SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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INSILICON CORPORATION
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<PAGE>
[LOGO] (TM)
inSilicon Corporation
411 East Plumeria Drive
San Jose, CA 95134
December 28, 2000
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of inSilicon Corporation to be held on Monday, February 5, 2001 at
10:00 AM at 411 East Plumeria Drive, San Jose, CA 95134. This is our first
meeting of stockholders following our separation from Phoenix Technologies Ltd.
and the initial public offering of our shares.
The actions expected to be taken at the Annual meeting are described in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.
Included with the Proxy Statement is a copy of the Company's Annual Report on
Form 10-K for fiscal year 2000. The Form 10-K includes important information on
the Company's operations, markets and products, as well as the Company's audited
financial statements.
We encourage you to read the attached information thoroughly, and to
participate in the affairs of the Company by joining us at our upcoming Annual
Meeting. However, whether or not you plan to attend the meeting, please sign and
return your proxy in the enclosed envelope as soon as possible. We appreciate
your participation, and look forward to seeing you at our first Annual Meeting.
Sincerely,
/s/ Wayne C. Cantwell
Wayne C. Cantwell
President and Chief Executive Officer
<PAGE>
inSilicon Corporation
411 East Plumeria Drive
San Jose, CA 95134
December 28, 2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
inSilicon Corporation will hold its Annual Meeting of Stockholders at
10:00 AM on Monday, February 5, 2001 at 411 East Plumeria Drive, San Jose, CA
95134.
At this meeting we will ask you:
o to elect one director, E. Thomas Hart, to serve until the 2004
Annual Meeting of Stockholders;
o to ratify the appointment of Ernst & Young LLP as independent public
accountants for the Company for fiscal year 2001; and
o to transact any other business that properly comes before the
meeting.
Your Board of Directors has selected December 27, 2000 as the record date
for determining stockholders entitled to vote at the meeting. A list of
stockholders on that date will be available for inspection at 411 East Plumeria
Drive, San Jose, CA 95134, for ten days before the meeting.
This Proxy Statement, a proxy card and the 2000 Annual Report to
Stockholders are being distributed on or about January 5, 2001, to those
entitled to vote. All stockholders are cordially invited to attend the meeting.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope provided. You may revoke your proxy at any
time prior to the Annual Meeting. If you attend and vote at the Annual Meeting,
your proxy will be automatically revoked and only your vote at the Annual
Meeting will be counted.
By Order of the Board of Directors
/s/ Joseph E. Hustein
JOSEPH E. HUSTEIN
Vice President, General Counsel and Secretary
<PAGE>
GENERAL INFORMATION
Q: Who is soliciting my proxy?
A: The Board of Directors of inSilicon Corporation is sending you this Proxy
Statement in connection with our solicitation of proxies for use at
inSilicon's 2001 Annual Meeting of Stockholders. Certain directors,
officers and employees of inSilicon may solicit proxies on our behalf by
mail, phone, fax or in person.
Q: Who is paying for this solicitation?
A: inSilicon will pay for the solicitation of proxies. inSilicon also will
reimburse banks, brokers, custodians, nominees and fiduciaries for their
reasonable charges and expenses to forward our proxy materials to the
beneficial owners of inSilicon common stock.
Q: What am I voting on?
A: The election of E. Thomas Hart to the Board of Directors and the
appointment of Ernst & Young LLP as independent public accountants to the
Company for the current fiscal year, along with any other matters to be
presented at the meeting.
Q: Who can vote?
A: Only those who owned inSilicon common stock at the close of business on
December 27, 2000, the record date for the Annual Meeting, can vote. Each
share of common stock outstanding on that date is entitled to one vote on
all matters to come before the meeting.
Q: How do I vote?
A: You may vote your shares either in person or by proxy. To vote by proxy,
you should mark, date, sign and mail the enclosed proxy in the prepaid
envelope. Giving a proxy will not affect your right to vote your shares if
you attend the Annual Meeting and want to vote in person - by voting you
automatically revoke your proxy. You also may revoke your proxy at any
time before the voting by giving the Secretary written notice of your
revocation or by submitting a later-dated proxy. If you sign and return
your proxy in time, the individuals named as proxyholders will vote your
shares as you instruct. If you sign and return your proxy but do not mark
your voting instructions, the individuals named as proxyholders will vote
your shares FOR the election of the nominee for director and appointment
of independent public accountants.
Q: What constitutes a quorum?
A: On the record date, inSilicon had 14,223,371 shares of common stock, $.001
par value, outstanding. Voting can take place at the Annual Meeting only
if stockholders owning a majority of the issued and outstanding stock
entitled to vote at the meeting are present in person or represented by
proxy. We include the shares of persons who abstain in determining those
present and entitled to vote, but exclude shares held by brokers in
"street" or "nominee" name when the broker indicates that you have not
voted and it lacks discretionary authority to vote your shares (i.e.,
"broker non-votes").
<PAGE>
Q: What vote is needed to approve the proposals?
A: If a quorum is present, the affirmative vote of the holders of a plurality
of the shares present or represented is required to elect the nominee. As
a result, if you withhold your authority to vote for the nominee, your
vote will not count for or against the nominee, nor will a broker
"non-vote" affect the outcome of the election. Ratification of the
selection of the independent public accountants requires the affirmative
vote of the holders of a majority of the shares present or represented at
the meeting. An abstention or a broker non-vote is the same as a vote
against the proposal.
Q: Can I vote on other matters?
A: inSilicon's by-laws limit the business conducted at any annual meeting to
(1) business in the notice of the meeting, (2) business directed by the
Board of Directors and (3) business brought by a stockholder of record
entitled to vote at the meeting so long as the stockholder has notified
our Secretary in writing (at our San Jose headquarters) not less than 60
days nor more than 90 days before the anniversary of the mailing of the
proxy statement for the prior year's annual meeting. The notice must
briefly describe the business to be brought and the reasons; give the
name, address and number of shares owned by the stockholder of record and
any beneficial holder for which the proposal is made; and identify any
material interest the stockholder of record or any beneficial owner has in
the business.
We do not expect any matters not listed in the Proxy Statement to come
before the meeting. If any other matter is presented, your signed proxy
card gives the individuals named as proxyholders the authority to vote
your shares to the extent authorized by Rule 14a-4(c) under the Securities
Exchange Act of 1934 (the "Exchange Act").
