<PAGE>1
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
[X] Definitive proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CYPRESS SEMICONDUCTOR CORPORATION
- --------------------------------------------------
(Name of Registrant as specified in its charter)
CYPRESS SEMICONDUCTOR CORPORATION
- --------------------------------------------------
(Name of person(s) filing proxy statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
14a-6(i)(3).
[ ] 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: ______________________________________
(4) Proposed maximum aggregate value of transaction: _______________________
(A) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check the box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: __________________________________
(2) Form, Schedule or Registration Statement No.: _________________________
(3) Filing Party: __________________________________
(4) Date Filed: _________________________________
<PAGE>2
April 5, 1996
Dear Stockholder:
You are cordially invited to attend the Cypress Semiconductor Corporation
Annual Meeting of Stockholders to be held on Friday, May 3, 1996 at 10:00 a.m.,
local time, at the Company's offices located at 4001 North First Street, San
Jose, California 95134.
At the Annual Meeting, in addition to electing five directors and
approving the appointment of Price Waterhouse LLP as the Company's independent
accountants for this fiscal year, you will be asked to approve a proposal
relating to the Company's 1994 Stock Option Plan.
The Company proposes to amend its 1994 Stock Option Plan relating to the
vesting of options granted to non-employee directors of the Company. The
proposal would change the vesting of all future grants of options to such
directors to provide that such options would vest over a five-year term, as
compared to the current vesting term, which provides for full vesting after
four years. The purpose of such amendment is to have the vesting term of
options granted to outside directors correspond with the vesting term of
options granted to employees of the Company.
We hope you will be able to attend the Annual Meeting on May 3rd for a
report on the status of the Company's business and performance during 1995.
There will be an opportunity for stockholders to ask questions. Whether or not
you plan to attend the meeting, please sign and return the enclosed proxy card
to ensure your representation at the meeting.
Very truly yours,
T.J. Rodgers, President and CEO
<PAGE>3
CYPRESS SEMICONDUCTOR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 3, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Cypress
Semiconductor Corporation (the "Company"), a Delaware corporation, will be held
on Friday, May 3, 1996 at 10:00 a.m., local time, at its offices located at
4001 North First Street, San Jose, California 95134, for the following
purposes:
1. To elect directors to serve for the ensuing year and until their successors
are elected.
2. To ratify and approve the amendment to the Company's 1994 Stock Option Plan
to amend the vesting of options granted to non-employee directors of the
Company such that (i) future initial grants of options to outside directors
will vest over a five-year term, as compared to the current four-year term, and
(ii) future subsequent grants of options to outside directors will vest over a
five-year term, as compared to the current structure which provides for full
vesting after four years.
3. To ratify the appointment of Price Waterhouse LLP as independent accountants
of the Company for the fiscal year ending December 30, 1996.
4. 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 March 5, 1996 are
entitled to receive notice of, to attend and to vote at the meeting and any
adjournment thereof.
All stockholders are cordially invited to attend the meeting in person. Any
stockholder attending the meeting may vote in person even if such stockholder
returned a proxy.
FOR THE BOARD OF DIRECTORS
Emmanuel Hernandez, Secretary
San Jose, California
April 5, 1996
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
<PAGE>4
CYPRESS SEMICONDUCTOR CORPORATION
_______________
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Cypress Semiconductor Corporation (the "Company") for use at the Company's
Annual Meeting of Stockholders ("Annual Meeting") to be held Friday,
May 3, 1996, at 10:00 a.m., local time, or at any adjournment(s) or
postponement(s) thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at 4001 North First Street, San Jose, California 95134.
The Company's principal executive offices are located at 3901 North First
Street, San Jose, California 95134. The telephone number at that address is
(408) 943-2600.
These proxy solicitation materials were mailed on or about April 5, 1996
to all stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on March 5, 1996 are
entitled to notice of, and to vote at, the Annual Meeting. At the record date,
79,725,519 shares of the Company's Common Stock were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
Every stockholder voting for the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the stockholder's shares are entitled, or distribute such stockholder's votes
on the same principle among as many candidates as the stockholder may select,
provided that votes cannot be cast for more than five candidates. However, no
stockholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the stockholder, or any other
stockholder, has given notice at the meeting prior to the voting of the
intention to cumulate the stockholder's votes. On all other matters each share
has one vote.
The cost of this solicitation will be borne by the Company. The Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telegram.
<PAGE>5
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock outstanding on the Record Date.
Shares that are voted "FOR," "AGAINST" or "WITHHELD" from a matter are treated
as being present at the meeting for purposes of establishing a quorum and are
also treated as votes eligible to be cast by the Common Stock present in person
or represented by proxy at the Annual Meeting and "entitled to vote on the
subject matter" (the "Votes Cast") with respect to such matter.
While abstentions (votes "withheld") will be counted for purposes of
determining both the presence or absence of a quorum for the transaction of
business and the total number of Votes Cast with respect to a particular
matter, broker non-votes with respect to proposals set forth in this Proxy
Statement will not be considered "Votes Cast" and, accordingly, will not affect
the determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
DEADLINES FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting must be
received by the Company no later than December 6, 1996 in order to be included
in the proxy statement and form of proxy relating to that meeting.
<PAGE>6
PROPOSAL ONE - ELECTION OF DIRECTORS
NOMINEES
A Board of five directors is to be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five nominees named below, all of whom are presently directors of the
Company. In the event that any nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in
such a manner in accordance with cumulative voting as will ensure the election
of as many of the nominees listed below as possible. In such event, the
specific nominees for whom such votes will be cumulated will be determined by
the proxy holders. The term of office of each person elected as a director
will continue until the next Annual Meeting of Stockholders or until his
successor has been elected and qualified. It is not expected that any nominee
will be unable or will decline to serve as a director.
The name of and certain information regarding each nominee is set forth
below.
Director
Name of Nominee Age Principal Occupation Since
- ---------------------- --- ------------------------------- --------
T.J. Rodgers 48 President and Chief Executive 1982
Officer of the Company
Pierre R. Lamond 65 General Partner, Sequoia Partners 1983
Fred B. Bialek 62 Business Consultant 1991
Eric A. Benhamou 40 President and Chief Executive 1993
Officer of 3COM Corporation
John C. Lewis 60 Chairman of the Board of Amdahl 1993
Corporation
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above during the past five years. There are no
family relationships among directors or executive officers of the Company.
