SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
MICRO LINEAR CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(1)(2) or Item
22(a)(2) of Schedule 14A. [ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
<PAGE>
[MICRO LINEAR LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Micro Linear Corporation, a Delaware corporation (the "Company"), will be held
on Wednesday, May 26, 1999, at 11:00 a.m., local time, at the offices of Wilson
Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California,
legal counsel to the Company, for the following purposes:
1. To elect five directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers, LLP as independent
auditors for the Company for the 1999 fiscal year.
3. To transact such other business as may properly come before the meeting
or any adjournment 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 April 9, 1999
are entitled to notice of and to vote at the meeting. All stockholders are
cordially invited to attend the meeting in person. However, to assure your
representation at the meeting, you are urged to mark, sign and return the
enclosed proxy as promptly as possible in the postage-prepaid envelope enclosed
for that purpose. Any stockholder attending the meeting may vote in person even
if such stockholder has returned a proxy.
FOR THE BOARD OF DIRECTORS
/s/ JEFFREY D. SAPER
--------------------
Jeffrey D. Saper
Secretary
San Jose, California
April 30, 1999
IMPORTANT: Whether or not you plan to attend the meeting, you are requested
to complete and promptly return the enclosed proxy in the envelope provided.
<PAGE>
MICRO LINEAR CORPORATION
2092 CONCOURSE DRIVE
SAN JOSE, CALIFORNIA 95131
PROXY STATEMENT FOR 1999
ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors
of Micro Linear Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held on Wednesday, May 26, 1999, at 11:00 a.m., local time,
or at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill
Road, Palo Alto, California, legal counsel to the Company.
The proxy solicitation materials were mailed on or about April 28,
1999 to all stockholders of record on April 9, 1999 (the "Record Date").
INFORMATION CONCERNING SOLICITATION AND VOTING
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it any time before its use by delivering to the Secretary of the
Company at the above address of the Company written notice of revocation or a
duly executed proxy bearing a later date, or by attending the meeting and voting
in person.
Voting and Solicitation
Proxies properly executed, duly returned to the Company and not
revoked, will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted as the management of the
Company may propose. If any matter not described in this Proxy Statement is
properly presented for action at the meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote according to their best
judgment.
Each stockholder is entitled to one vote for each share of Common
Stock on all matters presented at the meeting. The required quorum for the
transaction of business at the Annual Meeting is a majority of the votes
eligible to be cast by holders of shares of Common Stock issued and outstanding
on the Record Date. Shares that are voted "FOR," "AGAINST," "WITHHELD" or
"ABSTAIN" are treated as being present at the meeting for purposes of
establishing a quorum and are also treated as shares entitled to vote at the
Annual Meeting (the "Votes Cast") with respect to such matter. Abstentions will
have the same effect as a vote against a proposal. Broker non-votes will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, but will not be counted for purposes of determining the
number of Votes Cast with respect to the particular proposal on which a broker
has expressly not voted. Thus, a broker non-vote will not affect the outcome of
the voting on a particular proposal.
The cost of soliciting proxies will be borne by the Company. The
Company may also reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers, and employees, without additional
compensation, personally or by telephone, facsimile or telegram.
Deadline for Receipt of Stockholder Proposals
Stockholders of the Company may submit proper proposals for inclusion
in the Company's proxy statement and for consideration at the next annual
meeting of its stockholders by submitting their proposals in writing to the
Secretary of the Company in a timely manner. In order to be included in the
Company's proxy materials for the annual meeting of stockholders to be held in
the year 2000, stockholder proposals must be received by the Secretary of the
Company no later than December 31, 1999, and must otherwise comply with the
requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
In addition, the Company's Bylaws establish an advance notice
procedure with regard to certain matters, including stockholder proposals not
included in the Company's proxy statement, to be brought before an annual
meeting of stockholders. For nominations or other business to be properly
brought before the meeting by a stockholder, such stockholder must provide
written notice delivered to the Secretary of the Company not less than 120 days
prior to the first anniversary of the preceding year's annual meeting of
stockholders. A copy of the full text of the Bylaw provision discussed above may
be obtained by writing to the Secretary of the Company. All notices of proposals
by stockholders, whether or not included in the Company's proxy materials,
should be sent to Micro Linear Corporation, 2092 Concourse Drive, San Jose,
California 95131, Attention: Corporate Secretary.