Q: When are stockholder proposals due for the 2002 Annual Meeting?
A: To be considered for presentation in the proxy statement for inSilicon's
2002 Annual Meeting of Stockholders, a stockholder proposal must be
received at inSilicon's offices no later than September 7, 2001.
Q: How do I nominate someone to be an inSilicon director?
A: A stockholder may recommend nominees for director notifying our Secretary
in writing (at our San Jose headquarters) not less than 60 nor more than
90 days before the anniversary of the mailing of the proxy statement for
the prior year's annual meeting. The notice must include the full name,
age, business and residence addresses, principal occupation or employment
of the nominee, the number of shares of inSilicon common stock the nominee
beneficially owns, any other information about the nominee that must be
disclosed in proxy solicitations under Rule 14(a) of the Securities
Exchange Act of 1934 and the nominee's written consent to the nomination
and to serve, if elected.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTOR
inSilicon's Board of Directors is divided into three classes serving
staggered three-year terms. At the Annual Meeting, you and the other
stockholders will elect one individual, E. Thomas Hart, to serve as a director
until the 2004 Annual Meeting. Mr. Hart is now a member of the Board of
Directors.
The individuals named as proxyholders will vote your proxy for the
election of Mr. Hart unless you direct them to withhold your votes. If Mr. Hart
becomes unable to serve as a director before the meeting (or decides not to
serve), the individuals named as proxyholders may vote for a substitute.
We recommend a vote FOR the nominee.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has engaged Ernst & Young LLP as its principal independent
public accountants to perform the audit of the Company's financial statements
for fiscal year 2001. Ernst & Young LLP has audited the Company's financial
statements for fiscal year 2000, our first year as a stand-alone public company.
The Board of Directors expects that representatives of Ernst & Young LLP will be
present at the Annual Meeting, will be given an opportunity to make a statement
at the meeting if they desire to do so and will be available to respond to
appropriate questions.
We recommend a vote FOR the ratification.
Below are the names and ages of the directors, the years they became
directors, their principal occupations or employment for at least the past five
years and certain of their other directorships.
Nominees for Election for a Three-Year Term Ending with the 2004 Annual Meeting
E. Thomas Hart Age 58, a director since February 2000.
President and Chief Executive Officer of
QuickLogic since 1994; from 1992 to 1994,
Vice President and General Manager of the
Advanced Networks Division at National
Semiconductor (a semi-conductor
manufacturing company); from 1986 to 1992,
private consultant with Hart Weston
International (technology-based management
consulting firm).
Directors Continuing in Office Until the 2002 Annual Meeting
Wayne C. Cantwell Age 35, a Director since November 1999.
Our President and Chief Executive Officer
since November 1999; from 1999 to 2000,
Senior Vice President and General Manager
of the
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<PAGE>
Semiconductor IP Division of Phoenix
Technologies Ltd.; from 1998 to 1999, Vice
President and General Manager, Worldwide
Field Operations at Phoenix; from March
1998 to October 1998, Vice President and
General Manager, North American Operations
at Phoenix; from 1997 to 1998, Vice
President, Asia/America Operations at
Phoenix; from 1996 to 1997, General
Manager, Asia Operations at Phoenix; from
1991 to 1996; and various sales, sales
management and general management roles
with Phoenix; prior to that, various roles
in sales and engineering at Intel and NEC
Technologies.
Raymond J. Farnham Age 53, a Director since February 2000;
since 1998, Director of hi/fn (a designer
and developer of semiconductor devices and
software); from 1998 to 2000, Chairman of
the Board of Directors, President and
Chief Executive Officer of hi/fn; from
1996 to 1998, Executive Vice President of
Integrated Device Technology (a supplier
of microprocessor, logic and memory
integrated circuits); from 1995 to 1996,
an independent consultant; from 1994 to
1995, President and Chief Executive
Officer of OPTi (a fabless semiconductor
company); from 1991 to 1993, President of
the Communication and Computing Group of
National Semiconductor Corp.
Directors Continuing in Office Until the 2003 Annual Meeting
John R. Harding Age 45, a Director since February 2000;
Chairman of the Board of Directors and
Chief Executive Officer of The Dorset
Group (a venture management and investment
firm) since January 2000; from 1997 to
1999, Chief Executive Officer and Director
of Cadence Design Systems (a provider of
software and services for electronic
design); from May 1997 to October 1997,
served as Cadence's Senior Vice President
of the Strategic Business Group; from 1994
to 1997, President and Chief Executive
Officer of Cooper & Chyan Technology, Inc.
(an electronic design automation software
tool company); from 1992 to 1994,
Executive Vice President of Zycad
Corporation (an electronic design
automation company). Also Chairman of the
Board of Directors of SafeCorp.com (an
information security consulting company)
and director of Zland.com (a provider of
internet-based applications for
businesses).
Albert E. Sisto Age 50, a Director since November 1999 and
Chairman of our Board of Directors since
December 1999; Phoenix's Chief Executive
Officer since June 1999; from 1997 to
1999, Chief Operating Officer of RSA Data
Security (a subsidiary of Security
Dynamics Technologies, providing
encryption
4
<PAGE>
technology); from 1994 to 1997, Chairman,
President and Chief Executive Officer of
Documagix (a software developer of
document imaging software). Also, a
Director of Insignia Solutions, plc.,
hi/fn, Inc., efax.com, Inc. and Tekgraf,
Inc.
Committees of the Board of Directors; Meetings
During the fiscal year ended September 30, 2000, the Board held seven
meetings. Each of the directors attended at least 75% of the meetings. The Board
has an Audit Committee, a Compensation Committee and an Option Grant Committee.
The Board has adopted a written Audit Committee Charter, which is attached to
this Proxy Statement as Appendix A. The Board does not have a nominating
committee or a committee performing the functions of a nominating committee.
Audit Committee
o Recommends outside auditors for approval by the Board and, if
necessary, the termination of the outside auditors presently
engaged;
o Reviews audit results and annual and interim financial statements
and discusses the audited financial statements with both the
Company's outside auditors and the Company's management prior to any
public filing of those reports;
o Discusses with the Company's outside auditors the quality of
accounting principles applied in the Company's financial statements
and the other matters required by SAS 61 (including amendments or
supplements);
o Ensures the receipt of, and reviewing, a formal written statement
from the Company's outside auditors delineating all relationships
between the outside auditor and the Company, consistent with
Independence Standards Board Standard 1;
o Oversees the adequacy and effectiveness of the Company's system of
internal accounting controls, including obtaining from the outside
auditors management letters or summaries on such internal accounting
controls; and
o Oversees the Company's procedures for preparing published annual
statements and management commentaries.
