SCHEDULE 14A INFORMATION
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the Securities Exchange Act of 1934
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Rule 14a-12
SILICON IMAGE, INC.
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[SILICON IMAGE, INC. LOGO]
April 16, 2001
To Our Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Silicon Image, Inc. to be held at our headquarters located at 1060 East
Arques Ave., Sunnyvale, California, on Tuesday, May 22, 2001, at 2 p.m., local
time.
The matters expected to be acted upon at the meeting are described in detail
in the accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the affairs of
Silicon Image by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ David D. Lee
David D. Lee
President and Chief Executive Officer
SILICON IMAGE, INC.
1060 EAST ARQUES AVE.
SUNNYVALE, CALIFORNIA 94086
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders of
Silicon Image, Inc. will be held at our headquarters located at 1060 East Arques
Ave., Sunnyvale, California, on Tuesday, May 22, 2001, at 2 p.m., local time for
the following purposes:
1. To elect two Class II directors of Silicon Image, each to serve until
the 2004 annual meeting of stockholders and until his successor has been
elected and qualified, or until his earlier death, resignation or
removal. Silicon Image's Board of Directors intends to present the
following nominees for election as Class II directors:
David A. Hodges Ronald V. Schmidt
2. To approve an amendment to Silicon Image's Second Amended and Restated
Certificate of Incorporation to increase the authorized number of shares
of common stock issuable by Silicon Image from 75,000,000 to 150,000,000.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of Silicon Image for the fiscal year ending December 31,
2001.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 26, 2001 are
entitled to notice of, and to vote at, the meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ David D. Lee
David D. Lee
President and Chief Executive Officer
Sunnyvale, California
April 16, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
SILICON IMAGE, INC.
1060 EAST ARQUES AVE.
SUNNYVALE, CALIFORNIA 94086
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PROXY STATEMENT
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APRIL 16, 2001
The accompanying proxy is solicited on behalf of the Board of Directors of
Silicon Image, Inc., a Delaware corporation, for use at the 2001 Annual Meeting
of Stockholders to be held at our headquarters located at 1060 East Arques Ave.,
Sunnyvale, California, on Tuesday, May 22, 2001, at 2 p.m., local time. Only
holders of record of our common stock at the close of business on March 26,
2001, which is the record date, will be entitled to vote at the Annual Meeting.
At the close of business on March 26, 2001, we had 54,224,304 shares of common
stock outstanding and entitled to vote. A majority of such shares, present in
person or represented by proxy, will constitute a quorum for the transaction of
business. This Proxy Statement and the accompanying form of proxy were first
mailed to stockholders on or about April 16, 2001. An annual report for the year
ended December 31, 2000 is enclosed with the Proxy Statement. Unless otherwise
indicated, all amounts in this Proxy Statement reflect the two-for-one split of
the common stock of Silicon Image which became effective on August 18, 2000.
VOTING RIGHTS AND REQUIRED VOTE
Holders of Silicon Image common stock are entitled to one vote for each
share held as of the above record date.
For Proposal No. 1, directors will be elected by a plurality of the votes of
the shares of common stock present in person or represented by proxy at the
Annual Meeting and entitled to vote on the election of directors. Proposal
No. 2 requires for approval the affirmative vote of a majority of all
outstanding shares of common stock entitled to vote. Proposal No. 3 requires for
approval the affirmative vote of the majority of shares of common stock present
in person or represented by proxy at the Annual Meeting and entitled to vote on
the proposal. All votes will be tabulated by the inspector of election appointed
for the Annual Meeting, who will tabulate affirmative and negative votes and
abstentions. Abstentions will be counted towards a quorum and have the same
effect as negative votes with regard to Proposal Nos. 2 and 3. In the event that
a broker indicates on a proxy that it does not have discretionary authority to
vote certain shares on a particular matter, such broker non-votes will also be
counted towards a quorum and will have the same effect as a negative vote with
respect to Proposal No. 2, but will not be counted in determining whether
Proposal No. 3 is approved.
VOTING OF PROXIES
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors of Silicon Image for use at the Annual Meeting. Stockholders
are requested to complete, date and sign the accompanying proxy and promptly
return it in the enclosed envelope. All signed, returned proxies that are not
revoked will be voted in accordance with the instructions contained therein.
However, returned signed proxies that give no instructions as to how they should
be voted on a particular proposal at the Annual Meeting will be counted as votes
"for" such proposal, or in the case of the election of Class II directors, as a
vote "for" election to Class II of the Board of all the nominees presented by
the Board. In the event that sufficient votes in favor of the proposals are not
received by the date of the Annual Meeting, the persons named as proxies may
propose one or more adjournments of the Annual Meeting to permit further
solicitations of proxies. Any such adjournment would require
the affirmative vote of the majority of the outstanding shares present in person
or represented by proxy at the Annual Meeting.
EXPENSES OF SOLICITATION
The expenses of soliciting proxies to be voted at the Annual Meeting will be
paid by Silicon Image. Following the original mailing of the proxies and other
soliciting materials, Silicon Image and/or its agents may also solicit proxies
by mail, telephone, telegraph or in person. Following the original mailing of
the proxies and other soliciting materials, Silicon Image will request that
brokers, custodians, nominees and other record holders of its common stock
forward copies of the proxy and other soliciting materials to persons for whom
they hold shares of common stock and request authority for the exercise of
proxies. In such cases, Silicon Image, upon the request of the record holders,
will reimburse such holders for their reasonable expenses. Georgeson Shareholder
Communications, Inc. will assist Silicon Image in obtaining the return of
proxies at an estimated cost to Silicon Image of $7,500.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by a writing
delivered to Silicon Image stating that the proxy is revoked, by a subsequent
proxy that is signed by the person who signed the earlier proxy and is presented
at the Annual Meeting or by attendance at the Annual Meeting and voting in
person. Please note, however, that if a stockholder's shares are held of record
by a broker, bank or other nominee and that stockholder wishes to vote at the
Annual Meeting, the stockholder must bring to the Annual Meeting a letter from
the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
TELEPHONE OR INTERNET VOTING
For stockholders with shares registered in the name of a brokerage firm or
bank, a number of brokerage firms and banks are participating in a program for
shares held in "street name" that offers telephone and Internet voting options.
If your shares are held in an account at a brokerage firm or bank participating
in this program, you may vote those shares by calling the telephone number
specified on your proxy or accessing the Internet website address specified on
your proxy instead of completing and signing the proxy itself. The giving of
such a telephonic or Internet proxy will not affect your right to vote in person
should you decide to attend the Annual Meeting. Stockholders with shares
registered directly in their names with Mellon Investor Services, Silicon
Image's transfer agent, will not be able to vote using the telephone or
Internet.
The telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. Stockholders voting via the Internet should understand that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the stockholder.
2
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Silicon Image's Board of Directors is presently comprised of six members.
Silicon Image's Second Amended and Restated Certificate of Incorporation
provides that the Board of Directors shall be divided into three classes,
designated as Class I, Class II and Class III, with the number of directors in
each class to be divided as equally as reasonably possible. One class of
directors is elected by the stockholders at each annual meeting to serve until
the third succeeding annual meeting and until their successors are duly elected
and qualified. Keith McAuliffe and Douglas C. Spreng have been designated as
Class I directors, and replaced Herbert Chang and Sang-Chul Han, respectively,
who resigned from the Board of Directors in November 2000 and February 2001,
respectively. David A. Hodges and Ronald V. Schmidt have been designated as
Class II directors and David D. Lee and Andrew S. Rappaport have been designated
as Class III directors. The Class II directors will stand for reelection or
election at the Annual Meeting, the Class III directors will stand for
reelection or election at the 2002 annual meeting of stockholders and the
Class I directors will stand for reelection or election at the 2003 annual
meeting of stockholders. Unless otherwise provided by law, any vacancy on the
Board, including a vacancy created by an increase in the authorized number of
directors, may only be filled by the affirmative vote of a majority of the
directors then in office or by a sole remaining director. Any director so
elected to fill a vacancy shall serve for the remainder of the full term of the
class of directors in which the vacancy occurred and until such director's
successor is elected and qualified, or until his or her earlier death,
resignation or removal.
Each of the nominees for election to Class II is currently a director of
Silicon Image and was previously elected by the stockholders. If elected at the
Annual Meeting, each of the nominees would serve until the 2004 annual meeting
of stockholders and until his successor is elected and qualified, or until such
director's earlier death, resignation or removal. Directors will be elected by a
plurality of the votes of the shares of common stock present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors. Shares represented by an executed proxy will be voted "for" the
election of the two nominees recommended by the Board unless the proxy is marked
in such a manner as to withhold authority so to vote. In the event that any
nominee for any reason is unable to serve, or for good cause will not serve, the
proxies will be voted for such substitute nominee as the present Board may
determine. Silicon Image is not aware of any nominee who will be unable to
serve, or for good cause will not serve, as a director.
3
The names of the nominees for election as Class II directors at the Annual
Meeting and of the incumbent Class I and Class III directors, and certain
information about them, including their ages as of February 28, 2001, are
included below.
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---- -------- -------------------------------------- --------------
Nominees for election as Class II
directors for a term expiring in 2004:
David A. Hodges(1) 63 Professor in the Graduate School, 1997
University of California at Berkeley
Ronald V. Schmidt(2) 56 Private Investor 1997
Incumbent Class III directors with terms
expiring in 2002:
David D. Lee 44 Chairman of the Board, Chief Executive 1995
Officer and President of Silicon Image
Andrew S. Rappaport(1)(2) 43 Partner of August Capital, LLC 1997
Incumbent Class I directors with terms
expiring in 2003:
Keith McAuliffe(1) 43 Vice President, Product Development of 2000
RLX Technologies, Inc.