T.J. Rodgers is a co-founder of the Company and has been its President and
Chief Executive Officer since 1982. Mr. Rodgers serves as a director of
Vitesse Semiconductor Corporation and C-Cube Corporation.
Pierre R. Lamond has been a general partner of Sequoia Partners, which
manages several venture capital funds, including Sequoia Capital IV, Sequoia
Capital V and Sequoia Capital Growth Fund, since 1981. Mr. Lamond serves as a
director of Vitesse Semiconductor Corporation, CKS Group, Inc. and
VidaMed, Inc.
<PAGE>7
Fred B. Bialek has been an independent business consultant since November
1986, during which time he has been active in the negotiation and execution of
merger and acquisition transactions for semiconductor and other technology
companies. Mr. Bialek has acted as a consultant to Cypress in certain of its
acquisitions, including Cypress Semiconductor (Minnesota) Inc. ("CMI"), the
Company's third wafer fabrication facility. Mr. Bialek, who was a founder of
National Semiconductor Corporation, has over 30 years operating experience in
semiconductor and related technology industries.
Eric A. Benhamou was Vice President and General Manager of 3COM
Corporation ("3COM"), a data Networking company, from September 1987 to April
1990. From April 1990 to September 1990, he was Chief Operating Officer of
3COM. In April 1990, he was promoted to President and Chief Executive Officer
of 3COM, a position in which he has served since then. Mr. Benhamou is a
director of 3COM.
John C. Lewis has been Chairman of the Board of Amdahl Corporation, a
computer manufacturer, since 1987. He was President of Amdahl from 1977 until
1987, and Chief Executive Officer of Amdahl from 1983 until 1992. Mr. Lewis is
also a director of Vitesse Semiconductor Corporation and Pinnacle Systems, Inc.
REQUIRED VOTE
The five nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but have no further legal effect under Delaware law.
BOARD MEETINGS AND COMMITTEES
Pierre R. Lamond serves as Chairman of the Board of Directors of the
Company. The Board of Directors held a total of seven meetings during the
fiscal year ended January 1, 1996. During fiscal 1995, no director attended
fewer than 75% of all such meetings of the Board of Directors and of the
committees, if any, upon which such director served. The Board of Directors
has an Audit Committee and a Compensation Committee. The Board of Directors
does not have a nominating committee or any committee performing similar
functions.
The principal functions of the Audit Committee, which consists of Messrs.
Lamond and Lewis, are: (1) to consult with the Company's independent
accountants concerning the scope of the audit and to review with them the
results of their examination; and (2) to review and approve any material
accounting policy changes affecting the Company's operating results and to
review the Company's control procedures and personnel. The Audit Committee
held two meetings in fiscal 1995.
The Compensation Committee, which consists of Messrs. Lamond and Benhamou,
reviews compensation and benefits for the Company's senior executives and has
authority to grant stock options under the Company's 1994 Stock Option Plan
(the "1994 Option Plan") to employees and consultants (including officers and
directors who are also employees or consultants of the Company). The
Compensation Committee held six meetings during fiscal 1995.
<PAGE>8
COMPENSATION OF DIRECTORS
STANDARD ARRANGEMENTS
Directors who are not employees receive $5,000 each quarter.
The 1994 Option Plan provides for the automatic grant of nonstatutory
options to outside directors of the Company. Each outside director is granted
an initial option to purchase 80,000 shares of Common Stock (the "Initial
Option") and an additional Option to purchase 20,000 shares of Common Stock (a
"Subsequent Option") each year thereafter. The Initial Option becomes
exercisable over a four-year period in annual installments of 20,000 shares and
Subsequent Options become exercisable four years after the date on which they
are granted. Consequently, the 1994 Option Plan provides for an on-going
vesting program of 20,000 shares per year to outside directors. The exercise
price of options granted under the 1994 Option Plan is the fair market value of
the Company's Common Stock on the date of grant.
OTHER ARRANGEMENTS
The Company has a consulting relationship with one of its directors, Fred
B. Bialek. See "Certain Transactions."
<PAGE>9
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 1, 1996 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) the
Company's Chief Executive Officer and each of the four other most highly
compensated individuals who served as executive officers of the Company at
fiscal year end (the "Named Officers") and (iv) all individuals who served as
directors or executive officers at fiscal year end as a group:
SHARES BENEFICIALLY OWNED(1)
----------------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS(2) NUMBER PERCENT
- ------------------------------------------------- -------------- -------------
DIRECTORS
T.J. Rodgers(3) 1,498,190 1.8%
Pierre R. Lamond(4) 197,254 *
Fred B. Bialek(5) 336,419 *
Eric A. Benhamou(6) 40,000 *
John C. Lewis(7) 45,000 *
NAMED OFFICERS
J. Daniel McCranie(8) 14,173 *
Antonio L. Alvarez(9) 69,407 *
Emmanuel Hernandez(10) 62,635 *
Lothar Maier(11) 58,296 *
All directors and executive officers at fiscal year
end as a group (9 persons)(12) 2,321,374 2.8%
- ----------------------
* Less than 1%.
(1) All share amounts have been adjusted to reflect a two-for-one stock split
effected in the form of a stock dividend which was paid on
October 31, 1995.
(2) Based on a Schedule 13G filed on February 2, 1996, pursuant to the
Securities Exchange Act of 1934, as amended, J&W Seligman & Co.
Incorporated owned 6,232,100 shares of the Company's Common Stock on
December 31, 1995, representing 7.6% of the Company's outstanding common
stock on such date. However, on February 16, 1996, J&W Seligman & Co.
Incorporated filed an amendment to its Schedule 13G indicating that it no
longer held 5% of the outstanding Common Stock of the Company.
(3) Mr. Rodgers is also President and Chief Executive Officer of the Company.