The current members of the Audit Committee are Raymond J. Farnham, John R.
Harding and E. Thomas Hart, three independent directors. The Audit Committee met
two times in fiscal year 2000.
Compensation Committee
o Reviews annually and approves the Company's stated compensation strategy
and determines the individual elements of total compensation for the Chief
Executive Officer and for the other executive officers and key management,
and communicates in the annual Compensation Committee Report to
stockholders the specific relationship of corporate performance to
executive compensation;
o Approves, for submission to stockholders where appropriate, all new
equity-related incentive plans, and administers the Company's long-term
incentive programs in a manner consistent with the terms of the plans;
5
<PAGE>
o Fixes the terms and awards of stock and other compensation elements for
members of the Board in accordance with the rules in effect under Section
16 of the Securities Exchange Act of 1934;
o Delegates to a committee of at least one director the power to grant
equity-based awards to individuals who are not subject to Section 16 of
the Securities Exchange Act of 1934 and who are not "covered individuals"
under Section 162(m) of the IRS Code; and
o Reviews the Company's salary increase budget and employee benefits
programs and approves changes, subject where appropriate, to stockholder
or Board approval.
The current members of the Compensation Committee are Raymond J. Farnham,
John R. Harding and E. Thomas Hart, three independent directors. The
Compensation Committee met one time in fiscal year 2000.
Option Grant Committee
o Grants equity-based awards to individuals who are not subject to Section
16 of the Securities Exchange Act of 1934 and who are not "covered
individuals" under Section 162(m) of the IRS Code.
The Option Grant Committee currently includes only Wayne C. Cantwell. The
Stock Option Committee did not formally meet in fiscal year 2000 but took action
seven times by unanimous written consent.
Independent Public Accountants
Ernst and Young was the principal accountant for the fiscal year ended
September 30, 2000, and has been selected for the current fiscal year. A
representative from Ernst & Young is expected to be present at the annual
meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
STOCK OWNERSHIP
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
This table shows as of November 30, 2000: (1) the beneficial owner of more
than 5% of the common stock and the number of shares it beneficially owned; and
(2) the number of shares each director, each executive officer named in the
Summary Compensation Table on page 11 and all directors and executive officers
as a group beneficially owned, as reported by each person. Except as noted, each
person has sole voting and investment power over the shares shown in this table.
Unless otherwise indicated, the address of each of the named individuals is c/o
inSilicon Corporation, 411 East Plumeria Drive, San Jose, California, 95134.
6
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Common Stock Beneficially Owned
-----------------------------------
Number of Shares Percent of
Beneficially Owned (1) Class
---------------------- ----------
<S> <C> <C>
Stockholder
Phoenix Technologies Ltd. (2) 10,450,000 73.7%
411 East Plumeria Drive
San Jose, CA 95134
Directors and Other Named Executive Officers:
Wayne C. Cantwell (3) 249,076 1.8%
Barry O. Hoberman (4) 134,342 1.0%
William E. Meyer (5) 99,477 *
Robert C. Nalesnik (6) 42,840 *
Anand C. Naidu (7) 33,490 *
Raymond J. Farnham (8) 8,000 *
John R. Harding (9) 5,750 *
Alfred E. Sisto (10) 5,000 *
E. Thomas Hart (11) 5,000 *
All inSilicon directors and executive
officers as a group (13 persons) (12) 659,974 4.6%
</TABLE>
----------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to options currently exercisable, or exercisable within 60 days,
are deemed outstanding for computing the percentage of the person holding
such option but are not deemed outstanding for computing the percentage of
any other person. Except as indicated by footnote, and subject to
community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them. The Percent of Class is
calculated based on 14,188,624 shares outstanding as of November 30, 2000.
(2) Includes 50,000 shares subject to warrants exercisable within 60 days of
November 30, 2000.
(3) Includes 174,190 shares subject to options exercisable within 60 days of
November 30, 2000.
(4) Includes 134,342 shares subject to options exercisable within 60 days of
November 30, 2000.
(5) Includes 59,387 shares subject to options exercisable within 60 days of
November 30, 2000.
(6) Includes 21,120 shares subject to options exercisable within 60 days of
November 30, 2000.
(7) Includes 31,250 shares subject to options exercisable within 60 days of
November 30, 2000.
7
<PAGE>
(8) Includes 5,000 shares subject to options exercisable within 60 days of
November 30, 2000, and 3,000 shares as to which Mr. Farnham shares
ownership with his wife, including all voting and investment powers.
(9) Includes 3,750 shares subject to options exercisable within 60 days of
November 30, 2000, and 2,000 shares directly owned by Harding Partners.
Mr. Harding is a general partner of Harding Partners.
(10) Includes 5,000 shares subject to options exercisable within 60 days of
November 30, 2000.
(11) Includes 5,000 shares subject to options exercisable within 60 days of
November 30, 2000.
(12) Includes 510,444 shares subject to options exercisable within 60 days of
November 30, 2000 held by all executive officers and directors of the
company.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Raymond J. Farnham, John
R. Harding and E. Thomas Hart. No member of the Compensation Committee was an
officer or employee of the Company or any of its subsidiaries during fiscal year
2000. None of the executive officers of the Company has served on the board of
directors or on the compensation committee of any other entity, any of whose
officers served either on the Board of Directors or on the Compensation
Committee of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Under U.S. securities laws, directors, certain executive officers and
persons holding more than 10% of inSilicon's common stock must report their
initial ownership of the common stock and any changes in that ownership to the
Securities and Exchange Commission. The Securities and Exchange Commission has
designated specific due dates for these reports and inSilicon must identify in
this Proxy Statement those persons who did not file these reports when due.
Based solely on its review of copies of the reports filed with the Securities
and Exchange Commission and written representations of its directors and
executive officers, inSilicon believes all persons subject to reporting filed
the required reports on time in fiscal year 2000, except each of the executive
officers and directors (Allan Strong, Matthew Raggett and each of the Directors
and Named Executive Officers) did not timely file a report on Form 5 with
respect to his ownership position as of September 30, 2000.