The attached proxy card grants the proxy holders discretionary
authority to vote on any matter raised at the Annual Meeting. If a stockholder
intends to submit a proposal at the Company's 2000 Annual Meeting, which is not
eligible for inclusion in the proxy statement and form of proxy relating to that
meeting, the stockholder must do so no later than March 15, 2000. If such a
stockholder fails to comply with the foregoing notice provision, the proxy
holders will be allowed to use their discretionary voting authority when the
proposal is raised at the 2000 Annual Meeting.
Record Date and Principal Share Ownership
Stockholders of record at the close of business on April 9, 1999 are
entitled to notice of the meeting and to vote at the meeting. At the record
date, 10,834,810 shares of the Company's Common Stock, $0.001 par value per
share, were issued, outstanding and eligible to be voted at the meeting. The
following table sets forth the beneficial ownership of the Company's Common
Stock as of April 9, 1999, by each of the holders of more than five percent of
the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
Name Number of Shares Percent of Total
<S> <C> <C>
FMR Corp. (1) 1,182,800 10.9%
82 Devonshire Street
Boston, MA 02109
Arthur B. Stabenow (2) 828,576 7.5%
24877 Olive Tree Lane
Los Altos Hills, CA 94024
<FN>
(1) Based solely on information contained in a Schedule 13G/A filed with
the Securities and Exchange Commission on February 12, 1999.
(2) Based solely on information obtained from Mr. Stabenow. Includes
218,002 shares issuable upon the exercise of options to purchase Common Stock
which are exercisable within 60 days of April 9, 1999. Also includes 1,300
shares held by Mr. Stabenow's wife.
</FN>
</TABLE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of five directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's five nominees named below, all of
whom are presently directors of the Company. If any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for the nominee designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next Annual Meeting or until a
successor has been elected and qualified.
Vote Required; Recommendation of Board of Directors
The five candidates receiving the highest number of "FOR" votes shall
be elected to the Company's Board of Directors. An abstention will have the same
effect as a vote withheld for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW:
<TABLE>
<CAPTION>
Name Age Principal Occupation
<S> <C> <C>
David L. Gellatly 55 Chairman of the Board of Directors, President and Chief Executive
Officer of the Company
Roger A. Smullen 61 Chairman of the Board of Directors, Applied Micro Circuits
Corporation
Jeffrey D. West 48 Owner, Miramar Ventures
Joseph D. Rizzi 55 General Partner, Matrix Partners
William B. Pohlman 56 Vice President, Microprocessor Group and Director of Development
Efficiency Programs, Intel Corporation
</TABLE>
Except as set forth below, each nominee has been engaged in his
principal occupation described above during the past five years. There is no
family relationship among any directors or executive officers of the Company.
Mr. Gellatly has been a director of the Company since December 1997, and
has served as Chief Executive Officer, President and Chairman of the Board since
January 1999. Since 1982, Mr. Gellatly has been the principal of New Technology
Marketing, a high technology marketing consulting company. Clients included
Lucent Technology, IBM, National Semiconductor, Cyrix, Intel Corporation, Apple
Corporation, and Siemens. Prior to 1982, Mr. Gellatly worked at Intel
Corporation for five years where he served in various marketing management
positions in the microprocessor operation. Mr. Gellatly received his MSEE from
the University of Minnesota.
Mr. Smullen has been a director of the Company since April 1986. Since
August 1989, Mr. Smullen has been Chairman of the Board of Applied Micro
Circuits Corporation ("AMCC"). From September 1994 to December 1995, Mr. Smullen
was President and Chief Executive Officer of Advance Systems Products, Inc.