Douglas C. Spreng(2) 57 President and Chief Executive Officer 2001
of MMC Networks, Inc.
- ------------------------
(1) Member of the audit committee
(2) Member of the compensation committee
DAVID A. HODGES has served as a director of Silicon Image since
February 1997. Dr. Hodges is a Professor in the Graduate School and the Daniel
M. Tellep Distinguished Professor Emeritus at the University of California at
Berkeley, where he has been a member of the faculty in the department of
Electrical Engineering and Computer Sciences since 1970. From 1990 to 1996,
Dr. Hodges served as Dean of the College of Engineering at the University of
California at Berkeley. From 1966 to 1970, Dr. Hodges worked at Bell Telephone
Laboratories, the research and development division of the American Telephone
and Telegraph Company. Dr. Hodges serves as a director of Mentor Graphics
Corporation, an electronic design automation company. Dr. Hodges holds a
Bachelor of Electrical Engineering degree from Cornell University and Master of
Science and Ph.D. degrees in Electrical Engineering from the University of
California at Berkeley.
RONALD V. SCHMIDT has served as a director of Silicon Image since
April 1997. From 1997 to February 2000, he held the position of Research Vice
President at Lucent Bell Laboratories Research Silicon Valley, a division of
Lucent Technologies, Inc., a global communications company. From 1994 to 1997,
he served as Executive Vice President and Chief Technical Officer and a director
of Bay Networks, Inc., a data networking products and services company formed by
the merger of SynOptics Communications, Inc., and Wellfleet
Communications, Inc. Dr. Schmidt was a co-founder of Synoptics in 1985, and
served as Senior Vice President, Chief Technical Officer and a director of
SynOptics until the merger. From 1981 to 1985, Dr. Schmidt was a research fellow
at Xerox Corporation's Palo Alto Research Center. Dr. Schmidt serves as a
director of several private companies. Dr. Schmidt holds Bachelor of Science,
Master of Science and Ph.D. degrees in Electrical Engineering and Computer
Science from the University of California at Berkeley.
4
DAVID D. LEE has served as Chairman of the Board and Chief Executive Officer
since our inception on January 1, 1995, and in addition served as President from
inception until October 1996 and since June 1999. Prior to founding Silicon
Image, Dr. Lee was a principal investigator at Sun Microsystems, Inc., a
computer networking company, where he led advanced development projects from
1993 to 1995, as a Visiting Scientist at Sun's Technology Development Group and
as Senior Staff Engineer at Sun Labs. Before joining Sun, Dr. Lee was a member
of the research staff at Xerox Corporation's Palo Alto Research Center, from
1989 to 1994. Dr. Lee holds Bachelor of Science, Master of Science and Ph.D.
degrees in Electrical Engineering and Computer Sciences from the University of
California at Berkeley.
ANDREW S. RAPPAPORT has served as a director of Silicon Image since
June 1997. Mr. Rappaport has been a partner of August Capital, LLC, a venture
capital firm, since July 1996. Prior to that time, Mr. Rappaport was President
of The Technology Research Group, Inc., a Boston-based strategic management
consulting firm that he founded in August 1984. Mr. Rappaport serves as a
director of several private companies. Mr. Rappaport attended Princeton
University.
KEITH MCAULIFFE has served as a director of Silicon Image since
November 2000. Mr. McAuliffe has served as Vice President, Product Development
of RLX Technologies, Inc., a server platform company since December 2000. Prior
to that time, Mr. McAuliffe served with Compaq Computer Corporation, a computer
systems company, as Vice President and General Manager of the Service Provider
and dotCOM Business Unit from December 1999 to December 2000, as Vice President
of Mainstream Servers of the Industry Standard Server Division from 1998 to
1999, as Vice President of Engineering in the Systems Division from 1997 to
1998, and as Director of Hardware Engineering in the Systems Division from 1995
to 1997. Mr. McAuliffe holds a Bachelor of Science degree in Electrical
Engineering Technology from Texas Tech University.
DOUGLAS C. SPRENG has served as a director of Silicon Image since
February 2001. Mr. Spreng has served as the President and Chief Executive
Officer of MMC Networks, Inc., a developer and supplier of network processors,
since April 1999. Prior to that time, Mr. Spreng was the Executive Vice
President of the Client Access Business Unit of 3Com Corporation, a networking
company, from June 1995 to April 1999. Mr. Spreng is also a director of Applied
Micro Circuits Corp., a supplier of processors for optical networks and parent
of MMC Networks, Inc. Mr. Spreng holds a Bachelor of Science degree in
Electrical Engineering from the Massachusetts Institute of Technology and a
Master of Business Administration degree from Harvard Business School.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINATED DIRECTORS
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
BOARD OF DIRECTORS. During fiscal year 2000, the Board met sixteen times,
including seven telephone conference meetings, and acted by written consent
once. No director attended fewer than 75% of the aggregate of the total number
of meetings of the Board (held during the period for which he was a director)
and the total number of meetings held by all committees of the Board on which
such director served (held during the period that such director served).
Standing committees of the Board include an audit committee and a
compensation committee. The Board does not have a nominating committee or
committee performing similar functions.
AUDIT COMMITTEE. The audit committee consists of Dr. Hodges and
Mr. Rappaport, as well as Mr. McAuliffe, who was appointed to the committee in
March 2001. The audit committee met four times during fiscal year 2000,
including three telephone conference meetings. The audit committee reviews our
financial reporting process, our system of internal control, the audit process
and our process for monitoring compliance with laws and regulations. The audit
committee also reviews the
5
performance of our external accountants, recommends to the Board the appointment
or discharge of our external accountants and confirms the independence of our
external accountants.
COMPENSATION COMMITTEE. The compensation committee consists of
Mr. Rappaport and Dr. Schmidt, as well as Mr. Spreng, who was appointed to the
committee in February 2001. The compensation committee met once during fiscal
year 2000 and acted by written consent three times. The compensation committee
reviews and recommends to the Board of Directors the compensation and benefits
of all officers, directors and consultants of Silicon Image and reviews general
policy relating to compensation and benefits. Except for grants under our 1999
Equity Incentive Plan made by the compensation committee by written consent on
February 29, 2000, April 14, 2000 and at a meeting on November 16, 2000, the
Board of Directors has continued to administer the issuance of stock options and
other awards under our 1999 Equity Incentive Plan and our 1999 Employee Stock
Purchase Plan. The Board of Directors has also delegated to Mr. Lee the limited
authority to grant stock options to non-officer employees.
DIRECTOR COMPENSATION
Directors of Silicon Image do not receive cash compensation for their
services as directors, but are reimbursed for their reasonable and necessary
expenses for attending board and board committee meetings. Except for
Messrs. McAuliffe and Spreng, who have not served continuously on the board or a
board committee for at least one year, all board members are eligible to receive
stock options pursuant to the automatic option grant program in effect under our
1999 Equity Incentive Plan.
Immediately following each annual meeting of our stockholders, each director
who is not an employee and whose direct pecuniary interest in our common stock
is less than 5% will automatically be granted an option under our 1999 Equity
Incentive Plan to purchase 20,000 shares if the director has served continuously
as a member of the board of directors for a period of at least one year, an
additional option for 10,000 shares if the director has served continuously on
the audit committee for a period of at least one year, and an additional option
for 10,000 shares if the director has served continuously on the compensation
committee for a period of at least one year. Each option will have an exercise
price equal to the fair market value of our common stock on the date of grant.
These annual grants will vest monthly over a 24 month period, subject to
acceleration of vesting upon a change of control of Silicon Image, and will have
a five-year term, but will generally terminate three months following the date
the option-holder ceases to be a director or consultant.
On May 23, 2000, following the 2000 annual meeting or our stockholders, the
following option grants were made to our directors at that time pursuant to the
automatic annual grant program in effect at that time: Herbert Chang--an option
for 20,000 shares and an option for 10,000 shares; Andrew Rappaport--an option
for 20,000 shares and two options for 10,000 shares each; David Hodges--an
option for 20,000 shares and an option for 10,000 shares; and Ronald Schmidt--an
option for 20,000 shares and an option for 10,000 shares. Each of these options
has an exercise price of $19.50, the closing price per share of our common stock
on the Nasdaq National Market on that date, has a two year term, and was fully
vested upon grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of Silicon Image's board of directors is
currently comprised of Messrs. Rappaport and Spreng and Dr. Schmidt. None of
these individuals has at any time been an officer or employee of Silicon Image.
None of our executive officers serves as a member of the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of our board of directors or compensation committee.
6
PROPOSAL NO. 2--AMENDMENT OF CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
On March 19, 2001, the Board of Directors of Silicon Image approved an
amendment to Silicon Image's Second Amended and Restated Certificate of
Incorporation, subject to stockholder approval, to increase the authorized
number of shares of common stock of Silicon Image from 75,000,000 shares, $0.001
par value per share, to 150,000,000 shares, $0.001 par value per share. The
authorized number of shares of preferred stock will remain unchanged at
5,000,000. If the stockholders approve the proposed amendment, Silicon Image
will file with the Delaware Secretary of State a certificate of amendment
reflecting the increase in the authorized number of shares of common stock. On
February 28, 2001, 54,189,762 shares of Silicon Image common stock were issued
and outstanding, 9,621,792 shares of common stock were reserved for issuance
upon exercise of outstanding stock options, 3,758,866 shares were reserved for
future grants under Silicon Image's existing equity incentive plan and employee
stock purchase plan, and no shares of preferred stock were issued or
outstanding.