COMPENSATION OF DIRECTORS AND THE NAMED EXECUTIVE OFFICERS
Compensation of Directors
Compensation. During fiscal year 2000, a director who was not an officer
or employee of inSilicon or any of its affiliates received $1,000 per board
meeting and $500 per committee meeting. Directors who are employees of inSilicon
or any of its affiliates received no compensation for their services as
directors.
During fiscal year 2000, we paid to directors a total of $13,500 in fees.
We also reimbursed the directors for their out-of-pocket expenses in attending
Board and committee meetings. The Board met seven times in fiscal year 2000.
Each director attended at least 75% of the total Board and applicable committee
meetings.
Stock Options. The 2000 Stock Plan provides for grants to each
non-employee director of options to purchase 20,000 shares of our common stock
upon appointment as a director,
8
<PAGE>
and additional annual grants of 7,500 shares of our common stock annually
thereafter. Members of the audit and compensation committees also receive grants
of an additional 5,000 shares upon appointment to each committee. These options
vest quarterly over a period of four years at the rate of 6.25% per quarter.
Compensation of the Named Executive Officers
Summary Compensation Table
The following table summarizes the compensation of inSilicon's Chief
Executive Officer and the other four most highly compensated executive officers
based on employment with inSilicon whose aggregate compensation exceeded
$100,000 during the year ended September 30, 2000. We refer to these individuals
as the "named executive officers" elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
----------
Annual Compensation Securities
----------------------- Underlying All Other
Name and Salary (1) Bonus (1) Options (2) Compensation (3)
Principal Position Year ($) ($) (#) ($)
-------------------------------- ---- --------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Wayne C. Cantwell..... 2000 $ 200,000 $100,625 205,009 $ 3,000
President and Chief 1999 199,166 94,262 66,000 1,000
Executive Officer
Barry A. Hoberman..... 2000 173,250 53,759 30,220 3,000
Executive Vice President and 1999 169,125 32,918 25,996 1,000
Chief Technical Officer
William E. Meyer...... 2000 166,188 71,974 60,000 3,000
Executive Vice President and 1999 141,667 30,060 75,000 1,000
Chief Financial Officer
Anand C. Naidu........ 2000 160,000 39,056 50,520 3,000
Vice President 1999 132,275 17,272 40,000 1,000
Robert G. Nalesnik.... 2000 160,000 38,022 10,000 61,000 (4)
Vice President 1999 140,400 19,658 40,000 59,000 (4)
</TABLE>
(1) 1999 amounts represent salary and bonus paid by Phoenix to the named
executive officers for their services to Phoenix while employed at
Phoenix.
(2) 1999 amounts represent options to purchase Phoenix common stock granted by
Phoenix. The named executive officers have exchanged these Phoenix options
for options to purchase inSilicon common stock at a ratio of 1.862 shares
of inSilicon common stock for each share of Phoenix common stock, except
for Mr. Naidu and Mr. Nalesnik, each of whom did not exchange their
options with respect to 2,500 shares of Phoenix common stock.
(3) Consists of company contributions to the individual's 401(k) savings
account.
(4) Includes $58,000 paid in October 1999 and 2000 for two of three annual
installments of a $174,000 retention bonus.
Option/SAR Grants in Last Fiscal Year
9
<PAGE>
The following table provides summary information regarding options to
purchase inSilicon common stock that were granted by inSilicon to the named
executive officers during the fiscal year ended September 30, 2000.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Percent of
Number of Total
Securities Options/SARs Potential Realizable Value at
Underlying Granted to Exercise Assumed Annual Rate of
Options/ Employees in Price Per Expiration Stock Price Appreciation For
Name Granted (1) Fiscal Year Share Date Option Term (2)
-------------------- ----------- ------------ --------- ---------- ----------------------------
5% 10%
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Wayne C. Cantwell 205,009(3) 13.1% $7.36 12/21/09 $1,383,037 $3,096,007
Barry A. Hoberman 30,220 1.9% 7.36 12/21/09 203,871 456,377
William E. Meyer 60,000 3.8% 7.36 12/21/09 404,774 906,109
Anand C. Naidu 50,520 3.2% 7.36 12/21/09 40,819 762,943
Robert G. Nalesnik 10,000 0.6% 7.36 12/21/09 67,462 151,018
</TABLE>
(1) In the fiscal year 2000, inSilicon granted options to purchase an
aggregate of 1,737,505 shares of inSilicon's common stock. Unless
otherwise stated, options to purchase shares vest quarterly at the rate of
6.25% per quarter. Options have a term of ten years but may terminate
before their expiration dates if the optionee's status as an employee is
terminated or upon the optionee's death or disability.
(2) 5% and 10% assumed annual rates of compounded stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.
The potential realizable values are calculated by assuming the Exercise
Price shown on the table, that the common stock appreciates at the
indicated rate and sold on the last day of the option term at the
appreciated price.
(3) 22,500 of these shares were subject to an accelerated vesting schedule,
based upon Mr. Cantwell's achievement of certain quarterly
management-related goals, all of which had vested as of November 30, 2000.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Options/SAR Values
The following table provides summary information regarding options to
purchase inSilicon common stock that were exercised by the named executive
officers during the fiscal year ended September 30, 2000 and the number and
value of unexercised in the money inSilicon options held by the named executive
officers at September 30, 2000.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at Fiscal
Shares Fiscal Year-End (#) (1) (2) Year-End ($) (3)
Acquired on Value -------------------------- -----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne C. Cantwell 73,109 $ 273,854 141,307 260,582 $1,237,422 $2,101,042
Barry A. Hoberman -- -- 123,495 71,505 682,069 645,173
William E. Meyer 37,822 119,851 48,933 142,687 401,235 1,196,820
Anand C. Naidu -- -- 18,783 101,562 146,695 806,951
Robert G. Nalesnik 19,480 164,440 11,185 88,120 92,445 843,468
</TABLE>
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(1) These options were granted on various dates during fiscal years 1991
through 2000 and generally vest quarterly at the rate of 6.25% per
quarter.
(2) Stock option exercise prices ranged from $6.17 - $20.37 per share.