("AdvanSys"), a provider of computer add-in cards. From March 1988 to June 1990,
Mr. Smullen was President and Chief Executive Officer of Plus Logic Corporation,
a semiconductor manufacturer, and from 1983 to 1987, was Chief Executive Officer
of AMCC.
Mr. West has been a director of the Company since October 1983. Since 1986,
Mr. West has operated Miramar Ventures, a private consulting firm. Prior to
1986, Mr. West was a general partner of Oak Investment Partners, a venture
capital investment firm.
Mr. Rizzi has been a director of the Company since January 1997.
Since March 1986, Mr. Rizzi has served as a general partner of Matrix Partners,
a venture capital firm. Mr. Rizzi also serves as a member of the board of
directors of Veritas Software Corp., a developer of storage management software,
Sandisk Corporation, a manufacturer of data, image and audio storage products,
and Overland Data, Inc., a developer of magnetic tape data storage systems.
Mr. Pohlman has been a director of the Company since April 1999. Mr.
Pohlman currently serves as Vice President, Microprocessor Group and Director of
Development Efficiency Programs of Intel Corporation, a semiconductor
manufacturer. Since 1985, he has held various positions with Intel Corporation.
Board Meetings and Committees
The Board of Directors of the Company held five (5) meetings during
fiscal 1998.
The Audit Committee, which in fiscal 1998 consisted of Messrs.
Smullen and Gellatly, held two (2) meetings during fiscal 1998. The Audit
Committee reviews the financial statements and the internal financial reporting
system and controls of the Company with the Company's management and independent
auditors, recommends resolutions for any dispute between the Company's
management and its auditors, and reviews other matters relating to the
relationship of the Company with its auditors.
The Compensation Committee, which in fiscal 1998 consisted of Messrs.
Rizzi and West, held four (4) meetings during fiscal 1998. The Compensation
Committee makes recommendations to the Board of Directors regarding the
Company's executive compensation policies and administers the Company's stock
option plans and employee stock purchase plan.
The Board of Directors has a Stock Option Approval Committee,
currently consisting of Mr. Gellatly, who has the authority to grant options
under the Company's stock option plans to eligible persons who are not subject
to liability under Section 16(b) of the Exchange Act. Such Committee may not
grant an option to purchase more than 30,000 shares of Common Stock to any one
person.
The Board of Directors currently has no nominating committee or
committee performing a similar function.
Each director attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors held during fiscal 1998 and (ii)
the total number of meetings held by all committees of the Board of Directors
during fiscal 1998 on which such director served.
Compensation of Directors
Directors receive no cash remuneration for serving on the Board of
Directors. Non-employee directors participate in Company's 1994 Director Option
Plan (the "Director Plan"). Under the Director Plan, each non-employee director
who joins the Board is automatically granted a nonstatutory option to purchase
10,000 shares of Common Stock on the date upon which such person first becomes a
director (the "Initial Grant"). In addition, each non-employee director
automatically receives a nonstatutory option to purchase 7,000 shares of Common
Stock upon such director's annual re-election to the Board, provided the
director has been a member of the Board for at least six months upon the date of
re-election (the "Annual Grant"). The exercise price of each option granted
under the Director Plan must be equal to the fair market value of the Common
Stock on the date of grant. The Initial Grant vests at the rate of twenty-five
percent (25%) of the option shares upon the first and second anniversaries of
the date of grant and 1/48th of the option shares per month thereafter and the
Annual Grant vests monthly over a twelve month period. Options granted under the
Director Plan have a term of ten years unless terminated sooner, whether upon
termination of the optionee's status as a director or otherwise pursuant to the
Director Plan. Messrs. Gellatly, Smullen, West and Rizzi each received an Annual
Grant of 7,000 shares at an exercise price of $4.438 per share on June 3, 1998.