The Board believes that authorizing additional shares of common stock is
essential to provide Silicon Image with the flexibility it needs to meet
business needs and to take advantage of opportunities as they arise. The
proposed increase in the number of authorized shares of common stock would
result in additional shares being available for stock splits and stock
dividends, stock issuances for other corporate purposes, such as acquisitions of
businesses or assets, increases in shares reserved for issuance pursuant to
employee benefit plans, and sales of stock or convertible securities for capital
raising purposes. Silicon Image currently has no specific plans, arrangements or
understandings with respect to the issuance of these additional shares.
If the stockholders approve the proposed amendment to the certificate of
incorporation, the Board may cause the issuance of additional shares of common
stock without further stockholder approval, unless stockholder approval is
otherwise required by law or the rules of any securities exchange on which the
common stock is then listed. The additional shares would have rights identical
to the currently outstanding common stock and no other change in the rights of
stockholders is proposed. Current holders of common stock have no preemptive or
similar rights, which means that they do not have a prior right to purchase any
new issue of common stock in order to maintain their proportionate ownership
thereof. The issuance of additional shares of common stock could decrease the
proportionate equity interest and voting power of Silicon Image's current
stockholders and, depending on the price paid for the additional shares, could
result in dilution in the book value of shares held by the current stockholders.
The proposed amendment could have an anti-takeover effect, although that is
not Silicon Image's intention. For example, it may be possible for the Board to
delay or impede a takeover or transfer of control of Silicon Image by causing
additional authorized shares to be issued to holders who might side with the
Board in opposing a takeover bid. The amendment, therefore, may have the effect
of discouraging unsolicited takeover attempts. By potentially discouraging the
initiation of takeover attempts, the proposed amendment may limit the
opportunity of stockholders to dispose of their shares at the higher price
generally available in takeover attempts or that may be available under a merger
proposal. However, our Board is not aware of any attempt or proposal to take
over or transfer control of Silicon Image, and Silicon Image is not proposing
this amendment with the intent that it be used as a type of anti-takeover
device.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
7
PROPOSAL NO. 3--RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of Silicon Image for the year
ending December 31, 2001, and recommends that the stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting, will have the opportunity to make a statement at the Annual Meeting if
they desire to do so, and will be available to respond to appropriate questions.
For the fiscal year ended December 31, 2000, PricewaterhouseCoopers LLP,
Silicon Image's independent accountant, billed the approximate fees set forth
below:
Audit Fees.................................................. $137,000
Financial Information Systems Design and Implementation
Fees...................................................... --
All Other Fees.............................................. 176,200
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as to the beneficial ownership of
our common stock as of February 28, 2001 by:
- each stockholder known by us to be the beneficial owner of more than 5% of
our common stock;
- each of our directors;
- our chief executive officer and the four other most highly compensated
executive officers who were executive officers as of December 31, 2000 and
earned more than $100,000 in 2000; and
- all current directors and executive officers as a group.
The percentage ownership is based on 54,189,762 shares of common stock
outstanding as of February 28, 2001. Shares of common stock that are subject to
options or other convertible securities currently exercisable or exercisable
within 60 days of February 28, 2001, are deemed outstanding for the purposes of
computing the percentage ownership of the person holding these options or
convertible securities, but are not deemed outstanding for computing the
percentage ownership of any other person. Beneficial ownership is determined
under the rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. To our knowledge, unless
otherwise indicated below, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. Unless otherwise indicated,
the address for each listed stockholder is c/o Silicon Image, Inc., 1060 East
Arques Ave., Sunnyvale, California 94086.
SHARES BENEFICIALLY OWNED
-----------------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ------------------------ ---------------- ----------------
PRIMECAP Management Company(1).............................. 4,111,000 7.6%
Sang-Chul Han(2)............................................ 4,007,650 7.4
Vanguard Horizon Funds--Vanguard Capital Opportunity
Fund(3)................................................... 3,304,000 6.1
David D. Lee(4)............................................. 3,231,450 5.9
Steve Tirado(5)............................................. 798,361 1.5
Jalil Shaikh(6)............................................. 421,108 *
Parviz Khodi(7)............................................. 334,560 *
Daniel K. Atler(8).......................................... 326,098 *
Ronald V. Schmidt(9)........................................ 302,136 *
Andrew Rappaport(10)........................................ 294,444 *
David A. Hodges(11)......................................... 178,600 *
Keith McAuliffe(12)......................................... 6,167 *
Douglas C. Spreng(13)....................................... 1,667 *
All current executive officers and directors as a group
(13 persons)(14).......................................... 6,489,505 11.8
- ------------------------
* Less than 1%.
(1) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission on March 9, 2001 which indicates sole investment power over
these shares. Includes 3,304,000 shares reported as beneficially owned by
Vanguard Horizon Funds--Vanguard Capital Opportunity Fund on a
Schedule 13G (see footnote (3) below). PRIMECAP Management Company acts as
investment advisor to Vanguard Horizon Funds--Vanguard Capital Opportunity
Fund. The address of PRIMECAP Management Company is 225 South Lake Avenue
#400, Pasadena, CA 91101.
9
(2) Based upon a Schedule 13G filed with the Securities and Exchange Commission
on February 13, 2001 which indicates sole voting and investment power over
these shares. Mr. Han's address is c/o Kang Nam Cable, Ryukyung Building
239-1, Bonhyun-dong, Kangnam-ku, Seoul, Korea 135-010.
(3) Based upon a Schedule 13G filed with the Securities and Exchange Commission
on February 13, 2001 which indicates sole voting power and shared
investment power over these shares. The address of Vanguard Horizon
Funds--Vanguard Capital Opportunity Fund is P.O. Box 2600, Valley Forge, PA
19482.
(4) Includes 2,890,350 shares held by Mr. Lee and Joanne W. Lee, trustees of
the David D. Lee and Joanne W. Lee Trust Agreement dated March 15, 2000.
Includes 208,850 shares subject to options held by Mr. Lee that are
exercisable within 60 days of February 28, 2001. Includes 125,000 shares
held by Mr. Lee subject to our right of repurchase as of February 28, 2001.
(5) Includes 1,000 shares held by the Tirado Family Trust, of which Mr. Tirado
is a trustee. Includes 3,767 shares subject to options held by Mr. Tirado
that are exercisable within 60 days of February 28, 2001. Includes 548,537
shares held by Mr. Tirado subject to our right of repurchase as of
February 28, 2001.
(6) Includes 16,000 shares held by Mr. Shaikh as custodian for his minor
children. Includes 10,944 shares subject to options held by Mr. Shaikh that
are exercisable within 60 days of February 28, 2001. Includes 92,000 shares
held by Mr. Shaikh subject to our right of repurchase as of February 28,
2001.
(7) Includes 18,787 shares subject to options held by Mr. Khodi that are
exercisable within 60 days of February 28, 2001. Includes 170,000 shares
held by Mr. Khodi subject to our right of repurchase as of February 28,
2001.
(8) Includes 8,650 shares subject to options held by Mr. Atler that are
exercisable within 60 days of February 28, 2001. Includes 195,000 shares
held by Mr. Atler subject to our right of repurchase as of February 28,
2001.
(9) Includes 190,000 shares subject to options held by Mr. Schmidt that are
exercisable within 60 days of February 28, 2001, of which 20,000 shares
would be subject to our right of repurchase as of April 29, 2001.
(10) Includes 8,000 shares held by a trust of which Mr. Rappaport is a trustee.
Includes 40,000 shares subject to options held by Mr. Rappaport that are
exercisable within 60 days of February 28, 2001. Mr. Rappaport's address
is c/o August Capital, L.P., 2480 Sand Hill Road, Suite 101, Menlo Park,
CA 94025.
(11) Includes 148,600 shares held by the Hodges Family Trust 5/16/90, of which
Mr. Hodges and Susan A. Hodges are trustees. Includes 30,000 shares
subject to options held by Mr. Hodges that are exercisable within 60 days
of February 28, 2001. Includes 40,000 shares held by the trust subject to
our right of repurchase as of February 28, 2001.
(12) Includes 4,167 shares subject to an option held by Mr. McAuliffe that is
exercisable within 60 days of February 28, 2001. Mr. McAuliffe's address
is c/o RLX Technologies, Inc., 25231 Grogan's Mill Rd., Suite 600, The
Woodlands, TX 77380.
(13) Includes 1,667 shares subject to an option held by Mr. Spreng that is
exercisable within 60 days of February 28, 2001. Mr. Spreng's address is
c/o MMC Networks, Inc., 1144 E. Arques Ave., Sunnyvale, CA 94085.
(14) Includes 1,039,200 shares subject to options that are exercisable within
60 days of February 28, 2001, of which 520,000 shares would be subject to
our right of repurchase as of April 29, 2001. Includes 1,170,537 shares
subject to our right of repurchase as of February 28, 2001.
