC with copies of
those filings. Based solely on its review of the copies of such forms received
by PMC, or written representations from certain reporting persons, PMC believes
that during fiscal year 2002, all the reporting persons complied with all
applicable Section 16(a) filing requirements.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report summarizes the principles and other factors considered by
the Compensation Committee in determining executive compensation.
Compensation Philosophy. Under the Committee's supervision, PMC has
implemented compensation policies, plans and programs to achieve the following
objectives:
o attract, retain and motivate talented executive officers
o provide them with cash bonus opportunities linked to achievement
of business objectives and individual performance goals
o align the financial interests of executive officers with those of
stockholders by providing executive officers with an equity stake
in PMC.
Elements of Compensation. Executive officer compensation consists of a
base salary, quarterly bonuses and stock options. Potential cash bonuses depend
on achieving corporate objectives and enhancing stockholder value. Stock option
grants depend on personal and corporate performance and the retention value of
the officer's unvested options. Each fiscal year the Chief Executive Officer
submits for Committee review and approval an annual plan for base salary and
quarterly bonuses for PMC's executive officers (other than the CEO). The
Committee considers the total earned or potentially available compensation of
each executive officer in establishing each element of the officer's
compensation. The Committee compares total compensation and elements of
compensation to companies in the semiconductor industry that have revenues
comparable to PMC's revenues, or that compete with PMC for executive talent
irrespective of revenue level.
Cash Compensation. PMC generally sets base salaries below amounts paid
to senior managers with comparable qualifications, experience and
responsibilities at comparable companies in order to emphasize quarterly and
longer-term incentive compensation. Base salaries are determined in light of
industry and peer group surveys, compensation for the executives as a group,
individual position and responsibilities, the individual's total compensation in
the prior year and PMC's plan for the current fiscal year. PMC did not increase
base salaries in 2002.
Each executive officer is also eligible to receive a quarterly cash
bonus equal to a percentage of PMC's pre-tax profits for the quarter. The
Committee determines each officer's annual percentage of profits based on the
individual's past and expected future contributions to PMC. PMC did not pay cash
bonuses to executive officers in 2002.
Stock Options. During each fiscal year, the Committee considers whether
to grant executive officers long-term equity incentives such as stock options.
The Committee believes stock option grants encourage the achievement of superior
results over time and align employee and stockholder interests. The Committee
reviews recommended awards, taking into account scope of accountability,
strategic and operational goals, and anticipated performance requirements and
contributions of the senior management group. The Committee did not recommend
new option grants to executive officers in 2002 due to their participation in
the Stock Option Exchange Program described below and on page 6.
12
Stock Option Exchange Program. Like many other companies in the
technology industry, PMC's stock price declined significantly in 2001 and 2002.
As a result, a significant percentage of PMC's outstanding stock options had
exercise prices significantly higher than the trading range of PMC's common
stock. This meant that many of PMC's stock options were no longer incentives to
motivate and retain employees while the potential dilution from outstanding
options could have adversely affected PMC's market capitalization.
In the third quarter of 2002, PMC offered a voluntary exchange of stock
options to executive officers holding options with exercise prices at or above
$8.00 per share and granted from December 1, 1999 through December 31, 2001. All
executive officers accepted the offer to exchange eligible stock options.
The Committee recommended the exchange offer to the board because the
Committee is philosophically committed to the concept of employees, including
executive officers, as owners and saw the exchange offer as an opportunity to
motivate PMC's workforce to create future stockholder value and to act as an
incentive to retain PMC's workforce. The Committee believed that the exchange
offer would benefit stockholders by decreasing the number of options outstanding
and providing additional employee retention incentives through additional
vesting.
Chief Executive Officer Compensation. The Committee determines the
CEO's total cash compensation based on similar competitive compensation data as
that used for other executive officers, the Committee's assessment of his past
performance and the Committee's expectations as to his future contributions to
PMC. In fiscal 2002 PMC did not change the CEO's base salary or pay him a cash
bonus. PMC did not grant new options to the CEO in fiscal 2002 because he
participated in the Stock Option Exchange Program.
Respectfully submitted by:
Alexandre Balkanski
James Diller
13
STOCK PRICE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
returns for PMC, the Nasdaq National Market, the line-of-business index for
semiconductors and related devices (SIC code 3674) published by Media General
Financial Services, and the S&P 500 Index. Because PMC's stock is included in
the Standard & Poor's 500 Stock Index, PMC is required by SEC rules to use the
S&P 500 Index. The graph assumes the investment of $100 on January 1, 1998. The
performance shown is not necessarily indicative of future performance.