Messrs. Gellatly and Rizzi each received a grant of 7,000 shares at an exercise
price of $5.813 per share on April 28, 1998 under the Company's 1998
Nonstatutory Stock Plan (the "NSO Plan"). Mr. Gellatly was not an officer of the
Company at the time of these grants.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers, LLP,
independent auditors, to audit the financial statements of the Company for the
1999 fiscal year. This nomination is being presented to the stockholders for
ratification at the meeting. PricewaterhouseCoopers has served as the Company's
independent auditors since March 1997. A representative of
PricewaterhouseCoopers is expected to be present at the meeting, will have the
opportunity to make a statement, and is expected to be available to respond to
appropriate questions.
Ernst & Young LLP had served as the Company's independent auditors
from the Company's inception until the Board of Directors' decision to engage
PricewaterhouseCoopers in March 1997. The report of Ernst & Young LLP on the
Company's financial statements for fiscal year 1996 contained no adverse opinion
or disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles. During such fiscal year and during the
subsequent interim period ending March 28, 1997, there were no disagreements
with Ernst & Young on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, nor did Ernst &
Young advise the Company of any concern or circumstance relating to any such
matter. In addition, the Company has had no dispute with Ernst & Young relating
to its fees for services. The change in accountants was approved by the Board of
Directors. During fiscal year 1996 and through March 28, 1997, the Company did
not consult with PricewaterhouseCoopers, LLP on any accounting or financial
reporting matters.
Vote Required; Recommendation of Board of Directors
The affirmative vote of a majority of the Votes Cast on the proposal
at the Annual Meeting is required to ratify the Board's selection. If the
stockholders reject the nomination, the Board will reconsider its selection.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
ADDITIONAL INFORMATION
Security Ownership of Management
The following table sets forth the beneficial ownership of the
Company's Common Stock as of April 9, 1999 (i) by each director of the Company,
(ii) by the Company's Chief Executive Officer during fiscal 1998 and the four
other most highly compensated executive officers employed by the Company at the
end of fiscal 1998 (such officers are collectively referred to as the "Named
Executive Officers") and (iii) by all current directors and executive officers
as a group:
<TABLE>
<CAPTION>
Name Number of Shares Percent of Total
<S> <C> <C>
David L. Gellalty (1) 14,500 *
Carlos Laber (2) 151,075 1.4%
Chris Ladas (3) 81,913 *
J. Philip Russell (4) 124,503 1.1
William B. Pohlman -- --
Joseph D. Rizzi (5) 127,433 1.2
Roger A. Smullen (6) 91,200 *
Jeffrey D. West (7) 112,048 1.0
Arthur B. Stabenow (8) 828,576 5.5
Paul E. Standish (9) 219,111 2.2
All officers and directors as a group (11 persons) (10) 1,766,701 14.0
<FN>
* Less than 1%.
(1) Includes 9,500 shares issuable upon the exercise of options to purchase
Common Stock which are exercisable within 60 days of April 9, 1999.
(2) Includes 131,037 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999.
(3) Includes 64,166 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999.
(4) Includes 100,833 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999.
(5) Includes 18,833 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999.
(6) Includes 52,800 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999.
(7) Includes 38,000 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999.
(8) Includes 218,002 shares issuable upon the exercise of options to
purchase common Stock which are exercisable within 60 days of April 9, 1999.
Also includes 1,300 shares held by Mr. Stabenow's wife. Mr. Stabenow left the
Company in January 1999.
(9) Includes 208,334 shares issuable upon the exercise of options to
purchase Common Stock which are exercisable within 60 days of April 9, 1999. Mr.
Standish left the Company in April 1999.
(10) Includes 854,588 shares issuable upon the exercise of options to
purchase common Stock which are exercisable within 60 days of April 9, 1999.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation
paid to the Named Executive Officers during the Company's last three fiscal
years.