10
The foregoing table does not include the following options granted under the
1999 Equity Incentive Plan by the Compensation Committee on January 2, 2001 to
our executive officers: David D. Lee--37,931 shares; Steve Tirado--31,391
shares; Daniel K. Atler--18,497 shares; Badar Baqai--22,989 shares; Jalil
Shaikh--18,767 shares; Parviz Khodi--23,868 shares; Michael Kelley--17,011
shares. Each option granted has a ten year term and an exercise price per share
of $5.4375, the opening price of our common stock on the Nasdaq National Market
on January 2, 2001 and will become vested and exercisable upon our satisfaction
of financial performance criteria for each quarter of the 2001 fiscal year. For
each quarter, our 2001 operating plan specifies a low and high target financial
performance number and the option will vest as to 12.5% of the shares if we
achieve the low target number, as to 25% of the shares if we achieve the high
target number, and as to between 12.5% and 25% of the shares if our performance
is between the low and high target numbers, with the exact percentage in this
latter case to be determined in the discretion of the Board or Compensation
Committee. However, even if we do not satisfy the specified financial
performance criteria, each option granted will become vested with respect to 16%
of the unvested shares on January 2, 2003, an additional 1.417% of the unvested
shares each of the 24 months thereafter, and an additional 4.167% of the
unvested shares each of the 12 months thereafter. In the event of a change in
control of Silicon Image, then six months afterwards, each option granted will
automatically become vested with respect to 25% of the shares for each set of
quarterly financial performance criteria which were to be achieved after the
change in control, provided the optionee either continues to provide services to
Silicon Image or its successor or has not been terminated for cause. Should the
Board or Compensation Committee determine that we have achieved the financial
performance criteria for the first quarter of 2001 prior to April 29, 2001, then
for the officers listed in the foregoing table, an additional 12.5% to 25% of
the share numbers set forth in this paragraph should be deemed outstanding for
purposes of calculating the ownership and percentage ownership figures in the
table.
In March 2001, the Board of Directors approved an option repricing program
for our executive officers which allowed them to exchange their stock options
with exercise prices greater than $5.625 for new options issued on April 4, 2001
with an exercise price of $5.625. The vesting schedule for the new options was
restarted, with the new options vesting as to 12.5% of the shares after six
months and 2.083% of the shares each of the 42 months thereafter. The foregoing
table reflects the exchange of options by executives made pursuant to this
program for purposes of calculating the number of shares subject to options
exercisable within 60 days of February 28, 2001, notwithstanding the fact that
the exchange took place after February 28, 2001.
11
EXECUTIVE OFFICERS
The following sets forth certain information with regard to executive
officers of Silicon Image, including their ages as of February 28, 2001:
NAME AGE POSITION
- ---- -------- --------------------------------------------------------
David D. Lee......................... 44 Chairman of the Board, Chief Executive Officer and
President
Steve Tirado......................... 46 Chief Operating Officer
Daniel K. Atler...................... 41 Vice President, Finance and Administration and Chief
Financial Officer
Badar Baqai.......................... 52 Executive Vice President, Engineering
Jalil Shaikh......................... 46 Executive Vice President, Operations
Jaime Garcia-Meza.................... 38 Vice President, Worldwide Sales
Parviz Khodi......................... 41 Vice President, Marketing
Michael Kelley....................... 53 Vice President, Business Development
DAVID D. LEE has served as Silicon Image's Chairman of the Board and Chief
Executive Officer since our inception on January 1, 1995, and in addition served
as President from inception until October 1996 and since June 1999. Prior to
founding Silicon Image, Dr. Lee was a principal investigator at Sun
Microsystems, Inc., a computer networking company, where he led advanced
development projects from 1993 to 1995, as a Visiting Scientist at Sun's
Technology Development Group and as Senior Staff Engineer at Sun Labs. Before
joining Sun, Dr. Lee was a member of the research staff at Xerox Corporation's
Palo Alto Research Center, from 1989 to 1994. Dr. Lee holds Bachelor of Science,
Master of Science and Ph.D. degrees in Electrical Engineering and Computer
Sciences from the University of California at Berkeley.
STEVE TIRADO has served as Silicon Image's Chief Operating Officer since
November 2000 and previously served as Silicon Image's Executive Vice President
of Marketing and Business Development from August 1999 to November 2000. From
April 1986 to July 1999, Mr. Tirado held various marketing and management
positions at Sun Microsystems, Inc., a computer networking company, serving most
recently as Vice President of Marketing and Business Development for the NC
Systems Group. From 1985 to 1986, Mr. Tirado was President of Tirado, Sorrentino
Associates, a consulting firm. From 1984 to 1985, Mr. Tirado held the position
of Marketing Administration Manager at Qualogy, a mass storage disk drive and
controller company. From 1976 to 1984, Mr. Tirado was a public program
administrator and policy analyst within various government agencies. Mr. Tirado
holds a Bachelor of Arts degree in Psychology from the University of California
at Santa Barbara, a Master of Arts Degree in Organizational Planning and
Consultation from Boston University and a Master of Business Administration
degree from the University of California at Berkeley.
DANIEL K. ATLER has served as Silicon Image's Chief Financial Officer and
Vice President, Finance and Administration since June 1998. Mr. Atler served as
Chief Financial Officer and Vice President of Finance and Administration for
Wireless Access, Inc., a two-way wireless communication systems company, from
January 1995 to November 1997, when Wireless Access, Inc., was acquired by
Glenayre Technologies, Inc., a wireless personal communication systems company.
After the merger, Mr. Atler continued in the same position at Wireless Access
Group, a division of Glenayre Technologies, Inc., from November 1997 to
June 1998. From July 1992 to December 1994, Mr. Atler served as Corporate
Controller for Global Village Communication, Inc., a designer, developer and
marketer of communication products for personal computers. From July 1982 to
July 1992, Mr. Atler was with Ernst & Young, a financial accounting firm, most
recently as a Senior Manager. Mr. Atler holds a Bachelor of Science degree in
Business Administration from Colorado State University.
12
BADAR BAQAI has served as Silicon Image's Executive Vice President,
Engineering since November 2000. Prior to that time, Mr. Baqai served with
Fujitsu Microelectronics, Inc., a supplier of semiconductors and electronics, as
Executive Vice President of the Systems Solutions Group from September 1998 to
November 2000, as Vice President of the ASIC business unit of the Systems
Solutions Group from September 1997 to September 1998, and as Vice President of
Engineering of the Processor Product Group from September 1994 to
September 1997. Mr. Baqai holds a Master of Science degree in electrical
engineering from the University of California at Los Angeles and a Master of
Business Administration degree from the University of Phoenix.
JALIL SHAIKH has served as Silicon Image's Executive Vice President,
Operations since May 2000 and previously served as Silicon Image's Vice
President, Operations from September 1996 to May 2000. From August 1994 to
August 1996, he served as Director of Engineering Operations for graphics and
multimedia products at Trident Microsystems, a designer, developer and marketer
of digital media. From July 1991 to August 1994, he served as Product
Engineering Manager at Micro Linear Corporation, an analog and mixed signal
semiconductor company. Mr. Shaikh holds a Master of Science degree in Electrical
Engineering from Rutgers, The State University of New Jersey and a Master of
Business Administration degree from the University of Phoenix.
JAIME GARCIA-MEZA has served as Silicon Image's Vice President, Worldwide
Sales since April 2001. From January 2001 to March 2001, he was a general
partner at The Corporate Finance Group, a venture capital firm. From August 1999
to December 2000, he served as Venture Director at Index Ventures Management, a
venture capital firm. Prior to that time, he served with Sun Microsystems Inc.,
a computer networking company, as Director, Integrated Operations and Business
Support Systems Solutions, Worldwide Telecommunications from July 1998 to July
1999, as Director, Telecommunications Industry Sales Development, International
from July 1997 to June 1998, as Director, Telecommunications Industry Sales
Development, Europe from April 1996 to June 1997, and as Regional Sales Manager,
Mexico from October 1992 to March 1996. Mr. Garcia-Meza holds Bachelor of
Science and Master of Science degrees in electrical engineering from the
University of Kansas.
PARVIZ KHODI has served as Silicon Image's Vice President, Marketing since
April 2001 and previously served as Silicon Image's Vice President, Worldwide
Sales from August 1998 to April 2001. Mr. Khodi joined Silicon Image in
July 1998 as Director of Asia Pacific Sales. From November 1987 to July 1998,
Mr. Khodi worked at Chips and Technologies, Inc., a maker of semiconductor chips
principally for the graphics market, where he held various sales management
positions, most recently Director, Asia Pacific Sales. From 1986 to 1987,
Mr. Khodi was responsible for worldwide field applications at Touch
Communications, Inc., a client/server software company. From 1984 to 1986,
Mr. Khodi held engineering positions in the microprocessor and microcontroller
divisions of Intel corporation, a computer processor company. Mr. Khodi holds
Bachelor of Science and Master of Science degrees in electrical engineering from
the University of Kansas.
MICHAEL KELLEY has served as Silicon Image's Vice President, Business
Development since April 2001 and previously served as Silicon Image's Vice
President, Marketing from November 2000 to April 2001. Previously, Mr. Kelley
served as senior director of marketing for Silicon Image from September 1999 to
November 2000. From July 1996 to June 1999, Mr. Kelley served as president and
general manager of Argentina, Paraguay and Uruguay operations for Sun
Microsystems, Inc., a computer networking company, and from November 1992 to
June 1996, Mr. Kelley served as regional director, Interamerica for Sun
Microsystems, Inc. From 1977 to 1989, Mr. Kelley held various marketing and
management positions at Wang Laboratories, Inc., a computer networking company,
serving most recently as Area Director, Latin America. Mr. Kelley holds Bachelor
of Science degrees in mathematics, physics and chemistry from Andrews University
and a Master of Science degree in nuclear chemistry from the University of
California at Berkeley.