Includes options to purchase 1,084,666 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(4) Includes 177,254 shares held by the Lamond Living Trust. Also includes
options held by Mr. Lamond to purchase 20,000 shares of Common Stock
exercisable within 60 days of January 1, 1996.
<PAGE>10
(5) Represents options to purchase 336,419 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(6) Represents options to purchase 40,000 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(7) Represents options to purchase 45,000 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(8) Represents options to purchase 14,173 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(9) Represents options to purchase 69,407 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(10) Includes options to purchase 56,911 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(11) Includes options to purchase 51,124 shares of Common Stock exercisable
within 60 days of January 1, 1996.
(12) Includes options held by executive officers and directors of the Company
to purchase an aggregate of 1,717,700 shares of Common Stock exercisable
within 60 days of January 1, 1996.
<PAGE>11
EXECUTIVE COMPENSATION
The following table shows, as to each of the Named Officers, information
concerning compensation paid for services to the Company in all capacities
during the three fiscal years ended January 1, 1996:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Awards
Name and Securities All
Principal Underlying Other
Position Year Salary(1> Bonus(2) Other(3) Options(#)(4) Compensation(5)
- ---------------- ---- --------- -------- -------- ------------- ---------------
T.J. Rodgers 1995 $ 287,710 $236,813 -- 200,000 --
President, 1994 $ 278,911 $109,253 -- 300,000 --
Chief Executive 1993 $ 272,942 $ 351 -- 250,000 --
Officer and
Director
J. Daniel 1995 $ 283,551 $219,793 -- -- --
McCranie 1994 $ 291,029 $ 86,128 -- 200,000 --
Vice President, 1993 $ 57,586 $ -- -- 340,000 --
Marketing and
Sales
Antonio Alvarez 1995 $ 207,593 $160,043 -- 146,930 --
Vice President, 1994 $ 199,949 $ 66,440 -- 38,250 --
Research and 1993 $ 191,583 $ 351 -- 41,372 --
Development
Lothar Maier 1995 $ 184,730 $157,317 $ 61,354 160,060 $ 450
Vice President, 1994 $ 163,196 $ 64,047 $ 35,274 86,000 $ 550
Wafer Manufac- 1993 $ 159,595 $ 851 $ 35,724 62,198 --
turing, and
President
Cypress Semi-
conductor
(Minnesota)Inc.
Emmanuel 1995 $ 171,685 $162,167 -- 116,458 --
Hernandez 1994 $ 159,458 $ 59,994 -- 58,000 --
Vice President, 1993 $ 100,514 $ 351 -- 80,000 --
Finance and
Administration,
and Chief
Financial
Officer
- ---------------------------
(1) Compensation is included in the year earned.
<PAGE>12
(2) Includes cash profit sharing awarded to each employee under the Company's
Employee Profit Sharing Plan and other awards. Fiscal 1995 and fiscal 1994
bonuses also include amounts earned under the Company's 1995 key employee
bonus plan and 1994 key employee bonus plan, respectively, by virtue of the
Company's achievement of a target level of earnings per share, as well as
success in accomplishing certain group- and individual-specific goals, in
fiscal 1995 and fiscal 1994, respectively. Bonus amounts earned under the
1995 key employee bonus plan will be paid in three installments, the first
a 50% payment was made on January 31, 1996, the second a 25% payment to be
made approximately July 31, 1996 and the third a 25% payment to be made
approximately January 31, 1997; however, subject to certain limited
exceptions, only individuals remaining in the Company's employment at the
time of each such payment will receive that payment. Aggregate amounts
earned and (subject to the above condition) payable under the 1995 key
employee bonus plan are as follows: for Mr. Rodgers, $231,988; for Mr.
McCranie, $214,968; for Mr. Alvarez, $155,218; for Mr. Maier, $152,492; and
for Mr. Hernandez, $157,342.
(3) Represents annual compensation paid in connection with Mr. Maier's
relocation.
(4) All share amounts have been adjusted to reflect a two-for-one stock split
effected in the form of a stock dividend which was paid on October 31,
1995.
(5) Represents that portion of the Company's contribution toward the purchase
of Mr. Maier's computer which was paid in fiscal 1994. The Company's
contribution is made pursuant to its Computer Program, which is available
to all employees.
The following table shows, as to each of the Named Officers, option grants
during the last fiscal year and the potential realizable value of those
options, assuming 5% and 10% appreciation, at the end of their term:
OPTION GRANTS IN FISCAL 1995
% of Total Potential Realizable
Number of Options Value at Assumed
Securities Granted to Annual Rates of Stock
Underlying Employees Price Appreciation
Options in Fiscal Exercise Expiration For Option Term
Name Granted(1) Year(2) Price(3) Date(4) 5%(5) 10%(5)
- ----------- ---------- --------- -------- ---------- ---------- ----------
T.J. Rodgers 200,000 2.7% $ 16.19 10/01/05 $2,036,046 $5,159,741
J. Daniel
McCranie -- -- -- -- -- --
Antonio L.
Alvarez 146,930 2.0% $ 16.19 10/01/05 $1,495,781 $3,790,604
Lothar Maier 160,060 2.1% $ 16.19 10/01/05 $1,629,448 $4,129,341
Emmanuel Hernandez 116,458 1.6% $ 16.19 10/01/05 $1,185,569 $3,004,466
- --------------------
<PAGE>13
(1) Options granted under the Company's 1994 Stock Option Plan typically have a
10-year term, vest over a four-year period of employment and have an
exercise price equal to market value on the date of grant. All share
amounts have been adjusted to reflect a two-for-one stock split effected in
the form of a stock dividend which was paid on October 31, 1995.
(2) Options to purchase an aggregate of 7,504,204 shares of Common Stock of the
Company were granted to employees during the fiscal year ended January 1,
1996.
(3) The exercise price may be paid by check, cash or delivery of shares that
are already owned.
(4) Options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated, upon the optionee's
death or upon an acquisition of the Company.
(5) Potential realizable value is based on an assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the ten-year option term. These values are
calculated based on requirements promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation.