(3) The amounts in this column reflect the difference between the closing
market price of inSilicon's common stock on September 30, 2000, which was
$14.50, and the option exercise price.
Severance Agreements
We have entered into severance agreements with certain of our officers,
including all of our named executive officers other than Mr. Naidu. The
severance agreements provide for initial levels of base compensation, bonus, and
benefits. The base levels of compensation are as follows: Mr. Cantwell,
$200,000; Mr. Hoberman, $173,250; Mr. Meyer, $173,250; and Mr. Nalesnik,
$160,000. The agreements also provide for the continued payment of salary for 12
months (in the case of Mr. Cantwell, Mr. Hoberman and Mr. Meyer) and six months
(in the case of the other officers) with continued option vesting during such
period, and prorated portion of the executive's target bonus if the executive's
employment is terminated for reasons other than for cause or constructive
termination. Mr. Cantwell's and Mr. Meyer's agreements also provide for the full
vesting of all unvested options within 90 days of a change in control. Benefits
provided under the severance agreements include participation in an executive
bonus plan and company-paid post-termination health insurance.
RELATED PARTY TRANSACTIONS
Transactions with Phoenix Technologies Ltd.
For purposes of governing certain ongoing relationships between inSilicon
and Phoenix at and after the separation date, inSilicon and Phoenix have entered
into various agreements. This description summarizes the material terms of these
agreements.
Contribution Agreement
The Contribution Agreement generally identified the assets Phoenix
transferred to us and the liabilities we assumed from Phoenix in the separation.
The net book value of the assets transferred and the liabilities assumed under
this agreement was approximately $14.5 million. In general, the assets that were
transferred and the liabilities that were assumed were included on the
consolidated balance sheet as of September 30, 1999, after adjustments for
certain assets and liabilities were retained by Phoenix, and for activity that
occurred up to the separation date.
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Initial Public Offering Agreement
The Initial Public Offering Agreement governs the relationship between us
and Phoenix following our initial public offering. Both Phoenix and inSilicon
have agreed to exchange information unless the information is confidential and
the sharing would be commercially detrimental to us. So long as Phoenix is
required to consolidate our results of operations and financial position, we
have agreed to: (1) not change independent accounting firms without Phoenix's
consent, which shall not be unreasonably withheld, (2) mutual sharing of all
relevant information to enable Phoenix and inSilicon to prepare its financial
statements and (3) notify each other of any change in accounting principles.
Both parties have agreed not to directly recruit employees of the other
party until November 30, 2000 and each of Phoenix and inSilicon has agreed not
to engage in any business conducted by the other as of November 30, 1999 for a
period ending at the earliest of (a) November 30, 2004, (b) the date Phoenix no
longer owns at least 10% of our outstanding voting securities and (c) the date
the other ceases to engage in that business.
So long as it retains ownership of at least 50% of our outstanding voting
securities, Phoenix has agreed not to purchase more than 2% of our
then-outstanding shares of common stock on the open market during any 12-month
period.
In general, we have agreed to indemnify Phoenix and its affiliates,
agents, successors and assigns from all liabilities arising from our business,
liabilities or contracts and any breach by us of any contract between the
parties. Phoenix has agreed to indemnify us and our affiliates, agents,
successors and assigns from all liabilities arising from Phoenix's business
other than the business transferred to us and any breach by Phoenix of any
contract between Phoenix and us.
The agreement also contains provisions governing our insurance coverage
after the separation date. Phoenix will generally act as insurance administrator
and claims administrator for Phoenix insurance policies under which we are or
have been insured; provided, however, no settlements involving us shall be made
without our consent and all awards regarding us shall be promptly paid to us. We
fund a pro rata portion of the Phoenix insurance costs under the Services and
Cost-Sharing Agreement (discussed below) and are entitled to receive the
proceeds, if any from insured claims under these policies and applicable prior
policies, after the applicable deductible or retention.
Services and Cost-Sharing Agreement
We have also entered into a Services and Cost-Sharing Agreement with
Phoenix. This agreement covers various services that Phoenix provides and the
method by which certain costs will be shared by the companies. The services
include data processing, telecommunications, information technology support,
accounting, financial management, tax preparation, payroll, stockholder and
public relations, legal, human resources administration, procurement, real
estate management and other administrative functions. The shared costs include
the costs of the office space we occupy at Phoenix's headquarters and insurance
premiums.
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The amount we pay for services and shared costs is generally equal to the
aggregate cost to Phoenix and inSilicon of the services and costs multiplied by
a percentage representing the number of our employees to the total number of
Phoenix and inSilicon employees. The Services and Cost-Sharing Agreement had an
initial term that extended to June 30, 2000 for all services other than
accounting and an initial term that extended to September 30, 2000 with respect
to accounting services. The Services and Cost-Sharing Agreement has been renewed
on a month-to-month basis. Phoenix can terminate after those dates on 30 days'
written notice. Through September 30, 2000, Phoenix has allocated to the Company
total costs of $3.3 million under this Services and Cost Sharing Agreement.
Employee Matters Agreement
We have entered into an Employee Matters Agreement with Phoenix to
allocate assets, liabilities and responsibilities relating to current and former
United States employees of inSilicon Corporation and their participation in the
benefit plans, including stock plans, that Phoenix sponsored and maintained at
the time of separation. United States employees provided services to inSilicon
as employees of Phoenix. After the separation date, such employees remained on
the Phoenix payroll and provided services to inSilicon on a seconded basis
through December 31, 1999. Certain employees with pending visa applications were
being seconded for a longer period.
All eligible United States inSilicon employees will continue to
participate in the Phoenix benefit plans on comparable terms and conditions to
those for Phoenix employees until we establish comparable benefit plans for our
current and former employees. Once we establish our own comparable benefit plan,
we may modify or terminate that plan in accordance with the terms of that plan
and our policies. inSilicon benefit plans generally will not provide benefits
that overlap benefits under the corresponding Phoenix benefit plan. Each
inSilicon benefit plan will provide that all service, compensation and other
benefit determinations that, as of the offering, were recognized under the
corresponding Phoenix benefit plan will be taken into account under that
inSilicon benefit plan..