13
EXECUTIVE COMPENSATION
OFFICER COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to Silicon Image in all capacities during the years
ended December 31, 1998, 1999 and 2000 by (i) our chief executive officer and
(ii) the four other most highly compensated executive officers other than the
chief executive officer who were serving as executive officers as of
December 31, 2000 and whose salary and bonus for 2000 exceeded $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
---------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) BONUS ($) OPTIONS (#)
- ---------------------------- -------- ---------- --------- ---------------------
David D. Lee(1)...................................... 2000 $256,248 $42,740 --
Chairman of the Board and Chief Executive Officer 1999 189,446 2,178 1,000,000
1998 144,473 -- --
Steve Tirado(2)...................................... 2000 233,923 50,000 120,000
Chief Operating Officer 1999 93,750 -- --
Daniel K. Atler...................................... 2000 183,030 33,188 60,000
Vice President, Finance and Administration and 1999 166,320 -- 60,000
Chief Financial Officer 1998 82,245 -- 340,000
Jalil Shaikh......................................... 2000 184,424 32,102 140,000
Executive Vice President, Operations 1999 158,257 -- 80,000
1998 133,289 -- 120,000
Parviz Khodi(3)...................................... 2000 245,143 37,565 60,000
Vice President, Worldwide Sales 1999 236,642 10,000 60,000
1998 83,211 10,000 240,000
- ------------------------
(1) Silicon Image authorized the sale of 300,000 shares of common stock to
Dr. Lee in October 1998, and the sale was completed in January 1999. The
price per share was $0.175, which the board of directors determined was the
fair market value of our common stock on the date of sale. We have a right
to repurchase these shares upon termination of employment, which right
lapses over a four-year period.
(2) Mr. Tirado joined Silicon Image in June 1999. Silicon Image authorized the
sale of 940,350 shares of common stock to Mr. Tirado in June 1999, and the
sale was completed in June 1999. The price per share was $1.00, which the
board of directors determined was the fair market value of our common stock
on the date of sale. We have a right to repurchase these shares upon
termination of employment, which right lapses over a four-year period.
(3) Salary figures include sales commissions of $18,701 in 1998 and $68,672 in
1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information about each stock option granted during
2000 to each of the Named Executive Officers. In accordance with the rules of
the Securities and Exchange Commission, the table sets forth the hypothetical
gains or "option spreads" that would exist for the options at the end of their
respective ten-year terms. These gains are based on assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted to the end of the option terms. The 5% and 10% assumed annual rates of
stock price appreciation are mandated by the rules of
14
the Securities and Exchange Commission and do not represent our estimate or
projection of future common stock prices.
All options included in the following table are either incentive stock
options or nonqualified stock options. The options generally expire on the
earlier of ten years from the date of grant or three months after termination of
employment. The percentage numbers are based on an aggregate of 6,327,806
options granted to our employees during fiscal 2000.
POTENTIAL REALIZABLE
VALUE AT
PERCENTAGE ASSUMED ANNUAL RATES
NUMBER OF OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE PER OPTION TERM
OPTIONS EMPLOYEES SHARE EXPIRATION -----------------------
NAME GRANTED (#) IN 2000 ($) DATE 5% 10%
- ---- ----------- ---------- --------- ---------- ---------- ----------
David D. Lee....................... -- --% $ -- -- $ -- $ --
Steve Tirado....................... 120,000 1.9 27.125 9/27/10 2,047,052 5,187,632
Daniel K. Atler.................... 60,000 0.9 27.125 9/27/10 1,023,526 2,593,816
Jalil Shaikh....................... 80,000 1.3 18.375 5/24/10 924,475 2,342,801
60,000 0.9 27.125 9/27/10 1,023,526 2,593,816
Parviz Khodi....................... 60,000 0.9 27.125 9/27/10 1,023,526 2,593,816
The options granted to Messrs. Tirado, Atler, Shaikh and Khodi were granted
under our 1999 Equity Incentive Plan and the exercise price of each option
granted equaled the closing price per share of our common stock on the Nasdaq
National Market on the date of grant. Each of the options granted to
Messrs. Tirado, Atler and Khodi and the 60,000 share option granted to
Mr. Shaikh becomes exercisable with respect to 16% of the shares on
September 28, 2001, 1.417% of the shares each of the 24 months thereafter, and
4.167% of the shares each of the 12 months thereafter. The 80,000 share option
granted to Mr. Shaikh becomes exercisable with respect to 25% of the shares on
May 25, 2001 and 2.083% of the shares each of the 36 months thereafter.
AGGREGATED OPTION EXERCISES IN 2000 AND YEAR END OPTION VALUES
The following table sets forth the number of shares acquired upon the
exercise of stock options during 2000 and the number of shares covered by both
exercisable and unexercisable stock options held by each of the Named Executive
Officers at December 31, 2000. Also reported are values of unexercised
"in-the-money" options, which represent the positive spread between the
respective exercise prices of outstanding stock options and $5.4375, the closing
price per share of our common stock on December 29, 2000 on the Nasdaq National
Market.
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
ACQUIRED ON VALUE ------------------------------ ---------------------------
NAME EXERCISE (#)(1) REALIZED ($) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ -------------- ------------- ----------- -------------
David D. Lee................ -- $ -- 270,833 729,167 $ -- $ --
Steve Tirado................ -- -- -- 120,000 -- --
Daniel K. Atler............. 9,600 280,200 3,400 107,000 8,713 120,438
Jalil Shaikh................ 12,800 234,800 4,532 202,668 11,613 160,587
Parviz Khodi................ -- -- 13,000 107,000 33,313 120,438
- ------------------------
(1) Of these shares, the following numbers were vested as of December 31, 2000:
Daniel K. Atler--9,600 shares; Jalil Shaikh--12,800 shares.
(2) Of the shares issuable upon exercise of these options, the following numbers
were vested as of December 31, 2000: David D. Lee--270,833 shares; Daniel K.
Atler--3,400 shares; Jalil Shaikh--4,532 shares; Parviz Khodi--13,000
shares.
15
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Silicon Image entered into a severance agreement with David Lee on
April 22, 1997, amended and restated this agreement on August 15, 1997, amended
this agreement on January 24, 2000, and amended this agreement again on
March 29, 2001. The agreement provides that if, on or before December 31, 2006,
Dr. Lee is terminated by Silicon Image other than for cause, or if Dr. Lee
resigns for good reason, Dr. Lee will continue to receive salary at his current
rate for six months and vesting of his stock and options will accelerate,
subject to limitations in the event of specified types of acquisitions of
Silicon Image. In addition, if Dr. Lee is terminated for cause, or resigns
without good reason, then Silicon Image may elect to continue his salary for six
months. During any period in which Dr. Lee is receiving post-termination salary
pursuant to the severance agreement, he will be available to consult with
Silicon Image from time to time as Silicon Image may request, and he may not
compete with Silicon Image in defined geographical areas.
Silicon Image entered into an employment agreement with Daniel Atler on
June 15, 1998. In addition to describing Mr. Atler's initial title and
compensation, the agreement provides that Mr. Atler will continue to receive
salary at his current rate and benefits for six months in the event that his
employment terminates other than for cause. The agreement further provides that
vesting of Mr. Atler's stock and options will accelerate in part in the event of
a change in control of Silicon Image, subject to specific limitations. If
Mr. Atler's employment continues after a change in control of Silicon Image, his
options and restricted stock grants will continue to vest at an accelerated
rate.
Silicon Image entered into an employment agreement with Parviz Khodi on
June 10, 1999. In addition to describing Mr. Khodi's title and compensation, the
agreement provides for continuation of salary and commission for six months in
the event that there is a change in control of Silicon Image and Silicon Image
terminates Mr. Khodi's employment other than for cause, disability or death. The
agreement also provides that Mr. Khodi may purchase up to $10,000 of Silicon
Image's common stock at the end of each of eight fiscal quarters, commencing
with the fourth quarter of 1998, at the then current fair market value as
determined by the board of directors. Mr. Khodi has exercised this right by
purchasing a total of $40,000 of Silicon Image's stock. This stock purchase
opportunity expired upon the closing of Silicon Image's initial public offering
in October 1999.
Silicon Image entered into a letter agreement with Steve Tirado in
June 1999. The agreement sets forth Mr. Tirado's title and provides for an
initial salary of $225,000 per year and a bonus of up to $50,000 in the first
year. Pursuant to the agreement, Silicon Image sold Mr. Tirado 940,350 shares of
common stock at the price of $1.00 per share. All of the shares initially are
subject to our right to repurchase them at cost if Mr. Tirado's employment
terminates, and this right lapses over a four-year period. The agreement
provides that Mr. Tirado will continue to receive salary at his current rate and
benefits for six months in the event his employment terminates other than for
cause. In November 1999, Silicon Image entered into an additional letter
agreement with Mr. Tirado that provides that instead of the bonus provided for
under the initial letter agreement, Mr. Tirado will be eligible for a bonus
determined after June 30, 2000 equal to the greater of the amount due to him
under the Executive Bonus Plan adopted by Silicon Image or $45,833.