Comparison of 5-Year Cumulative Total Return*
Among PMC-Sierra, Inc., SIC Code Index, NASDAQ Market Index and S&P 500 Index
Measurement Period Semiconductors
(Fiscal Year Covered) PMC-Sierra Inc. Related Device NASDAQ Market Index S&P 500 Index
_____________________ _______________ _______________ ___________________ _____________
12/31/1997 100.00 100.00 100.00 100.00
12/31/1998 203.63 150.56 141.04 128.58
12/31/1999 1,034.27 323.94 248.76 155.64
12/29/2000 1,014.52 240.70 156.35 141.46
12/30/2001 274.32 195.35 124.64 124.65
12/30/2002 71.74 91.91 86.94 97.10
* The total return on each of these investments assumes the reinvestment of
dividends, although cash dividends have never been paid on PMC's common
stock.
14
AUDIT COMMITTEE REPORT
Each of the Audit Committee members satisfies the definition of
independent director as established in the Nasdaq listing standards. The board
recently amended the charter for the Audit Committee, which is attached as
Appendix A. The Audit Committee met five times during the 2002 fiscal year.
The Audit Committee has reviewed PMC's audited consolidated financial
statements and discussed them with management. The Audit Committee has discussed
with Deloitte & Touche LLP, PMC's independent auditors during the 2002 fiscal
year, the matters required to be discussed by Statement on Auditing Standards
No. 61.
The Audit Committee received from Deloitte & Touche LLP the written
disclosures required by Independence Standards Board Standard No. 1 and
discussed with them their independence.
Based on this review, the Audit Committee recommended to the board that
PMC's audited consolidated financial statements be included in PMC's Annual
Report on Form 10-K for the fiscal year ended December 29, 2002.
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, or the Exchange Act,
except to the extent that PMC specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Audit Committee Members:
Alexandre Balkanski, Chair
Colin Beaumont
Lewis Wilks
15
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has retained Deloitte & Touche LLP as PMC's
independent auditors to audit its consolidated financial statements for the 2003
fiscal year. During the 2002 fiscal year, Deloitte & Touche LLP served as PMC's
independent auditors and also provided certain tax and other audit-related
services. Although PMC is not required to seek stockholder ratification of this
appointment, the board believes it to be sound corporate practice to do so. If
the appointment is not ratified, the Audit Committee will investigate the
reasons for stockholder rejection and reconsider the appointment.
Fees billed to PMC by Deloitte & Touche LLP during Fiscal Year 2002
Audit Fees:
Audit fees billed to PMC by Deloitte & Touche LLP for review of PMC's
annual financial statements and those financial statements included in PMC's
quarterly reports on Form 10-Q and annual report on Form 10-K totaled $173,248
for fiscal year 2002.
Financial Information Systems Design and Implementation Fees:
PMC did not engage Deloitte & Touche LLP to provide advice to PMC
regarding financial information systems design and implementation during the
fiscal year ended December 29, 2002.
All Other Fees:
Tax Fees: Fees billed to PMC by Deloitte & Touche LLP for tax-related
services rendered to PMC totaled $435,979 for fiscal year 2002, of which
$307,000 was for tax compliance and the balance related to tax consulting and
planning.
Other Fees: Fees for all other services totaled $54,885 for fiscal year
2002. The fees for other services included (i) assistance with regulatory
filings, (ii) consultations on the effects of various accounting issues and
changes in professional standards; and (iii) audits of certain subsidiary
companies.
Representatives of Deloitte & Touche LLP are expected to attend the
annual meeting where they will be available to respond to appropriate questions
and, if they desire, to make a statement.
In making its recommendation to ratify the appointment of Deloitte &
Touche LLP as PMC's independent auditors for fiscal year 2003, the Audit
Committee has considered whether the non-audit services provided by Deloitte &
Touche LLP are compatible with maintaining the independence of Deloitte & Touche
LLP.
Recommendation
PMC's Board of Directors recommends a vote FOR the ratification of the
appointment of Deloitte &Touche LLP as PMC's independent auditors.
Vote Required
The affirmative vote of a majority of the votes cast is required to confirm the
appointment of Deloitte & Touche LLP as independent auditors of PMC for the 2003
fiscal year.
16
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: Why am I receiving these materials?