<PAGE>14
The following table shows, for each of the Named Officers, information
concerning options exercised during fiscal 1995 and the value of options held
at fiscal year end:
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND
FISCAL 1995 YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised
Shares Options at Fiscal
Acquired on Year End:
Exercise Value ------------- -------------
Name (#)(2) Realized($) Exercisable Unexercisable
- ------------------- ----------- ----------- ------------- -------------
T.J. Rodgers 180,800 $ 3,603,159 1,030,702 520,226
J. Daniel McCranie 51,969 $ 591,716 4,725 360,628
Antonio L. Alvarez 280,000 $ 4,136,069 55,845 187,353
Lothar Maier 248,942 $ 3,005,818 34,526 232,566
Emmanuel Hernandez 30,000 $ 551,040 44,547 179,911
Value of Unexercised
In-the-Money Options
at Fiscal Year Ended($)(1):
-----------------------------
Name Exercised Unexercisable
- ------------------- ------------ ---------------
T.J. Rodgers $ 6,102,255 $ 1,824,861
J. Daniel McCranie $ 27,759 $ 1,781,190
Antonio L. Alvarez $ 405,885 $ 368,633
Lothar Maier $ 167,764 $ 39,248
Emmanuel Hernandez $ 212,751 $ 28,576
- ---------------------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the options at December 29, 1995 ($12.625) and
the exercise price of the options.
(2) All share amounts have been adjusted to reflect a two-for-one stock split
effected in the form of a stock dividend which was paid on October 31,
1995.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors has the
responsibility to review compensation programs and benefits for the Company's
employees generally, and specifically for the executive officers of the
Company, and has exclusive authority to grant stock options to the executive
officers of the Company. The Company applies a consistent philosophy to
compensation for all employees including its executive officers, based on the
premise that the achievements of the Company result from the coordinated
efforts of all individuals working toward common objectives. The Company
strives to achieve those objectives through teamwork that is focused on meeting
the defined expectations of customers and stockholders.
<PAGE>15
The goals of the Compensation Committee are to align executive
compensation with business objectives and performance, and to enable the
Company to attract, retain and reward executive officers who contribute to the
long-term success of the Company. The Company's compensation program for
executive officers is based on the same principles applicable to compensation
decisions for all employees of the Company:
COMPETITIVE LEVELS OF COMPENSATION. The Company is committed to providing
a compensation program that helps attract and retain the best people in
the industry. To ensure that pay is competitive, the Company periodically
reviews the compensation practices of other leading companies in the
semiconductor industry. The Company believes that its compensation levels
fall within the median of industry compensation levels.
PERFORMANCE-DRIVEN REWARDS. Executive officers are rewarded based upon
corporate performance, business unit performance and individual
performance. Corporate performance and business unit performance are
evaluated by reviewing the extent to which strategic and business plan
goals are met, including such factors as operating profit, performance
relative to competitors and timely new product introductions. Individual
performance is evaluated by measuring organization progress against set
objectives.
PERFORMANCE AND COMPENSATION FEEDBACK. At the beginning of the
performance cycle, key quarterly and annual objectives are set for each
officer. The CEO gives ongoing feedback on performance to each officer.
At the end of the performance cycle, the Compensation Committee evaluates
the extent to which the key objectives have been accomplished, which
evaluation affects decisions on merit increases and stock option grants.
The Company's compensation program, which consists of cash- and equity-
based compensation, allows the Company to attract and retain highly skilled
officers, provide useful products and services to customers, enhance
stockholder value, motivate technological innovation and adequately reward its
executive officers and other employees. The components are:
Cash-Based Compensation:
The Committee sets base salary for officers on the basis of level of
responsibility, prior performance and other factors after reviewing the
compensation levels for competitive positions in the market.
The Company has a quarterly profit sharing plan under which it distributes
to all employees, including executive officers, payments based on the Company's
achieving a targeted level of earnings per share. The Company believes that
all employees share the responsibility of achieving profits. Accordingly, it
awards an equal portion to all employees regardless of salary or position
level. Under the profit-sharing plan, specific Company performance criteria
must be met for employees to be eligible for bonuses. For 1995, the Company
met these criteria during all quarters.
The Company adopted a key employee bonus plan effective at the beginning
of fiscal year 1995, in which the Chief Executive Officer, Company Vice
Presidents and certain other key employees participated. Plan participants
earned bonuses (in each case a percentage of the participant's base salary)
<PAGE>16
based on the Company's achievement of a targeted level of earnings per share,
as well as success in accomplishing certain group- and individual-specific
goals. The plan provided that no bonus would be awarded unless the Company
achieved at least 90% of its earnings target for fiscal year 1995. Bonus
amounts to be awarded under the plan have been determined for fiscal year 1995
and total in the aggregate $4,937,000. Bonus amounts earned will be paid in
three installments, the first a 50% payment was made on January 31, 1996, the
second a 25% payment to be made approximately July 31, 1996 and the third a 25%
payment to be made approximately January 31, 1997. Subject to certain limited
exceptions, only individuals remaining in the Company's employment at the time
of each such payment will receive that payment.
Equity-Based Compensation:
Stock options provide additional incentives to officers to work to
maximize stockholder value. The options become exercisable over a defined
period of employment with the Company to encourage officers to continue in the
employ of the Company. In line with its compensation philosophy, the Company
grants stock options to all employees, commensurate with their potential
contributions to the Company. Stock options are included as part of the
initial employment compensation package, and are also awarded for promotions
and pursuant to the annual Evergreen Stock Program, which provides long-term
incentives to virtually all employees based on performance and potential
contributions.