In November 1999, the compensation committee adopted an executive bonus plan
for the period from October 1, 1999 to June 30, 2000. David Lee, Daniel Atler,
Parviz Khodi, Jalil Shaikh and Steve Tirado were eligible under this plan to
receive a cash bonus based on a percentage of their respective base salaries
earned during this period. The applicable percentage ranged from zero to 65% and
was a function of Silicon Image's revenue and income from operations during this
period. The percentage for David Lee, as president of Silicon Image, was 150% of
the percentage for the other officers. In July 2000, the Board of Directors
adopted an executive bonus plan for the period from July 1, 2000 to
December 31, 2000. David Lee, Daniel Atler, Parviz Khodi, Jalil Shaikh and Steve
Tirado were eligible under this plan to receive a cash bonus based on a
percentage of their respective base salaries earned
16
during this period. The applicable percentage ranged from zero to 65% and was a
function of Silicon Image's revenue and income from operations during this
period. The percentage for David Lee, as president of Silicon Image, was 150% of
the percentage for the other officers.
REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee is required by the Securities and
Exchange Commission and, in accordance with the Commission's rules, will not be
deemed to be part of or incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that Silicon Image specifically
incorporates this information by reference, and will not otherwise be deemed
"soliciting material" or "filed" under either the Securities Act of 1933 or the
Securities Exchange Act of 1934.
The Compensation Committee of the Board of Directors (the "Committee"), in
conjunction with the members of the Board of Directors other than David Lee,
sets the base salaries of Silicon Image's executive officers, including the
Chief Executive Officer ("CEO"), and approves bonus programs for the executive
officers. Although the Committee has from time to time made stock option grants
to Silicon Image's employees, including its executive officers, the Board of
Directors has continued to administer the issuance of stock options and other
awards under the 1999 Equity Incentive Plan. The Committee has complete
discretion in establishing the terms of stock option grants it makes. The
Committee is comprised of three independent non-employee directors whose names
appear below. None of these directors has interlocking relationships as defined
by the Commission. The following is a summary of policies of Silicon Image that
affect the compensation paid to executive officers, as reflected in the tables
and text set forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY
Silicon Image's overall policy is to offer its executive officers cash-based
and equity-based compensation opportunities based on their personal performance
and the financial performance of Silicon Image and their contribution to that
performance. The principal factors taken into account in establishing each
executive's compensation package are summarized below. Additional factors may be
taken into account to a lesser degree and the relative weight given to each
factor varies with each individual in the discretion of the Committee. The
Committee may in its discretion apply entirely different factors, such as
different measures of financial performance, for future years.
CASH-BASED COMPENSATION. Silicon Image sets base salaries for executive
officers on the basis of personal performance, the financial performance of
Silicon Image and internal and industry comparability considerations. In
November 1999, the Committee adopted an executive bonus plan for the period from
October 1, 1999 to June 30, 2000. In July 2000, the Board of Directors adopted
an executive bonus plan for the period from July 1, 2000 to December 31, 2000.
Under each bonus plan, each of Silicon Image's executive officers is eligible to
receive a cash bonus based on a percentage of his base salary earned during
these periods. The applicable percentage is a function of Silicon Image's
revenue and income from operations during these periods.
LONG-TERM EQUITY-BASED COMPENSATION. Long-term equity incentives for
executive officers are effected through the granting of stock options. The
Committee believes that equity-based compensation in the form of stock options
links the interests of management and stockholders by focusing management on
increasing stockholder value. Stock options generally have value for the
executive only if the price of Silicon Image's common stock increases above the
exercise price determined on the option grant date and the executive remains
employed by Silicon Image for the period required for the shares to vest. Stock
options typically have been granted to executive officers when the executive
first joins Silicon Image, in connection with a significant change in
responsibilities, to achieve equity within
17
a peer group, and to provide greater incentives to continue employment with
Silicon Image and to strive to increase the value of Silicon Image's common
stock. The Board of Directors or Committee may, however, grant stock options to
executives for other reasons. The number of shares subject to each stock option
granted is within the discretion of the Board of Directors or Committee and may
be based on the executive's level of responsibility, anticipated future
contribution and ability to impact corporate results, past performance,
consistency within the executive's peer group, the number of existing option
shares held by the executive at the time of the grant, or other considerations.
The relative weight given to these factors varies with each executive in the
sole discretion of the Board of Directors or Committee.
2000 EXECUTIVE COMPENSATION
CASH-BASED COMPENSATION. The Committee was formed in October 1998. In
October 1999, the Committee determined the base salaries of Silicon Image's CEO
and vice presidents, effective as of October 1999. David Lee, Silicon Image's
CEO, made recommendations with respect to the base salaries of the vice
presidents after review of a salary survey prepared by the Radford Division of
Aon Consulting, which provides compensation and benefits surveys to
high-technology companies. In May 2000, the Board of Directors increased Jalil
Shaikh's annual base salary by $20,000 to $188,000 in connection with his
promotion to Executive Vice President, Operations. In September 2000, the Board
of Directors increased David Lee's annual base salary by $25,000 to $275,000.
LONG-TERM EQUITY-BASED COMPENSATION. In September 2000, the Board of
Directors granted stock options to four Vice Presidents, in order to aid in the
retention of these executive officers and align their interests with those of
the stockholders. In May 2000, the Board of Directors granted a stock option to
Jalil Shaikh in connection with his promotion to Executive Vice President,
Operations. In November 2000, the Board of Directors granted a stock option to
Michael Kelley in connection with his promotion to Vice President, Marketing. In
November 2000, the Committee granted a stock option to Badar Baqai in connection
with his hiring as Executive Vice President, Engineering. These grants were also
made in order to aid in the retention of these executive officers and align
their interests with those of the stockholders.
COMPANY PERFORMANCE AND CEO COMPENSATION. In October 1999, the Committee
set the annual base salary for David Lee at $250,000 based on the criteria for
cash-based compensation set forth above and taking into account the increases in
base salaries awarded to Silicon Image's vice presidents at that time. In
September 2000, the Board of Directors increased David Lee's annual base salary
by $25,000 to $275,000 based on the criteria for cash-based compensation set
forth above. In 2000, Mr. Lee also received a bonus of $42,740 pursuant to
Silicon Image's executive bonus plan for the period from October 1, 1999 to
June 30, 2000 described above.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE. Internal
Revenue Code Section 162(m) limits Silicon Image's ability to deduct
compensation in excess of $1,000,000 in any taxable year to the individual who
is the CEO at the end of the taxable year and the four other highest compensated
officers of Silicon Image during the taxable year. Cash compensation for 2000
for any individual was not in excess of $1,000,000 and Silicon Image does not
expect cash compensation for 2001 to be in excess of $1,000,000 for any
individual.
OPTION REPRICING PROGRAMS
Equity incentive compensation is a critical compensation issue in high
technology companies where competition for talented personnel is intense. In
December 2000, the Board of Directors noted that a majority of the stock options
issued to new employees after Silicon Image's initial public offering had
exercise prices significantly higher than the market price of Silicon Image's
stock at that time. The Board believed that the outstanding options with
exercise prices above the market price were no longer
18
an effective tool for incentivizing and retaining employees. Accordingly, the
Board approved a repricing program for non-executive employees which allowed
them to exchange each of their options with an exercise price greater than
$5.625, the closing price of Silicon Image's stock on December 22, 2000, for a
new option granted on that date with an exercise price of $5.625. Subject to
very limited exceptions, the vesting schedule for the new options was restarted,
with the new options vesting as to 12.5% of the shares after six months and
2.083% of the shares each of the 42 months thereafter. Accordingly, employees
who elected to receive the new options would be required to work for an
additional four years before the new options were fully vested. In addition, new
options had a term of six years instead of the customary ten-year term for
options granted prior to that time.
In March 2001, the Board considered the need to incentivize and retain key
executives, several of whom had been issued stock options with exercise prices
significantly higher than the market price of Silicon Image's stock at that
time. The Board believed that the outstanding options with exercise prices above
the market price were no longer an effective tool for incentivizing and
retaining these executives. Accordingly, the Board, with David D. Lee
abstaining, approved a repricing program for executive officers modeled on the
employee repricing program. Subject to certain limitations, each executive
officer was allowed to exchange each of his options with an exercise price
greater than $5.625 for a new option granted on April 4, 2001 with an exercise
price of $5.625, which price exceeded the market price of Silicon Image stock on
that date. The vesting schedule for the new options was restarted, with the new
options vesting as to 12.5% of the shares after six months and 2.083% of the
shares each of the 42 months thereafter. Accordingly, executives who elected to
receive the new options would be required to work for an additional four years
before the new options were fully vested. In addition, new options had a term of
six years instead of the customary ten-year term for options granted prior to
that time. The following options were exchanged by executives for new options
under this program: David D. Lee--option for 431,724 shares; Steve
Tirado--options for 250,000 shares and 120,000 shares; Daniel K. Atler--option
for 60,000 shares; Jalil Shaikh--options for 80,000 shares and 60,000 shares;
Parviz Khodi--option for 60,000 shares; Badar Baqai--option for 367,816 shares;
Michael Kelley--options for 40,000 and 20,000 shares.
COMPENSATION COMMITTEE
Andrew S. Rappaport
Ronald V. Schmidt
Douglas C. Spreng
19
PERFORMANCE GRAPH
The stock price performance graph below is required by the SEC and shall not
be deemed to be incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent Silicon Image
specifically incorporates this information by reference and shall not otherwise
be deemed soliciting material or filed under such acts.