A: PMC's Board of Directors is providing these proxy materials to you in
connection with PMC's annual meeting of stockholders, which will take place
on May 15, 2003. Stockholders are invited to attend the annual meeting and
are requested to vote on the proposals described in this proxy statement.
Q: What information is contained in these materials?
A: The information included in this proxy statement relates to the proposals
to be voted on at the annual meeting, the voting process, the compensation
of directors and our most highly paid officers, and certain other required
information. PMC's 2002 Annual Report on Form 10-K, Proxy Card and return
envelope are also enclosed.
Q: What proposals will be voted on at the annual meeting?
A: There are two proposals scheduled to be voted on at the annual meeting:
o the election of directors for a one-year term; and
o the ratification of the appointment of Deloitte & Touche as PMC's
independent auditors.
Q: What is the board's voting recommendation?
A: PMC's board recommends that you vote your shares "FOR" each of the nominees
to the board and "FOR" the ratification of the appointment of Deloitte &
Touche as PMC's independent auditors.
Q: Which of my shares can be voted?
A: You can vote all shares you owned as of the close of business on March 31,
2003 (the "Record Date"). These shares include shares that are: (1) held
directly in your name as the stockholder of record, and (2) held for you as
the beneficial owner through a stockbroker, bank or other nominee.
Q: What is the difference between holding shares as a stockholder of record
and as a beneficial owner?
A: Most stockholders of PMC hold their shares through a stockbroker, bank or
other nominee rather than directly in their own name. As summarized below,
there are some distinctions between shares held of record and those owned
beneficially.
Stockholder of Record
If your shares are registered directly in your name with PMC's transfer
agent, American Stock Transfer & Trust Company, you are considered the
stockholder of record of those shares. As the stockholder of record, you
have the right to grant your voting proxy directly to PMC or to vote in
person at the annual meeting. PMC has enclosed a proxy card for you to use.
Beneficial Owner
If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the beneficial owner of shares held in street
name, and these proxy materials are being forwarded to you by your broker
or nominee who is considered, with respect to those shares, the stockholder
of record. As the beneficial owner, you have the right to direct your
broker on how to vote and are also invited to attend the annual meeting.
However, since you are not the stockholder of record, you may not vote
these shares in person at the annual meeting. Your broker or nominee has
enclosed a voting instruction card for you to use in directing the broker
or nominee regarding how to vote your shares.
Q: How can I vote my shares in person at the annual meeting?
A: Shares held directly in your name as the stockholder of record may be voted
in person at the annual meeting. If you choose to do so, please bring the
enclosed proxy card or proof of identification.
Even if you plan to attend the annual meeting, PMC recommends that you also
submit your proxy as described below so that your vote will be counted if
you later decide not to attend the annual meeting. Shares held in street
name may be voted in person by you only if you obtain a signed proxy from
the record holder giving you the right to vote the shares.
Q: How can I vote my shares without attending the annual meeting?
A: Whether you hold shares directly as the stockholder of record or
beneficially in street name, you may direct your vote without attending the
annual meeting. You may vote by granting a proxy for those shares you hold
directly as the stockholder of record or, for shares held in street name,
by submitting voting instructions to your broker or nominee using the
voting instruction card provided by your broker or nominee.
17
Q: Can I change my vote?
A: You may change your proxy instructions at any time prior to the vote at the
annual meeting. For shares held directly in your name, you may accomplish
this by granting a new proxy bearing a later date (which automatically
revokes the earlier proxy) or by attending the annual meeting and voting in
person. Attendance at the annual meeting will not cause your previously
granted proxy to be revoked unless you specifically so request. For shares
held beneficially by you, you may accomplish this by submitting new voting
instructions to your broker or nominee.
Q: How are votes counted?
A: In the election of directors, you may vote "FOR" all of the nominees or
your vote may be "WITHHELD" with respect to one or more of the nominees.
For the other proposals, you may vote "FOR", "AGAINST" or "ABSTAIN". If you
"ABSTAIN", it has the same effect as a vote "AGAINST". If you sign your
proxy card or broker voting instruction card with no further instructions,
your shares will be voted in accordance with the recommendations of the
board.
Q: What is the voting requirement to approve each of the proposals?
A: The six nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to vote shall be elected as
directors. All other proposals require the affirmative "FOR" vote of a
majority of those shares present and entitled to vote. If you are a
beneficial owner and do not provide the stockholder of record with voting
instructions, your shares may constitute broker non-votes, as described
below in "What is the quorum requirement for the annual meeting?" In
tabulating the voting result for any particular proposal, shares which
constitute broker non-votes are not considered entitled to vote.