Summary Compensation Table
Annual Long-Term Compensation
Compensation
(1)
Name and Principal Position Fiscal Salary Bonus Stock Option All Other
Year Grants Compensation (2)
(# of Shares)
<S> <C> <C> <C> <C> <C>
Arthur B. Stabenow(3) 1998 $330,006 $159,000 60,000 $ 45,471
Former Chief Executive Officer 1997 330,006 215,000 60,000 39,573
1996 330,006 137,445 60,000 72,823
Chris Ladas 1998 222,643 22,648 70,000 12,774
Vice President, Operations 1997 213,065 38,425 30,000 31,846 (4)
1996 192,315 (5) 20,680 20,000 10,141
Paul E. Standish(6) 1998 199,720 23,310 70,000 6,388
Former Vice President, Marketing and 1997 185,007 42,643 30,000 6,334
Applications 1996 185,007 30,290 20,000 6,151
J. Philip Russell 1998 199,527 24,591 70,000 7,567
Vice President, Finance and Administration 1997 174,999 42,100 30,000 6,843
1996 174,999 25,300 20,000 6,311
Carlos Laber 1998 199,335 25,095 70,000 4,763
Vice President, Engineering 1997 165,003 36,920 30,000 5,034
1996 167,861 20,990 20,000 5,055
<FN>
(1)Excludes certain perquisites and other amounts which in the aggregate do
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus for
each such executive officer.
(2)Represents premiums paid by the Company for long term disability
insurance and life insurance for each of the Named Executive Officers and tax
return preparation fees for certain Named Executive Officers. Also includes,
with respect to Mr. Stabenow, reimbursement of approximately $25,300, $25,000
and $53,000 for certain personal travel expenses in fiscal 1998, 1997 and 1996,
respectively.
(3)Mr. Stabenow left the Company in January 1999.
(4)In fiscal 1997, Mr. Ladas earned approximately $22,000 of a payment
being made in connection with his relocation in fiscal 1996.
(5)Mr. Ladas joined the Company in January 1996.
(6)Mr. Standish left the Company in April 1999.
</FN>
</TABLE>
<PAGE>
Option Information
The following tables set forth information regarding stock options
granted to the Named Executive Officers during fiscal 1998, as well as options
held by such officers as of December 31, 1998, the last day of the Company's
1998 fiscal year.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Potential
Grants (1)(2) Realizable
Values at
Assumed-Annual-Rates
of
Stock-Price-Appreciation
(Through
Expiration
Date)(3)
Name Option Grants % of Total Exercise Expiration 5% 10%
Options Price ($/SH) Date
Granted
<S> <C> <C> <C> <C> <C> <C>
Arthur B. Stabenow 60,000 1.7% $ 4.750 01/27/08 $ 179,235 $ 454,217
Chris Ladas 30,000 0.9 7.375 01/27/08 139,143 352,616
40,000 1.1 4.750 03/05/08 119,490 302,811
Paul E. Standish 30,000 0.9 4.750 01/27/08 89,617 227,108
40,000 1.1 4.750 03/05/08 119,490 302,811
J. Philip Russell 30,000 0.9 4.750 01/27/08 89,617 227,108
40,000 1.1 4.750 03/05/08 119,490 302,811
Carlos Laber 30,000 0.9 4.750 01/27/08 89,617 227,108
40,000 1.1 4.750 03/05/08 119,490 302,811
<FN>
(1) All options were granted under the Company's 1991 Stock Option Plan (the
"Option Plan") or the NSO Plan and are subject to the terms of such plan.
Options vest cumulatively to the extent of 25% of the shares subject to
the option on the first anniversary of the date of grant, an additional
25% of the shares subject to the option on the second anniversary of the
date of grant, and an additional 1/48th of the shares subject to the
option at the end of each one-month period thereafter.
(2) The information in the table reflects the officers' participation in the
Company's option exchange programs in January 1998 and July 1998.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and are not an estimate or
projection of future prices for the Company's Common Stock.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Dollar Value of
Unexercised Unexercised
Options at In-the-Money
Fiscal Year Options at
End(1) Fiscal Year
End(2)
Name Shares Value Realized Vested Unvested Vested Unvested
Exercised
<S> <C> <C> <C> <C> <C> <C>
Arthur B. Stabenow -- -- 110,050 197,950 $ 38,388 $--(3)
Chris Ladas -- -- 55,833 124,167 -- (3) -- (3)
Paul E. Standish -- -- 206,667 121,334 421,320 -- (3)
J. Philip Russell 22,500 $137,813 34,666 117,334 -- (3) -- (3)
Carlos Laber -- -- 74,809 139,790 -- (3) -- (3)
<FN>
(1) The information in the table reflects the officers' participation in the Company's option exchange programs in January 1998 and
July 1998.
(2) Represents the difference between the exercise price of the options and the closing price of the Company's Common Stock on
December 31, 1998 of $4.125 per share.
(3) The exercise price of these options exceeded the closing price of the Company's Common Stock on December 31, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Ten Year Option Repricings
The following table sets forth certain information with respect to the
Company's exchange of outstanding options with certain of its officers. For
further information with respect to such option exchanges, see "Report of the
Compensation Committee of the Board of Directors."
Name Date Securities Market Price Exercise Price Length of
Underlying of Stock at at Time of Original Option
Options Time of Repricing Term Remaining
Repriced Repricing (1) (In Years) at
Date of Repricing
<S> <C> <C> <C> <C> <C>
Arthur B. Stabenow 07/30/98 60,000 $ 4.750 $11.125 7
07/30/98 60,000 4.750 11.625 9
07/30/98 60,000 4.750 7.375 10
Chris Ladas 01/27/98 30,000 7.375 11.625 9
07/30/98 30,000 4.750 7.375 10
07/30/98 30,000 4.750 7.375 10
07/30/98 40,000 4.750 7.250 10
4.750
Paul E. Standish 01/27/98 30,000 7.375 11.625 9
07/30/98 30,000 4.750 7.375 10
07/30/98 30,000 4.750 7.375 10
07/30/98 40,000 4.750 7.250 10
J. Philip Russell 01/27/98 30,000 7.375 11.625 9
07/30/98 30,000 4.750 7.375 10
07/30/98 30,000 4.750 7.375 10
07/30/98 40,000 4.750 7.250 10
Carlos Laber 01/27/98 30,000 7.375 11.625 10
07/30/98 40,000 4.750 7.250 10
<FN>
(1) The market price of the stock at the time of repricing is the new exercise price of each such option.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
During fiscal 1998 the Compensation Committee of the Board of Directors
consisted of Messrs. Rizzi and West, neither of whom is an officer or employee
of the Company. No member of the Compensation Committee or executive officer of
the Company has a relationship that would constitute an interlocking
relationship with executive officers or directors of another entity.
Report of the Compensation Committee of the Board of Directors
During fiscal 1998 the members of the Compensation Committee of the Board
of Directors were Messrs. Rizzi and West, each of whom is a non-employee
director. The Compensation Committee sets, reviews and administers the executive
compensation program of the Company. The role of the Compensation Committee is
to establish and recommend salaries and other compensation paid to executive
officers of the Company and to administer the Company's stock option plans and
employee stock purchase plan. The Company's Board of Directors reviews and
approves all stock option grants to employees (other than grants made by the
Stock Option Approval Committee) and all executive officer base salaries and
cash bonus payments.
Compensation Philosophy. The Company's compensation philosophy is that
cash compensation must (a) be competitive with other semiconductor companies of
comparable size in order to help motivate and retain existing staff and (b)
provide a strong incentive to achieve specific Company goals. The Company
believes that the use of stock options as a long-term incentive links the
interests of the employees to that of the stockholders and motivates key
employees to stay with the Company to a degree that is critical to the Company's
long-term success.
Components of Executive Compensation. The principal cash components of
executive compensation are base salary and cash bonuses. The equity component
consists of stock options.
Base salary is set for executives commensurate with each officer's level
of responsibility and within the parameters of companies of comparable size
within the Company's industry. The Compensation Committee conducts an annual
survey of companies in the Company's industry to determine whether the Company's
executive base compensation is within the competitive range. In 1998, the
Compensation Committee determined that executive officer salaries should be
reviewed on a calendar-year basis. During 1998, executive officer base monthly
salaries were not increased from the base monthly salaries for fiscal 1997. The
base monthly salary for the Chief Executive Officer was not raised in fiscal
1998, compared to fiscal 1997.