In addition, persons who provided us services on December 21, 1999 were
able to exchange their Phoenix options for inSilicon stock options with the same
intrinsic value. The number of shares and the exercise price of Phoenix options
that were exchanged for inSilicon options were adjusted using a formula based
upon the relative fair market values of the two companies' stock on the date of
exchange. Each of the resulting inSilicon options maintains the original vesting
provisions and option period.
Tax-Sharing Agreement
We have entered into a Tax-Sharing Agreement with Phoenix concerning each
party's obligations for various tax liabilities. The Tax-Sharing Agreement
provides that Phoenix generally will pay all federal, state, local and foreign
taxes relating to our business before November 30, 1999. For any taxable period
after that date in which we are included in a Phoenix consolidated or combined
tax return, the agreement provides that we will make payments to Phoenix based
upon the amount of U.S. federal and state income taxes that would have been paid
by us had we and each of our subsidiaries filed our own federal and state income
tax returns, subject to specific adjustments. Further, if we incur losses on
either
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a federal or state basis that reduce Phoenix's consolidated or combined tax
liability, Phoenix will pay us an amount equal to the tax savings generated by
our losses.
Phoenix has agreed to indemnify us for any tax liability allocated to
Phoenix under the Tax-Sharing Agreement and we have provided a similar indemnity
to Phoenix.
The Tax-Sharing Agreement further provides for cooperation with respect to
tax matters, the exchange of information and the retention of records which may
affect the income tax liability of either party.
Registration Rights Agreement
The Registration Rights Agreement provides that, at Phoenix's request, we
will use our best efforts to register for sale under federal and state
securities laws any shares of inSilicon common stock (or any other securities
Phoenix receives in exchange for inSilicon common stock) that Phoenix owns,
subject to specified limitations. Phoenix also will have the right to include
its inSilicon shares in other registrations of our common stock initiated by us.
In the first registration in which Phoenix participates after this offering,
following waiver or expiration of the lockup, we will be entitled to sell at
least 40% of the shares of the total offering if we so desire, and in all
registrations thereafter, 50% of the shares provided that if the first following
registration involves a total of $50 million or less, we shall be entitled to
sell at least 50% of the shares of the total offering.
So long as Phoenix owns 50% or more of our common stock, Phoenix may
request or participate in an unlimited number of registrations. Once it owns
less than 50%, Phoenix will be limited to a total of four demand and an
unlimited number of "piggyback" registrations, provided that it is not entitled
to more than two demand registrations in any 12-month period. Phoenix must
request registration of a minimum of $25 million of shares in any demand
registration. Subject to specified limitations, Phoenix may assign these
registration rights. The Registration Rights Agreement also will require us to
indemnify Phoenix, the underwriters and others in connection with these
registrations.
Phoenix will pay its pro rata share (according to the percentage of shares
sold for its account) of expenses relating to any registration in which it
participates, and Phoenix will pay all of the underwriting discounts and
commissions attributable to the shares Phoenix sells.
Technology Distributor Agreement
We have entered into arrangements with Phoenix to act as our sales
representative and distributor of our firmware products in Japan and our full
line of products in the rest of Asia. Phoenix will promote the licensing of
inSilicon's firmware or other products, as applicable, identify prospective
customers, and solicit orders from prospective, as well as current, customers on
behalf of inSilicon. The agreement also provides Phoenix a nonexclusive license
for our firmware products that will allow it to perform customization, or
non-recurring engineering work, to the firmware in accordance with customer
specified requirements. Phoenix provides all the customer support obligations in
Japan for the firmware and the firmware customization it develops. We pay
Phoenix a commission of 20% of the net licensing and/or royalty revenue
specified under each license; and 80% of the
14
<PAGE>
net revenues for customization and non-recurring engineering work. We believe
that the terms of this agreement are no less favorable than we would have
obtained from an unaffiliated party. During fiscal year 2000, the Company
generated revenue of $752,000 and incurred distribution fees of $798,000 under
this Technology Distributor Agreement.
COMPENSATION COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act that
might incorporate this Proxy Statement or future filings with the SEC, in whole
or in part, the following report shall not be deemed to be incorporated by
reference into any such filing.
The Board of Directors of the Company has delegated to the Compensation
Committee of the Board of Directors (the "Committee") the authority to establish
and administer the Company's compensation programs. The Committee is comprised
of Raymond J. Farnham, John R. Harding and E. Thomas Hart, three independent
directors. The Committee is responsible for: (i) determining the most effective
total executive compensation strategy, based upon the business needs of the
Company and consistent with stockholders' interests; (ii) administering the
Company's executive compensation plans, programs and policies; (iii) monitoring
corporate performance and its relationship to compensation of executive
officers; and (iv) making appropriate recommendations concerning matters of
executive compensation.
Compensation Philosophy
inSilicon's philosophy in setting its compensation policies for executive
officers is to maximize stockholder value over time. The Compensation Committee
sets inSilicon's compensation policies applicable to the executive officers,
including the Chief Executive Officer, and evaluates the performance of such
officers. The Committee strongly believes that executive compensation should be
directly linked to continuous improvements in individual and corporate
performance and increases in stockholder value. The programs adopted by the
Compensation Committee are designed to:
o provide a competitive total compensation package that enables
inSilicon to attract and retain key executive talent,
o align all pay programs with inSilicon's annual and long-term
business strategies and objectives, and
o provide variable compensation opportunities that are directly linked
to the performance of inSilicon and that link executive reward to
stockholder return.
The Company considers the following key criteria when determining
executive compensation:
o the Company's financial performance,
o the individual's performance, including the promotion and the
maintenance of the Company's corporate values, and
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<PAGE>
o the compensation packages of executive officers in similar positions
in companies of comparable size, geographic region or industry.
The Committee believes that it is in the best interests of stockholders
for inSilicon's executive officers (as well as for the members of the Board of
Directors and certain other individuals) to emphasize longer-term compensation
incentives for executives as it believes that these longer-term incentives help
motivate the executives to better achieve inSilicon's corporate performance
goals, thereby more directly contributing to stockholder value. These incentives
include programs designed to encourage ownership of inSilicon stock.
Components of Executive Compensation
The Committee intends to provide compensation programs for its executive
officers, including the Chief Executive Officer, that are competitive within the
industry. The Compensation Committee focuses primarily on the following three
components in forming the total compensation package for its executive officers:
o Base Salary
o Incentive Bonuses
o Long-Term Incentives
Base Salary. The Committee, together with the Board of Directors,
subjectively evaluates the experience and level of performance of each executive
officer and reviews relevant market data in order to determine appropriate base
pay levels.
Incentive Bonuses. During fiscal year 2000, the executive officers of
inSilicon were eligible for quarterly and/or annual cash incentive bonuses. The
bonus targets for each executive officer were determined based upon the
individual's position and experience, and relevant market data. The bonus
amounts earned were contingent upon the performance of the individual or the
Company as measured by qualitative or quantitative factors. Such quantitative
factors included the achievement of defined objectives related to departmental
goals, Company revenue and Company earnings per share.
Long-Term Incentives. The Committee provides inSilicon's executive
officers with long-term incentive awards, the most significant of which includes
the granting of stock options. The Committee believes that stock options provide
inSilicon's executive officers with the opportunity to share in the appreciation
of the value of the stock, and that stock options therefore motivate an
executive to maximize long-term stockholder value. The options utilize vesting
periods in order to encourage key employees to continue to be employed by
inSilicon.
The Committee is responsible for determining who should receive stock
option grants, when the grants should be made, the exercise price per share and
the number of shares to be granted. The number of shares granted to each
executive officer, including the Chief Executive Officer, is based upon
individual or corporate performance as determined by the Committee. The stock
options generally vest over a four-year period, although a portion of the
vesting of certain grants may be accelerated upon the achievement of measurable
performance criteria established as of the date of grant.
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Compensation of Chief Executive Officer During Fiscal Year 2000
Wayne C. Cantwell has served as the Company's President and Chief
Executive Officer since November 1999. His base salary for fiscal year 2000 was
$200,000, and he was awarded a bonus of $100,625 during the year.
Compensation for the Chief Executive Officer during fiscal year 2000 was
determined using criteria and methodologies similar to that discussed above for
executive officers in general. The Compensation Committee reviewed and
considered relevant compensation data for Chief Executive Officers of companies
of comparable size within the semiconductor and software industries in
determining Mr. Cantwell's compensation during fiscal year 2000.
Summary
The Compensation Committee believes that its executive compensation
philosophy and practices serve the best interests of inSilicon and inSilicon's
stockholders.
Submitted by: Raymond J. Farnham, Chair
John R. Harding
E. Thomas Hart
AUDIT COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act that
might incorporate this Proxy Statement or future filings with the SEC, in whole
or in part, the following report shall not be deemed to be incorporated by
reference into any such filing.
Membership and Role of the Audit Committee
The Audit Committee consists of the following members of the Company's
Board of Directors: Raymond J. Farnham, John R. Harding and E. Thomas Hart. Each
of the members of the Audit Committee is independent as defined under the
National Association of Securities Dealers' listing standards. The Audit
Committee operates under a written charter adopted by the Board of Directors,
which is included in this Proxy Statement as Appendix A.
The primary function of the Audit Committee is to provide advice with
respect to the Corporation's financial matters and to assist the Board of
Directors in fulfilling its oversight responsibilities regarding finance,
accounting, tax and legal compliance. The Audit Committee's primary duties and
responsibilities are to: (1) serve as an independent and objective party to
monitor the Corporation's financial reporting process and internal control
system; (2) review and appraise the audit efforts of the Corporation's
independent accountants; (3) evaluate the Corporation's quarterly financial
performance as well as its compliance with laws and regulations; (4) oversee
management's establishment and enforcement of financial policies and business
practices; and (5) provide an open avenue of communication among the independent
accountants, financial and senior management, counsel and the Board of
Directors.
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Review of the Company's Audited Financial Statements for the Fiscal Year ended
September 30, 2000
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended September 30, 2000 with the
Company's management. The Audit Committee has discussed with Ernst & Young LLP,
the Company's independent public accountants, the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
The Audit Committee has also received the written disclosures and the
letter from Ernst & Young LLP required by Independence Standards Board Standard
No. 1 (Independence Discussion with Audit Committees) and the Audit Committee
has discussed the independence of Ernst & Young LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2000 for filing with the SEC.
Submitted by: John R. Harding, Chair
Raymond J. Farnham
E. Thomas Hart
STOCK PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act that
might incorporate this Proxy Statement or future filings with the SEC, in whole
or in part, the following graph shall not be deemed to be incorporated by
reference into any such filing.
This graph below compares the total return on inSilicon Corporation common
stock and certain indices from March 23, 2000, the date inSilicon Corporation
common stock began trading on the Nasdaq National Market, and the last day of
fiscal year 2000. The comparisons in the graph below are based upon historical
data and are not indicative of, nor intended to forecast, future performance of
the Company's Common Stock.
18
<PAGE>
COMPARISON OF 6 MONTH CUMULATIVE TOTAL RETURN*
AMONG INSILICON CORPORATION, THE NASDAQ STOCK MARKET (US) INDEX
AND THE CHASE H & Q TECHNOLOGY INDEX
[PERFORMANCE GRAPH]
3/22/00 3/00 6/00 9/00
-----------------------------------------
INSILICON CORPORATION $ 100.00 $ 131.78 $ 130.21 $ 120.83
NASDAQ STOCK MARKET (U.S.) 100.00 94.10 81.81 75.30
CHASE H & Q TECHNOLOGY 100.00 90.01 80.84 79.37
* $100 INVESTMENT ON 3/22/OO IN STOCK MARKET OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDED SEPTEMBER 30.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Proposals of stockholders intended to be included in the Company's proxy
statement for the 2002 Annual Meeting of Stockholders must be received by Joseph
Hustein, Vice President and General Counsel, inSilicon Corporation, 411 East
Plumeria Drive, San Jose, California 95134, no later than September 7, 2001. If
the Company is not notified of a stockholder proposal by November 6, 2001, then
the proxies held by management of the Company provide discretionary authority to
vote against such stockholder proposal, even though such proposal is not
discussed in the Proxy Statement.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
September 30, 2000 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the SEC. Stockholders
may obtain a copy of this report, without charge, by writing to Joseph Hustein,
Vice
19
<PAGE>
President and General Counsel, inSilicon Corporation, 411 East Plumeria Drive,
San Jose, California 95134.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
to the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies in the enclosed form will be voted in respect thereof as
the proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Joseph E. Hustein
JOSEPH E. HUSTEIN
Vice President, General Counsel
and Secretary
December 28, 2000
San Jose, California
20
<PAGE>
APPENDIX A
INSILICON CORPORATION
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Purpose
The purpose of the Audit Committee established by this charter will be to
oversee the corporate financial reporting process and the internal and external
audits of inSilicon Corporation (the "Company"). The Audit Committee will
undertake those specific duties, responsibilities and processes listed below,
and such other duties as the Board of Directors (the "Board") from time to time
may prescribe. It fulfilling this role, the Audit Committee will ensure that
there is effective communication among the Board, management and outside
auditors. In this way, it will help the Board fulfill its oversight
responsibility to the stockholders and the investment community relating to the
Company's financial statements and financial reporting process.
Charter Review
The Audit Committee will review and reassess the adequacy of this charter
at least once a year. This review is initially intended to be conducted at the
first Audit Committee meeting following the Company's annual meeting of
stockholders, but may be conducted at any time the Audit Committee desires to do
so. In addition, to the extent and in the manner that the Company is legally
required to do by the rules of the Securities and Exchange Commission (the
"SEC"), the Company will publicly file this charter (as then constituted).
Membership
The Audit Committee will be comprised of at least three members of the
Board. The members will be appointed by and serve at the pleasure of the Board.
The members of the Audit Committee will not be officers or employees of the
Company. Each member of the Audit Committee will be an "independent director,"
as defined by and to the extent required by the rules of the National
Association of Securities Dealers, Inc. ("NASD").
Each member of the Audit Committee also must be able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement, or must become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. In addition, at least one member of the Audit Committee must have
past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
Responsibilities
The responsibilities of the Audit Committee include:
A-1
<PAGE>
1. Recommending outside auditors for approval by the Board and, if
necessary, the termination of the outside auditors presently
engaged;
2. Reviewing the plan for the audit and related services at least
annually;
3. Reviewing audit results and annual and interim financial statements
and discussing the audited financial statements with both the
Company's outside auditors and the Company's management prior to any
public filing of those reports;
4. Reviewing any significant disputes between management and the
outside auditors that arise in connection with the preparation of
the audited financial statements;
5. Reviewing major issues regarding accounting principles and practices
that could significantly impact the Company's financial statements;
6. Discussing with the Company's outside auditors the quality of
accounting principles applied in the Company's financial statements
and the other matters required by SAS 61 (including amendments or
supplements), such as management judgments and accounting estimates
that affect financial statements, significant new accounting
policies and disagreements with management;
7. Ensuring the receipt of, and reviewing, a formal written statement
from the Company's outside auditors delineating all relationships
between the outside auditor and the Company, consistent with
Independence Standards Board Standard 1;
8. Reviewing and actively discussing with the Company's outside
auditors the auditor's independence, including any disclosed
relationship or service that may impact the objectivity and
independence of the outside auditor;
9. Taking, or recommending that the Board take, appropriate action to
oversee the independence of the outside auditor;
10. Overseeing the adequacy of the Company's system of internal
accounting controls, including obtaining from the outside auditors
management letters or summaries on such internal accounting
controls;
11. Overseeing the Company's procedures for preparing published annual
statements and management commentaries;
12. Overseeing the effectiveness of the internal audit function;
13. Overseeing the Company's compliance with SEC requirements for
disclosure of auditor's services and Audit Committee members and
activities; and
14. Ensuring that the Company make any appropriate certifications
required by the NASD.
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board delegates to it.
Finally, the Audit Committee will ensure that the outside auditors
understand both (i) their ultimate accountability to the Board and to the Audit
Committee, as representatives of the Company's stockholders, and (ii) the
Board's and the Audit Committee's ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the
A-2
<PAGE>
Company's outside auditors (or to nominate the outside auditor to be proposed
for stockholder approval in any proxy statement).
Meetings
The Audit Committee will meet separately with the President and Chief
Executive Officer and separately with the Chief Financial Officer of the Company
at least quarterly to review the financial affairs of the Company. The Audit
Committee will meet with the Company's outside auditors upon the completion of
the annual audit (which meeting may be held without the presence of management),
and at such other times as it deems appropriate, to review the outside auditors'
examination and management report.
Reports
The Audit Committee will to the extent deemed appropriate record its
summaries of recommendations to the Board in written form that will be
incorporated as a part of the minutes of the Board. To the extent required, the
Audit Committee also will prepare and sign a report for inclusion in the
Company's proxy statement for its annual meeting of stockholders.
A-3
<PAGE>
PROXY
INSILICON CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS, FEBRUARY 5, 2001
(See Proxy Statement for discussion of items)
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders of INSILICON CORPORATION and hereby appoints WAYNE C.
CANTWELL and WILLIAM E. MEYER, or any of them, each with power of substitution,
as proxies to represent the undersigned at the Annual Meeting of Stockholders of
INSILICON CORPORATION, to be held on Monday, February 5, 2001, at 10:00 a.m., at
the Company's offices, 411 E. Plumeria Drive, San Jose, California, and any
adjournment thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present on the following matters set forth on the
reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY
WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED
FOR THE NOMINEE FOR ELECTION AND FOR THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
|X| Please mark votes as
in this example.
CONTINUED FROM OTHER SIDE
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
--------------------------------------------------------------------------------
1. ELECTION OF DIRECTOR
Election of E. Thomas Hart to serve as director for a three-year term.
|_| FOR |_| WITHHELD
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
2001
|_| FOR |_| AGAINST |_| ABSTAIN
The shares represented by this Proxy Card will be voted as specified above, but
if no specification is made, they will be voted FOR items 1 and 2 and at the
discretion of the proxies on any other matter that may properly come before the
Annual Meeting or any adjournment or continuation thereof.
|_| MARK HERE FOR ADDRESS CHANGE |_| MARK HERE IF YOU PLAN TO
AND NOTE AT LEFT ATTEND THE MEETING
NOTE: Please sign exactly as the name or names appear on stock certificate (as
indicated hereon). If the shares are issued in the names of two or more persons,
all such persons should sign the proxy. A proxy executed by a corporation should
be signed in its name by its authorized officers. Executors, administrators,
trustees, and partners should indicate their positions when signing.
Please sign, date and return properly in the accompanying envelope.
___________________________________ ________________________________
Signature Date
___________________________________ ________________________________
Signature Date