T.J. Rodgers has been President and Chief Executive Officer of the Company
since its incorporation in 1982. In determining Mr. Rodgers' compensation, the
Committee evaluates corporate performance, individual performance, compensation
paid to other executive officers of the Company and total compensation
(including salary, bonus and equity compensation) paid to chief executive
officers of comparable companies. In 1995, Mr. Rodgers' annualized salary was
$287,710, and he received a cash bonus of $4,825 under the Employee Profit
Sharing Plan. A fundamental tenet of Cypress' compensation policy,
particularly with respect to compensation of the CEO, is to link the level of
compensation obtained to the Company's performance as measured by profitability
and long-term growth. One way that Cypress establishes this link is to award
Mr. Rodgers with compensation in the form of options to purchase stock, since
the market will reward superior Company performance by increasing the value of
his equity and penalize unsatisfactory performance by diminishing or
eliminating such value. Through his equity ownership in the Company, which
consisted of 413,524 shares of Common Stock and options to purchase 1,550,928
shares of Common Stock (including a 200,000 share option granted in fiscal
1995) on January 1, 1996, Mr. Rodgers shares with the other stockholders of the
Company a significant stake in the success of the Company's business. A second
way that Cypress establishes the link between Company performance and level of
compensation is by its bonus plan, which awards variable compensation based to
a substantial degree on an objective measure of the Company's profitability and
long-term growth. It is the philosophy of Cypress and this Committee to bias
compensation toward this kind of variable compensation as well as equity
awards, meaning that when the Company performs well, as principally indicated
by profitability, employees, and in particular the CEO, will be very well
compensated, to a level which may exceed the median of industry compensation
levels. When the Company's performance is below target levels, however,
variable compensation will be limited or non-existent and equity compensation
will not attain the same value, meaning that the CEO's overall compensation
<PAGE>17
package may well be below industry median levels. Consistent with these
objectives, Mr. Rodgers earned $231,988 under the 1995 key employee bonus plan
by virtue of the Company's achievement of a target level of earnings per share,
as well as success in accomplishing certain group-and individual-specific
goals, in fiscal 1995. Bonus amounts earned under the key employee bonus plan
will be paid in three installments, the first a 50% payment was made on January
31, 1996, the second a 25% payment to be made approximately July 31, 1996 and
the third a 25% payment to be made approximately January 31, 1997; however,
subject to certain limited exceptions, only individuals remaining in the
Company's employment at the time of each such payment will receive that
payment.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
-- Pierre R. Lamond
-- Eric A. Benhamou
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was or is an officer or employee
of the Company. Pierre R. Lamond, Chairman of the Board of the Company, and
T.J. Rodgers, President, Chief Executive Officer and a director of the Company,
are directors and members of the Compensation Committee of the Board of
Directors of Vitesse Semiconductor Corporation ("Vitesse"). Mr. Lamond is also
Chairman of the Board of Vitesse. Neither Cypress nor Vitesse treats Chairman
of the Board as an officer of the corporation for compensation purposes. Mr.
Lamond is a general partner of a venture capital firm which invested in the
Company prior to its initial public offering in 1986.
CERTAIN TRANSACTIONS
In October 1993, J. Daniel McCranie, Vice President of Marketing and
Sales, incurred $210,000 of indebtedness to the Company, which indebtedness
bears interest at 4% per annum and is unsecured. In 1995, the Company and Mr.
McCranie agreed to extend the length of time that such indebtedness is payable
by two years, such that the indebtedness is now due on October 7, 1998. In the
event Mr. McCranie is still employed by the Company on October 7, 1998, the
promissory note will be canceled and the indebtedness forgiven.
In October 1993, the Company entered into a consulting arrangement (the
"1993 Consulting Agreement") with Fred B. Bialek, a member of the Company's
Board of Directors. Pursuant to the terms of the 1993 Consulting Agreement, as
amended in February 1994, Mr. Bialek was paid an annualized fixed retainer of
$242,000, which was increased on April 1 of each year by an amount equal to the
average percentage salary increase as approved by the Board of Directors for
all Company employees. Under the 1993 Consulting Agreement, Mr. Bialek was
also granted a fully exercisable option to purchase 120,000 shares of the
Company's Common Stock and an additional option to purchase 240,000 shares of
the Company's Common Stock which vests over approximately two and one-half
years. In April 1995, the Company entered into a new consulting arrangement
(the "1995 Consulting Agreement") with Mr. Bialek pursuant to which he will be
paid an annualized fixed retainer of $269,346, payable in equal installments on
the first day of each month. Pursuant to the terms of the 1995 Consulting
Agreement, Mr. Bialek was also granted an option to purchase 20,000 shares of
<PAGE>18
the Company's Common Stock which vests four years from the date of grant. In
addition, Mr. Bialek is reimbursed for out-of-pocket business expenses for
travel, lodging, phone and administrative support related to his consulting
services for the Company on receipt of invoice. The 1995 Consulting Agreement
expires on April 1, 1996, but may be extended by mutual agreement of the
Company and Mr. Bialek. Prior to its expiration, the 1995 Consulting Agreement
is terminable by either the Company or Mr. Bialek 30 days following written
notice of such termination.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities
and Exchange Commission (the "SEC") and the National Association of Securities
Dealers. Such officers, directors and 10% stockholders are also required by
SEC rules to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the fiscal year ended January 1, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders were satisfied.
<PAGE>19
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
return for the Company's stock, the Standard & Poor's 500 Stock Index and the
S&P Electronic Index for Semiconductor and Component Manufacturers. The
Company is using the S&P Electronic Index for Semiconductor and Component
Manufacturers because the S&P Small Cap Semiconductor Index that has been
presented in prior years is no longer publicized. As a result, it is not
possible to compare the cumulative total return of the Company's Common Stock
through December 31, 1995 with that of the S&P Small Cap Semiconductor Index.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
EXERCISE DATE PRICE DIVIDENDS RETURN
- ---------------------------- --------- --------------- ------------
Cypress Semiconductor Corp.
- ----------------------------
12/29/95 12.63 -- 129.55
12/30/94 11.56 -- 110.23
12/31/93 6.81 -- 23.86
12/31/92 4.63 -- -15.91
12/31/91 8.56 -- 55.68
12/31/90 5.50 -- 00
S & P 500 Index:
- ----------------------------
12/29/95 615.93 13.799 113.24
12/30/94 459.27 13.170 55.52
12/31/93 466.45 12.573 53.55
12/31/92 435.71 12.385 39.67
12/31/91 417.09 12.203 30.00
12/31/90 330.22 .967 00
S & P Electronic Semi
- ----------------------------
12/29/95 282.32 1.301 398.77
12/30/94 208.80 1.015 267.19
12/31/93 179.51 .795 214.15
12/31/92 117.09 .568 104.01
12/31/91 72.06 .497 24.95
12/31/90 58.07 .125 00
* ASSUMES $100 INVESTED ON DECEMBER 31, 1990 IN EACH INVESTMENT. TOTAL RETURN
ASSUMES REINVESTMENT OF DIVIDENDS. PAST RESULTS ARE NOT AN INDICATION OF FUTURE
INVESTMENT RETURNS.