Q: What does it mean if I receive more than one proxy or voting instruction
card?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting
instruction cards you receive.
Q: Where can I find the voting results of the annual meeting?
A: PMC will announce preliminary voting results at the annual meeting and
publish final results in PMC's quarterly report on Form 10-Q for the second
quarter of fiscal year 2003.
Q: What happens if additional proposals are presented at the annual meeting?
A: Other than the two proposals described in this proxy statement, PMC does
not expect any matters to be presented for a vote at the annual meeting. If
you grant a proxy, the persons named as proxy holders, Robert Bailey, PMC's
President and Chief Executive officer, Alan Krock, PMC's Vice President of
Finance and Chief Financial Officer, and Glen Kayll, PMC's Treasurer, will
have the discretion to vote your shares on any additional matters properly
presented for a vote at the annual meeting. If for any unforeseen reason
any of PMC's nominees is not available as a candidate for director, the
persons named as proxy holders will vote your proxy for such other
candidate or candidates as may be nominated by the board.
Q: What class of shares is entitled to be voted?
A: Each share of PMC's common stock outstanding as of the close of business on
March 31, 2003, the Record Date, is entitled to one vote at the annual
meeting. In addition, since cumulative voting applies to PMC's common stock
in the election of directors, if any stockholder at the meeting and prior
to the voting gives notice of the stockholder's intention to cumulate votes
for the election of directors, then every stockholder, or the stockholder's
proxy, who is entitled to vote upon the election of directors may cumulate
such stockholder's votes and give one candidate a number of votes equal to
the number of directors to be elected multiplied by the number of shares
held by such stockholder, or distribute the stockholder's votes on the same
principle among as many candidates as the stockholder may select, provided
that votes cannot be cast for more than five nominees. On the Record Date,
PMC had approximately 168,544,651 shares of common stock issued and
outstanding.
18
Q: What is the quorum requirement for the annual meeting?
A: The quorum requirement for holding the annual meeting and transacting
business is a majority of the outstanding shares entitled to be voted as of
the Record Date. The shares may be present in person or represented by
proxy at the annual meeting. Both abstentions and broker non-votes are
counted as present for the purpose of determining the presence of a quorum.
Broker non-votes, however, are not counted as shares present and entitled
to be voted with respect to the matter on which the broker has expressly
not voted. Thus, broker non-votes will not affect the outcome of any of the
matters being voted on at the annual meeting. Generally, broker non-votes
occur when shares held by a broker for a beneficial owner are not voted
with respect to a particular proposal because (1) the broker has not
received voting instructions from the beneficial owner and (2) the broker
lacks discretionary voting power to vote such shares.
Q: Who will count the vote?
A: A representative of Georgeson Shareholder Communications Inc. will tabulate
the votes and act as the Inspector of Elections.
Q: Is my vote confidential?
A: Proxy instructions, ballots and voting tabulations that identify individual
stockholders are handled in a manner that protects your voting privacy.
Your vote will not be disclosed either within PMC or to third parties
except (1) as necessary to meet applicable legal requirements, (2) to allow
for the tabulation of votes and certification of the vote, or (3) to
facilitate a successful proxy solicitation by the board. Occasionally,
stockholders provide written comments on their proxy card which are then
forwarded to PMC's management.
Q: Who will bear the cost of soliciting votes for the annual meeting?
A: PMC will pay the entire cost of preparing, assembling, printing, mailing
and distributing these proxy materials. In addition to the mailing of these
proxy materials, the solicitation of proxies or votes may be made in
person, by telephone or by electronic communication by PMC's directors,
officers, and employees, who will not receive any additional compensation
for such solicitation activities. PMC has retained the services of
Georgeson Shareholder Communications Inc. to aid in the solicitation of
proxies from banks, brokers, nominees and intermediaries. PMC estimates
that it will pay Georgeson a fee of $15,000 for its services. In addition,
PMC may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to
such beneficial owners.
Q: May I propose actions for consideration at next year's annual meeting of
stockholders or nominate individuals to serve as directors?
A: You may submit proposals for consideration at future annual stockholder
meetings, including director nominations.
Stockholder Proposals: In order for a stockholder proposal to be considered
for inclusion in PMC's proxy statement for next year's annual meeting, the
written proposal must be received by PMC no later than December 13, 2003
and should contain such information as required under PMC's Bylaws. Such
proposals will need to comply with the U.S. Securities and Exchange
Commission's regulations regarding the inclusion of stockholder proposals
in PMC-sponsored proxy material
Any stockholder who wants to make a proposal or director nomination that is
not included in PMC's proxy statement for that annual meeting, must deliver
written notice to PMC's corporate secretary at least 120 days before the
one-year anniversary of the previous year's annual meeting (in the case of
the 2004 annual meeting this date is January 16, 2004). This notice must
contain the information specified in PMC's bylaws regarding the matters
proposed to be brought before the annual meeting and the stockholder
proposing such matters. If the date of the annual meeting is more than 30
days after the one-year anniversary of the previous year's annual meeting,
then the deadline will be changed.
19
APPENDIX A
AUDIT COMMITTEE CHARTER
(as revised February 4, 2003)
This Audit Committee Charter (Charter) has been adopted by the Board of
Directors (the Board) of PMC-Sierra, Inc (Company). The Audit Committee of the
Board (the Committee) shall review and reassess this charter at least annually
and recommend any proposed changes to the Board for approval.
1. Role, Organization and Authority
The Committee assists the Board in fulfilling its responsibility for oversight
of the quality and integrity of the accounting, auditing, internal control and
financial reporting practices of PMC. It may also have such other duties as may
from time to time be assigned to it by the Board. The Committee shall maintain
free and open communication with the independent auditors and Company
management.
The membership of the Committee shall consist of at least three directors, who
are each free of any relationship that, in the opinion of the Board, may
interfere with such member's individual exercise of independent judgment, who
meet the independence requirements of the Nasdaq Stock Market (Nasdaq) and the
Securities and Exchange Commission and meet the financial literacy requirements
for serving on audit committees, all as required by Nasdaq
The Committee is empowered to investigate any matter relating to PMC's
accounting, internal control or financial reporting practices brought to its
attention, with full access to all Company books, records, facilities and
personnel. The Committee has the authority to engage and determine funding for
independent counsel and other advisors, as it deems necessary to carry out its
duties.
One member of the Committee shall be appointed as chair. The chair shall be
responsible for leadership of the Committee, including scheduling and presiding
over meetings, preparing agendas, and making regular reports to the Board. The
chair will also maintain regular liaison with the CEO, CFO, and the lead
independent audit partner.
The Committee shall meet at least six times a year, or more frequently as the
Committee considers necessary. At least once each year the Committee shall have
separate private meetings with the independent auditors and management.
2. Responsibilities
Although the Committee may wish to consider other duties from time to time, the
general recurring activities of the Committee in carrying out is oversight role
are described below. The Committee shall be responsible for:
o Appointing, compensating, retaining and overseeing the work of the
independent auditors (including resolving disagreements between
management and the independent auditors regarding financial
reporting) for the purpose of preparing or issuing an audit report
or related work. The independent auditors shall report directly to
the Committee.
o Pre-approving any audit and permitted non-audit services provided to
the Company by the independent auditors (or subsequently approving
non-audit services in those circumstances where a subsequent
approval is necessary and permissible); in this regard, the
Committee shall have the sole authority to approve the hiring and
firing of the independent auditors, all audit engagement fees and
terms and all non-audit engagements, as may be permissible, with the
independent auditors. The Committee may delegate to one or more
members the authority to grant pre-approvals and then report such
decisions to the full Committee at its scheduled meetings.
o Obtaining annually from the independent auditors a formal written
statement describing all relationships between the auditors and PMC,
consistent with Independence Standards Board Standard Number 1. The
Committee shall actively engage in a dialogue with the independent
auditors with respect to any relationships that may impact the
objectivity and independence of the auditors and shall take, or
recommend that the Board take, appropriate actions to oversee and
satisfy itself as to the auditors' independence.
o Reviewing the audited financial statements and any report rendered
by the independent auditors and discussing them with management and
the independent auditors. These discussions shall include the
matters required to be discussed under Statement of Auditing
Standards No. 61 and consideration of the quality of PMC's
accounting principles as applied in its financial reporting,
including a review of particularly sensitive accounting estimates,
reserves and accruals, judgmental areas, audit adjustments (whether
or not recorded), and other such inquiries as the Committee or the
independent auditors shall deem appropriate. Based on such review,
the Committee shall make its recommendation to the Board as to the
inclusion of PMC's audited financial statements in PMC's Annual
Report on Form 10-K.
o Issuing annually a report to be included in PMC's proxy statement as
required by the rules of the Securities and Exchange Commission.
o Discussing with a representative of management and the independent
auditors any issues arising from the independent auditors review of
the quarterly financial statements prior to the filing of PMC's
Quarterly Report on Form 10-Q.
o Discussing with management and the independent auditors the quality
and adequacy of and compliance with PMC's internal controls.
o Discussing with management and/or PMC's general counsel any legal
matters (including the status of pending litigation) that may have a
material impact on PMC's financial statements, and any material
reports or inquiries from regulatory or governmental agencies.
The Committee's job is one of oversight. Management is responsible for the
preparation of PMC's financial statements and the independent auditors are
responsible for auditing those financial statements. The Committee and the Board
recognize that management and the independent auditors have more resources and
time, and more detailed knowledge and information regarding PMC's accounting,
auditing, internal control and financial reporting practices than the Committee
does; accordingly the Committee's oversight role does not provide any expert or
special assurance as to the financial statements and other financial information
provided by PMC to its stockholders and others.
Instructions for Voting Your Proxy
PMC-SIERRA, INC. is offering stockholders of record three alternative ways of
voting your proxy:
o By Telephone (using a touch-tone telephone)
o Through the Internet (using a browser)
o By Mail (traditional method)
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy card. We encourage you to
use these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
TELEPHONE VOTING Available only until 5:00 p.m. Eastern time on May 14, 2003
o This method of voting is available for residents of the U.S. and Canada
o On a touch-tone telephone, call TOLL FREE 1-877-816-0836, 24 hours a day,
7 days a week.
o You will be asked to enter ONLY the CONTROL NUMBER shown below.
o Have your proxy card ready, then follow the prerecorded instructions.
o Your vote will be confirmed and cast as you directed.
INTERNET VOTING Available only until 5:00 p.m. Eastern time on May 14, 2003
o Visit our Internet voting Website at http://proxy.georgeson.com.
o Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen.
o You will incur only your usual Internet charges.
VOTING BY MAIL
o Simply mark, sign and date your proxy card and return it in the
postage-paid envelope.
o If you are voting by telephone or the Internet, please do not mail your
proxy card.
COMPANY NUMBER CONTROL NUMBER
(SEE REVERSE SIDE)
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
ONLY IF YOU ARE VOTING BY MAIL
________________________________________________________________________________
[X] Please mark votes as in this example.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for the proposals.
1. To elect directors of the company to serve for the ensuing year and until the
next annual meeting or the election of their successors.
Nominees: James Diller, Frank Marshall, William Kurtz,
Robert Bailey, Alexandre Balkanski, Lewis Wilks
FOR all nominees
listed above (except
as indicated) WITHHOLD
[ ] [ ]
_____________________________________________
If you wish to withhold authority to vote for any individual nominee, write
the name of that nominee on the line above.
2. To ratify the appointment of Deloitte & Touche LLP as the company's
independent auditors for the 2003 fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
By executing this proxy, the undersigned stockholder grants the proxies, in
their discretion, the ability to vote upon such other business as may properly
come before the meeting or any adjournment thereof.
DATE: __________________________________________, 2003
___________________________________________________
Signature
___________________________________________________
Signature
(Note: This Proxy should be marked, dated and signed by the stockholder exactly
as his/her name is printed at the left and returned promptly in the enclosed
envelope. A person signing as an executor, administrator, trustee or guardian
should so indicate and specify his/her title. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person. If shares are held by
joint tenants or a community property, all joint owners should sign.)
PLEASE DETACH PROXY CARD HERE
________________________________________________________________________________
P
R
O
X
Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PMC-Sierra, Inc.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 15, 2003
The undersigned Stockholder of PMC-SIERRA, INC. (the "Company") acknowledges
receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement
each dated April 11, 2003, and the undersigned revokes all prior proxies and
appoints Robert Bailey, Alan Krock and Glen Kayll and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned to represent the undersigned and to vote all shares of
Common Stock of the Company which the undersigned would be entitled to vote at
the Annual Meeting of Stockholders to be held at Executive Plaza Hotel, 405
North Road, Coquitlam, British Columbia on May 15, 2003, at 2:00 p.m. local
time, and at any adjournment thereof, and instructs said proxies to vote as
directed on the reverse side.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for the proposals and for such matters as may properly come before the
meeting as the proxies deem advisable.
(Important - To be signed and dated on reverse side)