The following graph shows a comparison of cumulative total stockholder
return, calculated on a dividend reinvested basis, for Silicon Image, the Nasdaq
Composite Stock Market Index (US) and the S&P Technology Index. The graph
assumes that $100 was invested in Silicon Image's common stock, the Nasdaq
Composite Stock Market (US) and the S&P Technology Index from the date of
Silicon Image's initial public offering on October 6, 1999 through December 31,
2000. Note that historic stock price performance is not necessarily indicative
of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SILICON IMAGE NASDAQ COMPOSITE INDEX S&P TECHNOLOGY INDEX
December 31. 1999 $584 $142 $130
March 31, 2000 597 159 147
June 30, 2000 416 139 134
September 30, 2000 414 127 115
December 31, 2000 91 85 78
$100 INITIAL INVESTMENT ON OCTOBER 6, 1999
SILICON IMAGE NASDAQ COMPOSITE INDEX S&P TECHNOLOGY INDEX
------------- ---------------------- --------------------
December 31, 1999........................ $584 $142 $130
March 31, 2000........................... 597 159 147
June 30, 2000............................ 416 139 134
September 30, 2000....................... 414 127 115
December 31, 2000........................ 91 85 78
20
REPORT OF THE AUDIT COMMITTEE
This Report of the Audit Committee is required by the Securities and
Exchange Commission and, in accordance with the Commission's rules, will not be
deemed to be part of or incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that Silicon Image specifically
incorporates this information by reference, and will not otherwise be deemed
"soliciting material" or "filed" under either the Securities Act of 1933 or the
Securities Exchange Act of 1934.
The Audit Committee of Silicon Image (the "Committee") is composed of three
independent directors and operates under a written charter approved by the
Committee and adopted by the Board of Directors which is attached to this Proxy
Statement as Exhibit A. The members of the committee are David A. Hodges, Andrew
S. Rappaport and Keith McAuliffe. The Committee recommends to the Board of
Directors, subject to stockholder ratification, the selection of Silicon Image's
independent accountants.
Management is responsible for Silicon Image's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of Silicon Image's consolidated financial
statements in accordance with generally accepted auditing standards 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 accountants. Management has represented to the Committee
that Silicon Image's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated financial statements with management and
the independent accountants. The Committee has discussed with the independent
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
Silicon Image's independent accountants have also provided to the Committee
the written disclosures and letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee has discussed with the independent accountants that firm's
independence and considered whether the non-audit services provided by that firm
are compatible with maintaining its independence.
Based upon the Committee's discussions with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in Silicon Image's Annual Report on Form 10-K for the year
ended December 31, 2000 filed with the Securities and Exchange Commission.
Mr. McAuliffe, who was appointed to the Committee in March 2001, did not take
part in the foregoing actions by the Committee.
AUDIT COMMITTEE
David A. Hodges
Keith McAuliffe
Andrew S. Rappaport
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 2000 to the present, there have been no (and there are no
currently proposed) transactions in which the amount involved exceeded $60,000
to which we or any of our subsidiaries was (or is to be) a party and in which
any executive officer, director, 5% beneficial owner of our common stock or
member of the immediate family of any of the foregoing persons had (or will
have) a pecuniary interest, except as described in the Director Compensation and
Executive Compensation sections above, the Report of the Compensation Committee
above, and as set forth below.
STOCK OPTION GRANTS.
On January 2, 2001, the Compensation Committee made the following option
grants under the 1999 Equity Incentive Plan to our executive officers: David D.
Lee--30,345 shares; Steve Tirado--15,068 shares; Daniel K. Atler--7,399 shares;
Badar Baqai--9,195 shares; Jalil Shaikh--7,507 shares; Parviz Khodi--9,547
shares; Michael Kelley--13,609 shares. Each option granted has a ten year term
and an exercise price per share of $5.4375, the opening price of our common
stock on the Nasdaq National Market on January 2, 2001 and became vested and
exercisable as to 8.333% of the shares on January 31, 2001 and vests as to an
additional 8.333% of the shares at the end of each full succeeding month
thereafter. In December 2000, each of the foregoing executive officers was given
the option to reduce his 2001 salary by up to 30%, and the number of shares
subject to his option grant equals twice the dollar amount of the salary
foregone divided by $5.4375.
In addition, on January 2, 2001, the Compensation Committee made the
following option grants under the 1999 Equity Incentive Plan to our executive
officers: David D. Lee--37,931 shares; Steve Tirado--31,391 shares; Daniel K.
Atler--18,497 shares; Badar Baqai--22,989 shares; Jalil Shaikh--18,767 shares;
Parviz Khodi--23,868 shares; Michael Kelley--17,011 shares. Each option granted
has a ten year term and an exercise price per share of $5.4375, the opening
price of our common stock on the Nasdaq National Market on January 2, 2001 and
will become vested and exercisable upon our satisfaction of financial
performance criteria for each quarter of the 2001 fiscal year. For each quarter,
our 2001 operating plan specifies a low and high target financial performance
number and the option will vest as to 12.5% of the shares if we achieve the low
target number, as to 25% of the shares if we achieve the high target number, and
as to between 12.5% and 25% of the shares if our performance is between the low
and high target numbers, with the exact percentage in this latter case to be
determined in the discretion of the Board or Compensation Committee. However,
even if we do not satisfy the specified financial performance criteria, each
option granted will become vested with respect to 16% of the unvested shares on
January 2, 2003, an additional 1.417% of the unvested shares each of the
24 months thereafter, and an additional 4.167% of the unvested shares each of
the 12 months thereafter. In the event of a change in control of Silicon Image,
then six months afterwards, each option granted will automatically become vested
with respect to 25% of the shares for each set of quarterly financial
performance criteria which were to be achieved after the change in control,
provided the optionee either continues to provide services to Silicon Image or
its successor or has not been terminated for cause.
RESTRICTED STOCK PURCHASES. In 1998 and 1999, the following officers
purchased shares of our common stock in exchange for full recourse promissory
notes issued to us. Except as otherwise noted below, we have a right to
repurchase these shares, which right lapses over a four-year period with respect
to 25% of the shares after one year and 2.083% each month thereafter. Except as
otherwise
22
noted below, the full principal amount and accrued interest under each
promissory note remain outstanding. The terms of the restricted stock purchases
are summarized below:
PRINCIPAL
DATE OF NUMBER OF AMOUNT OF INTEREST BALANCE AS OF
NAME PURCHASE SHARES NOTE(S) DATE DUE RATE* FEB. 28, 2001
- ---- ------------- --------- --------- ------------- -------- -------------
Daniel K. Atler................ Aug. 13, 1998 340,000 $ 42,500 Aug. 13, 2003 5.49% $ -- (1)
June 1, 1999 120,000 60,000 June 1, 2004 5.30 65,184
Parviz Khodi(2)................ Dec. 30, 1998 120,000 18,000 Dec. 30, 2003 7.75 -- (3)
Feb. 24, 1999 120,000 18,000 Feb. 24, 2004 7.75 -- (4)
June 1, 1999 160,000 80,000 June 1, 2004 5.30 86,912
Sep. 13, 1999 4,000 10,000 Sep. 13, 2004 5.98 10,818
David D. Lee................... Jan. 29, 1999 300,000 52,500 Jan. 29, 2004 4.64 -- (5)
Steve Tirado................... June 21, 1999 940,350 940,350 June 21, 2004 5.30 -- (6)
Jalil Shaikh................... Dec. 24, 1998 162,000 10,125 Dec. 24, 2003 7.75 -- (7)
Apr. 6, 1999 266,000 30,125 Apr. 6, 2004 5.21 -- (8)
June 15, 1999 60,000 37,500 June 15, 2004 5.30 -- (9)
- ------------------------
* Compounded semi-annually
(1) Mr. Atler repaid all principal and accrued interest under this note in
February 2000. At the time of repayment, the principal and accrued interest
totaled $45,994.
(2) The shares purchased by Mr. Khodi on June 1, 1999 and September 13, 1999 are
not subject to a right of repurchase on behalf of Silicon Image.
(3) Mr. Khodi repaid all principal and accrued interest under these notes in
February 2000. At the time of repayment, the principal and accrued interest
totaled $19,610.
(4) Mr. Khodi repaid all principal and accrued interest under these notes in
February 2000. At the time of repayment, the principal and accrued interest
totaled $20,134.
(5) Mr. Lee repaid all principal and accrued interest under this note in
April 2000. At the time of repayment, the principal and accrued interest
totaled $54,941.
(6) Mr. Tirado repaid all principal and accrued interest under this note in
July 2000. At the time of repayment, the principal and accrued interest
totaled $995,000.
(7) Mr. Shaikh repaid all principal and accrued interest under these notes in
February 2000. At the time of repayment, the principal and accrued interest
totaled $10,998.
(8) Mr. Shaikh repaid all principal and accrued interest under these notes in
February 2000. At the time of repayment, the principal and accrued interest
totaled $31,312.
(9) Mr. Shaikh repaid all principal and accrued interest under this note in
February 2000. At the time of repayment, the principal and accrued interest
totaled $38,834.
TRANSACTIONS WITH BARRY MCAULIFFE. The brother of Keith McAuliffe, a
director of Silicon Image, is an employee of Silicon Image. During 2000, the
brother received total cash compensation of up to $250,000 and was granted stock
options for up to 50,000 shares with exercise prices equal to the closing price
of our common stock on the Nasdaq National Market on the date of grant.