<PAGE>20
PROPOSAL TWO AMENDMENT TO 1994 STOCK OPTION PLAN
GENERAL
The 1994 Stock Option Plan (the "Option Plan") was approved in February
1994 by the Board of Directors and in April 1994 by the stockholders of the
Company. There are currently a total of 19,468,322 shares of Common Stock
reserved for issuance under the Option Plan. As of January 1, 1996, options to
purchase approximately 19,448,101 shares were outstanding under the Option Plan
and an aggregate of 20,221 shares were available for future grant thereunder.
Such number of shares available for future grant thereunder will be increased
on the first day of each new fiscal year of the Company during the term of the
Option Plan by 4.5% of the number of shares of the Company's Common Stock
outstanding as of the last business day preceding each such first day of each
new fiscal year.
PROPOSAL
On January 25, 1996 (the "Board Approval Date"), the Board of Directors
adopted an amendment to the Option Plan which changed the vesting of options
granted to outside directors of the Company by providing that each option
granted to such directors will vest over a term of five years. The number of
shares or "size" of option grants to outside directors were not affected by the
amendment. At the Annual Meeting, the stockholders are being requested to
approve such amendment.
The purpose of the amendment is to ensure that options granted to outside
directors will vest over the same period of time as options granted to
employees of the Company. Prior to 1996, options granted to employees of the
Company vested over a four-year period, with 1/4 of the shares subject to the
option vesting one year from the date of grant and 1/48 of such shares vesting
each month thereafter. In 1995, the Board of Directors modified the vesting
of new option grants to employees, with such options vesting over a five-year
period. For new option grants to employees, 1/5 of the shares subject to the
option vest one year from the date of grant and 1/60 of such shares vest each
month thereafter. The amendment alters the vesting of new options granted to
outside directors, with the options now vesting in equal proportions over a
five-year period.
The Option Plan provides for the automatic grant of nonstatutory options
to non-employee directors of the Company. Each such director is granted an
option to purchase 80,000 shares of Common Stock (the "Initial Option") on the
later of October 12, 1988 or the date on which such person first becomes a
director, whether through election by the stockholders of the Company or
appointment by the Board of Directors to fill a vacancy. Thereafter, each non-
employee director is automatically granted an Option to purchase 20,000 shares
of Common Stock (a "Subsequent Option") on a date one year after the date of
grant of the Initial Option and on the same date each year thereafter.
The Initial Option currently becomes exercisable in annual installments of
20,000 shares with the first such installment exercisable one year from the
outside director's election to the Board and 20,000 shares becoming exercisable
each year thereafter, so that the Initial Option becomes fully vested four
years from the date of grant. The amendment provides that all future Initial
Options granted to outside directors will become exercisable in annual
installments of 16,000 shares with the first such installment exercisable one
<PAGE>21
year from the outside director's election to the Board and 16,000 shares
becoming exercisable each year thereafter, so that the Initial Option becomes
fully vested five years from the date of grant. The vesting of Initial Options
granted to outside directors prior to the Board Approval Date was not modified
by the amendment.
Each Subsequent Option granted under the Option Plan currently vests in
its entirety four years after the date on which it is granted. The amendment
provides that all future grants of Subsequent Options will become exercisable
in annual installments of 4,000 shares with the first such installment
exercisable one year from date of grant and 4,000 shares becoming exercisable
each year thereafter, such that each Subsequent Option is fully exercisable
five years from the date of grant. The vesting of Subsequent Options granted
to outside directors prior to the Board Approval Date was not modified by the
amendment.
DESCRIPTION OF THE 1994 STOCK OPTION PLAN
PURPOSE
The purpose of the Option Plan is to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentives to employees, consultants and directors of the Company and to
promote the success of the Company's business.
ADMINISTRATION
The Option Plan may be administered by the Board of Directors of the
Company or by a committee of the Board. All stock option grants are currently
being administered by the Compensation Committee of the Board of Directors,
except that option grants to outside directors are automatic and do not require
administration.
No member of the Board or committee may vote on any Common Stock grant to
himself or take part in any consideration of the Option Plan as it may apply to
himself. Members of the Board of Directors or committee receive no additional
compensation for their services in connection with the administration of the
Option Plan. All questions of interpretation of the Option Plan are determined
by the Board of Directors or its committee, and such determinations are final
and binding upon all participants.
ELIGIBILITY
The Option Plan permits participation by employees, consultants, officers
and directors of the Company or its majority-owned subsidiaries. Incentive
Stock Options may be granted only to employees, including officers. Options
for outside directors are limited to non-discretionary automatic grant
provisions.
TERMS OF OPTIONS GRANTED TO EMPLOYEES AND CONSULTANTS
The terms of options granted under the Option Plan may be determined by
the Board of Directors or its committee and are currently being determined by
<PAGE>22
the Compensation Committee of the Board of Directors. Each option is evidenced
by a stock option agreement between the Company and the employee or consultant
to whom such option is granted and is normally subject to the following
additional terms and conditions:
(a) Exercise of the Option: The Board of Directors or its committee of
the Board determines the vesting terms of the options granted to
employees and consultants under the Option Plan. The current form of
option agreement for new employees provides that options may be
exercised at the rate of 1/5 of the shares granted at the end of the
first year after commencement of employment and 1/60 of the shares at
the end of each month thereafter, for a five-year vesting period. The
Board or its committee may at any time or from time to time accelerate
the vesting of any outstanding option. An option is exercised by
giving written notice of exercise to the Company, specifying the
number of full shares of Common Stock to be purchased, and tendering
payment to the Company of the purchase price. The purchase price of
the shares purchased upon exercise of any option shall be paid in
consideration of such form as is determined by the Board of Directors
or its committee, and such form of consideration may vary for each
option.
(b) OPTION PRICE: The price of option grants under the Option Plan is
determined by the Board of Directors of the Company or its committee.
In the case of an incentive stock option granted to an employee, the
option price must not be less than 100% of the fair market value of
the Common Stock on the date the option is granted, with the exception
that in the case of an option granted to a stockholder who,
immediately prior to such grant, owns stock representing more than 10%
of the voting power or value of all classes of stock of the Company,
the exercise price must not be less than 110% of such fair market
value. In the case of a nonstatutory option granted to any other
eligible person, the per share exercise price shall be no less than
85% of fair market value per share on the date of grant.
(c) TERMINATION OF EMPLOYMENT: If the optionee's status as an employee or
consultant terminates for any reason other than death or disability,
options under the Option Plan may be exercised within such period of
time after such termination as the Board or its committee may
determine, up to 90 days in the case of incentive stock options and up
to two years in the case of nonstatutory options, and may be exercised
only to the extent the option was exercisable on the date of
termination.
(d) DISABILITY OF OPTIONEE: If an optionee should become totally and
permanently disabled while employed by the Company, options may be
exercised within such period of time after such termination due to
such disability as the Board or its committee may determine, with the
period of time being not less than six months and not more than twelve
months from the date of termination, but only to the extent such
options were exercisable on the date of termination.
<PAGE>23
(e) DEATH OF OPTIONEE: If an optionee should die while employed by the
Company, options may be exercisable at any time within six months
after death, but only to the extent the options would have been
exercisable had the optionee continued living and remained employed by
the Company 12 months after the date of death. If an optionee should
die after termination of employment with the Company, the Option Plan
provides that if death occurs within 30 days after termination of
continuous status as an employee or consultant, options may be
exercised within six months after death to the extent the options were
exercisable on the date of termination of employment.
(f) TERMINATION OF OPTIONS: Options granted under the Option Plan expire
10 years from the date of grant unless otherwise provided in the
option agreement. However, in the case of an option granted to an
employee who at the time the option is granted owns stock representing
more than ten percent of the voting power of all classes of stock of
the Company or any parent or subsidiary, the term of the option shall
not be greater than five years. No option may be exercised by any
person after such expiration.
(g) Non-transferability of Options: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution,
and is exercisable only by the optionee during his lifetime or, in the
event of death, by a person who acquires the right to exercise the
option by bequest or inheritance or by reason of the death of the
optionee.
(h) OTHER PROVISIONS: The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may
be determined by the Board of Directors or its committee.
TERMS OF OPTIONS GRANTED TO OUTSIDE DIRECTORS
Options granted to non-employee directors under the Option Plan are
automatic and do not require any action on the part of the Board of Directors
or any committee of the Board. Each such option is evidenced by a stock option
agreement between the Company and the director to whom such option is granted
and is subject to the following additional terms and conditions:
(a) EXERCISE OF OPTION: An option is exercised by giving written notice
of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and tendering payment to the Company of
the purchase price. Payment for shares issued upon exercise of an
option may consist of cash, check, exchange of shares of the Company's
Common Stock or a combination thereof.
(b) OPTION PRICE: The option price shall be 100% of the fair market value
of the Company's Common Stock on the date of grant. The Board of
Directors of the Company determines such fair market value based upon
the closing price of the Common Stock on the date the option is
granted.
<PAGE>24
(c) TERMINATION OF STATUS AS A DIRECTOR: The Option Plan provides that if
the optionee ceases to serve as a director of the Company, his option
may be exercised within 90 days after the date he ceases to be a
director as to all or part of the shares that the optionee was
entitled to exercise at the date of such termination.
(d) DISABILITY: If an optionee is unable to continue his service as a
director of the Company as a result of his total and permanent
disability, his option may be exercised at any time within six months
after the date of his termination, but only to the extent he was
entitled to exercise it at the date of such termination.
(e) DEATH: If an optionee should die while serving as a director of the
Company, his option may be exercised at any time within six months
after death but only to the extent that the option would have been
exercisable had the optionee continued living and remained a director
of the Company for 12 months after the date of death. If an optionee
should die within 30 days after ceasing to serve as a director of the
Company, the option may be exercised within six months after death to
the extent the option was exercisable on the date of such termination.
(f) TERMINATION OF OPTIONS: Options granted to outside directors under
the Option Plan have a term of 10 years. No option may be exercised
after its expiration.
(g) NONTRANSFERABILITY OF OPTIONS: An option is nontransferable by the
optionee, other than by will or the laws of descent and distribution,
and is exercisable only by the optionee during his lifetime or, in the
event of death, by a person who acquires the right to exercise the
option by bequest or inheritance or by reason of the death of the
optionee.
(h) OTHER PROVISIONS: The option agreement pursuant to which directors
are granted options may contain such other terms, provisions and
conditions not inconsistent with the Option Plan as may be determined
by the Board of Directors.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization which
results from a stock split or payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without receipt of
consideration, appropriate adjustment shall be made with respect to shares and
options available under the Option Plan. In the event of the proposed
dissolution or liquidation of the Company, each option will terminate unless
otherwise stipulated by the Board. In the event of a proposed sale of
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the option shall be assumed or an equivalent
option shall be substituted unless the Board makes the option fully exercisable
prior to the merger; provided, however, that with respect to options granted to
directors, if such options are not assumed or as to which an equivalent option
is not substituted, (i) those options granted on or after the effective date of
the Option Plan shall become fully vested and exercisable unless the Board
<PAGE>25
determines otherwise, while (ii) those options granted prior to the effective
date of the Option Plan shall terminate. If the Board makes an option
exercisable upon a merger or sale of assets, the Board shall notify the
participant that the option shall be fully exercisable for a period of 30 days
from the date of such notice and the option will terminate upon the expiration
of such period.
AMENDMENT AND TERMINATION
The Board of Directors may amend the Option Plan at any time or from time
to time or may terminate it without approval of the stockholders; provided,
however, that stockholder approval is required to the extent necessary to
comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
or applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor rule or provision or any other applicable law or
regulation. No action by the Board or stockholders may unilaterally alter or
impair any rights previously granted under the Option Plan without the consent
of the optionee.
TAX INFORMATION REGARDING STOCK OPTIONS
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or "nonstatutory options."
Options granted with respect to shares added to the Option Plan pursuant to the
4.5% annual increase must be nonstatutory options.
If an option granted under the Option Plan is an incentive stock option,
the optionee will recognize no income upon grant of the incentive stock option
and incur no tax liability due to the exercise unless the optionee is subject
to the alternative minimum tax. Upon the sale or exchange of the shares at
least two years after grant of the option and one year after receipt of the
shares by the optionee, any gain or loss will be treated as long-term capital
gain or loss. If these holding periods are not satisfied, the optionee will
recognize ordinary income equal to the difference between the exercise price
and the lower of the fair market value of the stock at the date of the option
exercise or the sale price of the stock. A different rule for measuring
ordinary income upon such a premature disposition may apply if the optionee is
also an officer, director or 10% stockholder of the Company. The Company will
be entitled to a deduction in the same amount as the ordinary income recognized
by the optionee. Any gain or loss recognized on such a premature disposition
of the shares in excess of the amount treated as ordinary income will be
characterized as long-term, or short-term capital gain or loss, depending on the
holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any
taxable income at the time he is granted a nonstatutory option. However, upon
its exercise, the optionee will recognize ordinary income for tax purposes
measured by the excess of the then fair market value of the shares over the
option price. In certain circumstances, where the shares are subject to a
substantial risk of forfeiture when acquired or where the optionee is an
officer, director or 10% stockholder of the Company, the date of taxation may
be deferred unless the optionee files an election with the Internal Revenue
Service under Section 83(b) of the Code. The income recognized by an optionee
<PAGE>26
who is also an employee of the Company will be subject to tax withholding by
the Company by payment in cash or out of the current earnings paid to the
optionee. Upon resale of such shares by the optionee, any difference between
the sales price and the exercise price, to the extent not recognized as
ordinary income as provided above, will be treated as capital gain or loss.
The Company will be entitled to a tax deduction in the amount and at the
time that the optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete, and does not
discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside.
PARTICIPATION IN THE 1994 STOCK OPTION PLAN, AS AMENDED
The grant of options under the Option Plan to outside directors is
automatic and does not require any action on the part of the Board of Directors
or any committee of the Board. Each current outside director will receive
options to purchase 20,000 shares of the Company's Common Stock each year,
which will vest over five years. The following table sets forth the additional
number of options that the non-executive directors as a group will receive
during the remainder of the term of the Option Plan as a result of the
foregoing amendment to the Option Plan.
AMENDED PLAN BENEFITS
1994 STOCK OPTION PLAN
Additional Options to be
Received during the Remainder
of the Term of the Option Plan
as a Result of the Foregoing
Name of Group Amendment (#)
- ----------------------------------- ------------------------------
T.J. Rodgers 0
J. Daniel McCranie 0
Antonio L. Alvarez 0
Emmanuel Hernandez 0
Lothar Maier 0
All current executive officers as a group 0
All current non-executive directors as a group 0
All current non-executive employees as a group 0
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the meeting is required to approve the foregoing
amendment to the Option Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE AMENDMENT TO THE OPTION PLAN.
<PAGE>27
PROPOSAL THREE RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP, independent
accountants, to audit the consolidated financial statements of the Company for
the fiscal year ending December 30, 1996 and recommends that stockholders vote
for ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Price Waterhouse LLP has audited the Company's financial statements
annually since 1982. Its representatives are expected to be present at the
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.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Affirmative votes constituting a majority of the Votes Cast will be
required to approve this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL
YEAR 1996.
OTHER MATTERS
The Company knows of no other matters to be submitted to the 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 may recommend.
It is important that your stock be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute
and return the accompanying proxy in the envelope which has been enclosed, at
your earliest convenience.
FOR THE BOARD OF DIRECTORS
Emmanuel Hernandez, Secretary
Dated: April 5, 1996
<PAGE>28
(Front Side of Proxy Card)
CYPRESS SEMICONDUCTOR CORPORATION
PROXY FOR 1996 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CYPRESS SEMICONDUCTOR CORPORATION, a
Delaware corporation, hereby acknowledge receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated April 5, 1996, and
hereby appoints T.J. Rodgers and Emmanuel Hernandez, and each of them, proxies
and attorneys-in-fact, with full power to each of substitution, on behalf and
in the name of the undersigned, to represent the undersigned at the 1996 Annual
Meeting of Stockholders of CYPRESS SEMICONDUCTOR CORPORATION to be held on
Friday, May 3, 1996, at 10:00 a.m., local time, at its offices located at 4001
North First Street, San Jose, California 95134 and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote, it then and there personally present, on
the matters set forth below.
A majority of such attorneys or substitutes as shall be presented and shall
act at said meeting or any adjournment or adjournments thereof (or if only one
shall represent and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>29
(Backside of Proxy Card)
[ X ] Vote as in this example
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO THE COMPANY'S
STOCK OPTION PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE
LLP AS INDEPENDENT ACCOUNTANTS OF THE COMPANY, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. ELECTION OF DIRECTORS:
Nominees: T.J. Rodgers; Pierre Lamond; Fred B. Bialek; Eric Benhamou;
John C. Lewis:
[ ] [ ]
FOR WITHHELD
[ ] ________________________________________
For all nominees except as noted above
2. PROPOSAL TO RATIFY AND APPROVE THE AMENDMENT TO THE COMPANY'S 1994 STOCK
OPTION PLAN TO AMEND THE VESTING OF OPTIONS GRANTED TO NON-EMPLOYEE
DIRECTORS OF THE COMPANY:
[ ] [ ] [ ]
FOR AGAINST WITHHELD
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE
INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR FISCAL 1996:
[ ] [ ] [ ]
FOR AGAINST WITHHELD
In their discretion, the proxies are authorized to vote upon such other
matter or matters which may properly come before the meeting or any adjournment
or adjournments thereof.
[ ]MARK HERE FOR ADDRESS CHANGE AND NOTE AT BELOW
Signature: ___________________________________ Date: _______________________
Signature: ___________________________________ Date: _______________________
(This proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