It is the policy of the Company that variable, at-risk bonus compensation
should comprise a meaningful portion of the annual executive compensation and
should be determined by the performance of each executive officer, based on
stated individual goals and the overall earnings performance of the Company. For
each executive officer, a target bonus award is established each fiscal quarter.
The actual bonus award for executive officers, other than Mr. Gellatly, is
determined by the Chief Executive Officer, with review by the Compensation
Committee, and paid quarterly. For Mr. Gellatly, the actual bonus payment is
determined by the Compensation Committee, and paid on a semi-annual basis.
During fiscal 1998, the target quarterly bonus for executive officers ranged
from $15,000 to $20,000, and the semi-annual target bonuses for Mr. Stabenow,
the former Chief Executive Officer, were $165,000 for both the first and second
halves of fiscal 1998. For 1998, the amount of annual bonus award paid to the
former Chief Executive Officer was $159,000.
Stock options are generally granted when an executive joins the Company
and on an annual basis thereafter. The options granted to each executive vest
over a four or five year period. In addition to the stock option program,
executives are eligible to participate in the Company's 1994 Employee Stock
Purchase Plan (the "Purchase Plan") pursuant to which stock may be purchased at
85% of the lower of the fair market value at the beginning and end of each
offering period (with the amount of deduction equal to up to a maximum of 10% of
salary).
In January 1998, the Company's Board of Directors approved an option
exchange program for all employees who were not directors of the Company whereby
all such employees that held options with exercise prices in excess of $7.50 per
share were offered the opportunity to exchange such options for new options at
$7.375 per share, which was the fair market value of the Common Stock on the
date of the exchange program. In order to participate in the option exchange
program, employees were required to restart the vesting period for their options
such that the vesting commencement date would be January 27, 1998. The Board
undertook this action in light of the then recent reduction in the trading price
of the Company's Common Stock and in consideration of the importance of the
Company of retaining its employees by offering them appropriate equity
incentives. The Board also considered the highly competitive environment for
obtaining and retaining qualified employees and the overall benefit to the
Company's stockholders from a highly motivated group of employees.
In July 1998, the Company's Board of Directors approved an additional
option exchange program whereby all employees that held options with exercise
prices in excess of $4.75 per share were offered the opportunity to exchange
such options for new options at $4.75 per share, which was the fair market value
of the Common Stock on the date of the exchange program. In order to participate
in the option exchange program, employees were required to restart the vesting
period for their options such that the vesting commencement date would be July
30, 1998. The Board undertook this action in light of the then recent reduction
in the trading price of the Company's Common Stock and in consideration of the
importance of the Company of retaining its employees by offering them
appropriate equity incentives. The Board also considered the highly competitive
environment for obtaining and retaining qualified employees and the overall
benefit to the Company's stockholders from a highly motivated group of
employees.
Other elements of executive compensation include a supplemental life
insurance program, supplemental long-term disability insurance, Company-wide
medical benefits and the ability to defer compensation pursuant to a 401(k)
plan. The Company matches annual contributions under the 401(k) plan up to a
maximum of $2,080.
The Company's Chief Executive Officer does not receive any other special
or additional compensation other than as described herein or in the Summary
Compensation Table.
The Compensation Committee has considered the impact of Section 162(m) of
the Code, and the regulations promulgated thereunder (the "Section"). The
Section disallows a tax deduction for any publicly-held corporation for
individual compensation exceeding $1 million in any taxable year for any of the
Named Executive Officers, unless such compensation is performance-based. Since
the cash compensation of each of the Named Executive Officers is below the $1
million threshold and the Compensation Committee believes that any options
granted under the Option Plan will meet the requirements of being
performance-based, the Compensation Committee believes that the Section to date
has not reduced and in the future will not reduce the tax deduction available to
the Company. The Company's policy is to qualify, to the extent reasonable, its
executive officers' compensation for deductibility under applicable tax laws.
However, the Compensation Committee believes that its primary responsibility is
to provide a compensation program that will attract, retain and reward the
executive talent necessary to the Company's success. Consequently, the
Compensation Committee recognizes that the loss of a tax deduction could be
necessary in some circumstances.
Compensation Committee of the Board of Directors
Joseph D. Rizzi
Jeffrey D. West
<PAGE>
Comparison of Total Cumulative Stockholder Return
The following graph sets forth the Company's total cumulative
stockholder return compared to the Standard & Poor's 500 Index and the Standard
& Poor's Semiconductor Index for the period October 13, 1994 (the date of the
Company's initial public offering) through December 31, 1998. Total stockholder
return assumes $100 invested at the beginning of the period in the Common Stock
of the Company, the stocks represented in the Standard & Poor's 500 Index and
the stocks represented in the Standard & Poor's Semiconductor Index,
respectively. Total return also assumes reinvestment of dividends; the Company
has paid no dividends on its Common Stock. Historical stock price performance
should not be relied upon as indicative of future stock price performance.
<TABLE>
<CAPTION>
S&P 500 S&P Semiconductor Index Micro Linear Corporation
<S> <C> <C> <C>
10/14/94 100 100 100
12/30/94 98 110 91
03/31/94 107 127 127
06/30/95 116 177 174
09/29/95 125 192 168
S&P 500 S&P Semiconductor Index Micro Linear Corporation
12/29/95 131 149 110
3/29/96 137 93 98
6/28/96 142 92 81
9/27/96 145 100 86
12/27/96 160 129 87
S&P 500 S&P Semiconductor Index Micro Linear Corporation
03/27/97 165 296 131
06/26/97 188 306 110
09/25/97 200 391 107
12/24/97 199 285 77
S&P 500 S&P Semiconductor Index Micro Linear Corporation
03/31/98 234 285 69
06/30/98 242 257 46
09/30/98 223 286 38
12/31/98 262 394 45
</TABLE>
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on its review of copies of filings under Section 16(a)
of the Exchange Act, received by it, or written representations from certain
reporting persons, the Company believes that during fiscal 1998 all Section 16
filing requirements were met.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors of the Company may recommend.
THE BOARD OF DIRECTORS
San Jose, California
April 30, 1999
<PAGE>
MICRO LINEAR CORPORATION
PROXY SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David L. Gellatly and J. Philip
Russell, jointly and severally, proxies with full power of substitution, to vote
all shares of Common Stock of Micro Linear Corporation, a Delaware corporation,
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
to be held at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page
Mill Road, Palo Alto, California, legal counsel to the Company, on May 26, 1999
at 11:00 a.m., local time, or any adjournment thereof. The proxies are being
directed to vote as specified on the reverse side hereof, or, if no
specification is made, FOR the election of directors, FOR the appointment of
PricewaterhouseCoopers, LLP as independent auditors and in accordance with their
discretion on such other matters that may properly come before the meeting.
THE DIRECTORS RECOMMEND A FOR VOTE ON EACH ITEM.
(Continued and to be signed on
reverse side.)
- -------------------------- FOLD AND DETACH HERE --------------------------------
Please mark your votes as this: [X]
1. Election of Directors:
Nominees: David L. Gellatly Roger A. Smullen
Joseph D. Rizzi Jeffrey D. West
William B. Pohlman
FOR all nominees listed WITHHOLD AUTHORITY
(except as withheld) to vote for nominees listed
[ ] [ ]
(Instructions: To withhold authority to vote for any individual nominee,
strike that nominees's name below.)
2. Proposal to ratify the appointment of PricewaterhouseCoopers, LLP
as independent auditors for the 1999 fiscal year:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I plan to attend the Meeting: Yes [ ] No [ ]
Signature(s): Dated _________________, 1999
Signature(s):
(Signature(s) must be exactly as name(s) appear on this proxy. (If signing as
attorney, executor, administrator, trustee, or guardian, please give full title
as such, and, if signing for a corporation, please give your title. When shares
are in the names of more than one person, each should sign this Proxy.)