23
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than 10% of our common stock
("10% Stockholders"), to file with the Securities and Exchange Commission
initial reports of ownership on a Form 3 and reports of changes in ownership of
our common stock and other equity securities on a Form 4 or Form 5. Such
executive officers, directors and 10% Stockholders are required by Commission
regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms furnished to us and
written representations from the executive officers and directors, we believe
that all of our executive officers, directors and 10% Stockholders made all the
necessary filings under Section 16(a) during 2000.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in Silicon Image's Proxy Statement and
form of proxy relating to Silicon Image's annual meeting of stockholders to be
held in 2002 must be received by December 17, 2001. Stockholders wishing to
bring a proposal before the annual meeting for 2002 (but not include it in
Silicon Image's proxy materials) must provide written notice of such proposal to
the Secretary of Silicon Image at the principal executive offices of Silicon
Image no later than March 23, 2002.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Annual Meeting, and, so far as is known to the Board, no matters are to be
brought before the Annual Meeting except as specified in the Notice of the
Annual Meeting. As to any business that may properly come before the Annual
Meeting, however, it is intended that proxies, in the form enclosed, will be
voted in respect thereof in accordance with the judgment of the persons voting
such proxies.
Whether or not you expect to attend the meeting, please complete, date, sign
and promptly return the accompanying proxy in the enclosed postage paid envelope
so that your shares may be represented at the meeting.
24
EXHIBIT A
SILICON IMAGE, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
PURPOSE
The audit committee will assist the board of directors in fulfilling its
oversight responsibilities by reviewing the financial reporting process, the
system of internal control, the audit process, and the company's process for
monitoring compliance with laws and regulations. In performing its duties, the
committee will maintain effective working relationships with the board of
directors, management, and the independent accountants. To effectively perform
his or her role, each committee member will obtain an understanding of the
detailed responsibilities of committee membership as well as the company's
business, operations, and risks.
ORGANIZATION
As of the date this charter is adopted and until June 13, 2001, the
Committee shall consist of at least two members of the Board. At least a
majority of the members shall be persons who are not officers or employees of
the Company or any subsidiary and who do not have any other relationship which,
in the opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. As of
June 14, 2001, the Committee shall consist of three or more members of the
Board, with the exact number being determined by the Board. Each member of the
Committee shall be "independent" as defined by the rules of the Nasdaq Stock
Market, as they may be amended from time to time (the "Rules"), except as
otherwise permitted by such Rules. Each member of the Committee shall have the
ability to read and understand fundamental financial statements (or become able
to do so within a reasonable time after joining the Committee) and at least one
member shall have prior experience in accounting, financial management or
financial oversight, as required by the Rules.
The members of the committee shall be elected by the board at the annual
organizational meeting of the board or until their successors shall be duly
elected and qualified. Unless a chair is elected by the full board, the members
of the committee may designate a chair by majority vote of the full committee
membership.
FREQUENCY OF MEETINGS
The committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
committee should meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or either of these groups believe should be discussed privately. In
addition, the committee or at least its chair should meet with the independent
accountants and management quarterly to review the company's financials.
ROLES AND RESPONSIBILITIES
1. Internal Control
a. Evaluate whether management is setting the appropriate tone at the top
by communicating the importance of internal control and ensuring that all
individuals possess an understanding of their roles and responsibilities.
b. Focus on the extent to which independent accountants review computer
systems and applications, the security of such systems and applications,
and the contingency plan for processing financial information in the
event of a systems breakdown.
A-1
c. Gain an understanding of whether internal control recommendations made
by independent accountants have been implemented by management.
d. Ensure that the independent accountants keep the audit committee
informed about fraud, illegal acts, deficiencies in internal control, and
certain other matters.
2. Financial Reporting
a. Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact
on the financial statements.
b. Ask management and the internal and independent accountants about
significant risks and exposures and the plans to minimize such risks.
3. Annual Financial Statements
a. Review the annual financial statements and determine whether they are
complete and consistent with the information known to committee members
and assess whether the financial statements reflect appropriate
accounting principles.
b. Make a recommendation to the Board of Directors as to whether they
should authorize the filing of the annual financial statements with the
Securities and Exchange Commission.
c. Pay particular attention to complex and/or unusual transactions and
judgmental areas such as those involving valuation of assets and
liabilities.
d. Meet with management and the independent accountants to review the
financial statements and the results of the audit.
e. Consider management's handling of proposed audit adjustments identified
by the independent accountants.
f. Review the MD&A and other sections of the annual report before its
release and consider whether the information is adequate and consistent
with members' knowledge about the company and its operations.
g. Ensure that the independent accountants communicate certain required
matters to the committee.
4. Interim Financial Statements
a. Be briefed on how management develops and summarizes quarterly financial
information and the extent to which the independent accountants review
quarterly financial information.
b. Meet with management and the independent accountants, either
telephonically or in person, to review the interim financial statements
and the results of the review (this may be done by the committee
chairperson or the entire committee) prior to the release of interim
financial statements to the public.
c. To gain insight into the fairness of the interim statements and
disclosures, obtain explanations from management and the independent
accountants on whether:
i) Actual financial results for the quarter or interim period varied
significantly from budgeted or projected results,
ii) Changes in financial ratios and relationships in the interim
financial statements are consistent with changes in the company's
operations and financing practices,
iii) Generally accepted accounting principles have been consistently
applied,
iv) There are any actual or proposed changes in accounting or financial
reporting practices,
A-2
v) There are any significant or unusual events or transactions,
vi) The company's financial and operating controls are functioning
effectively,
vii) The company has complied with the terms of loan agreements or
security indentures; and
viii) The interim financial statements contain adequate and appropriate
disclosures.
d. Ensure that the independent accountants communicate certain required
matters to the committee.
5. Compliance with Laws and Regulations
a. Review the effectiveness of the system for monitoring compliance with
laws and regulations, and the results of management's investigation and
follow-up (including disciplinary action) on any fraudulent acts or
accounting irregularities.
b. Periodically obtain updates from management, general counsel, and tax
advisors regarding compliance.
c. Be satisfied that all regulatory compliance matters have been considered
in the preparation of the financial statements.
d. Review the findings of any examinations by regulatory agencies, such as
the Securities and Exchange Commission.
6. Independent Accountants
a. Review the independent accountants' proposed audit scope and approach.
b. Review the performance of the independent accountants and recommend to
the board of directors the appointment or discharge of the independent
accountants.
c. Review and confirm the independence of the independent accountants by
reviewing the non-audit services provided and the accountants' assertion
of their independence in accordance with professional standards
(including Independence Standards Board Standard No. 1).
7. Other Responsibilities
a. Meet with the independent accountants and management in separate
executive sessions to discuss any matters that the committee or these
groups believe should be discussed privately.
b. Ensure that significant findings and recommendations made by the
independent accountants are received and discussed on a timely basis.
c. Review, with the company's counsel, any legal matters that could have a
significant impact on the company's financial statements.
d. Review the policies and procedures in effect for considering officers'
expenses and perquisites.
e. If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist.
f. Perform other oversight functions as requested by the full board.
g. Review and update the charter; receive approval of changes from the
board.
8. Reporting Responsibilities
a. Regularly update the board of directors about committee activities and
make appropriate recommendations.
b. Prepare a report to the Company's stockholder's for inclusion in the
Company's annual proxy statement as required by the Securities and
Exchange Commission.
A-3
PROXY
SILICON IMAGE, INC.
Annual Meeting of Stockholders - May 22, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David D. Lee and Daniel K. Atler, and
each of them, as proxies of the undersigned, each with full power to appoint
his substitute, and hereby authorizes them to represent and to vote all the
shares of stock of Silicon Image, Inc. which the undersigned is entitled to
vote, as specified on the reverse side of this card, at the Annual Meeting of
Stockholders of Silicon Image, Inc. to be held at our headquarters located at
1060 East Arques Ave., Sunnyvale, California, on Tuesday, May 22, 2001, at 2
p.m., local time, and at any adjournment or postponement thereof.
When this Proxy is properly executed, the shares to which this Proxy
relates will be voted as specified and, if no specification is made, will be
voted for the Board of Director nominees and for Proposal Nos. 2 and 3 and
this Proxy authorizes the above designated Proxies to vote in their
discretion on such other business as may properly come before the meeting or
any adjournments or postponements thereof to the extent authorized by Rule
14a-4(c) promulgated under the Securities Exchange Act of 1934, as amended.
----------
See (Continued and to be signed on reverse side)
reverse
side
-----------
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
Please mark /X/
your votes as
indicated in
this example
The Board of Directors recommends a vote FOR the Proposals:
FOR AGAINST ABSTAIN
1. ELECTION OF CLASS II DIRECTORS. / / / / / /
Nominees: David A. Hodges Ronald V. Schmidt
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
-----------------------------------
FOR AGAINST ABSTAIN
2. AMENDMENT OF CERTIFICATE OF INCORPORATION TO / / / / / /
INCREASE THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK FROM 75,000,000 TO 150,000,000.
FOR AGAINST ABSTAIN
3. RATIFICATION OF APPOINTMENT OF / / / / / /
PRICEWATERHOUSECOOPERS LLP AS
SILICON IMAGE'S INDEPENDENT
ACCOUNTANTS.
[ ] Mark here for address change and note below
Please sign exactly as your name(s) appear(s) on this Proxy. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign this Proxy. If shares of stock are held of record by a
corporation, this Proxy should be executed by the president or vice president
and the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute this Proxy for a deceased stockholder should give
their full title. Please date this Proxy.
Whether or not you plan to attend the meeting in person, you are urged to
complete, date, sign and promptly mail this Proxy in the enclosed return
envelope so that your shares may be represented at the meeting.
Signature: Date:
----------------------------------------- ------------------
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -