<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):
[ ] $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 filing.
(1) Amount Previously Paid: _______________________________
(2) Form, Schedule, or Registration Statement No.: __________________________
(3) Filing Party: ____________________________________
(4) Date Filed: ___________________________________
<PAGE>2
April 28, 1997
Dear Stockholder:
You are cordially invited to attend the Cypress Semiconductor Corporation
Annual Meeting of Stockholders to be held on Tuesday, May 13, 1997 at 10:00
a.m., local time, at the Company's offices located at 3939 North First Street,
San Jose, California 95134.
At the Annual Meeting, you will be asked to elect five directors and
approve the appointment of Price Waterhouse LLP as the Company's independent
accountants for this fiscal year.
We hope you will be able to attend the Annual Meeting on May 13th for a
report on the status of the Company's business and performance during 1996.
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 13, 1997
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 Tuesday, May 13, 1997 at 10:00 a.m., local time, at its offices located at
3939 North First Street, San Jose, California 95134, for the following
purposes:
1. To elect five directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the appointment of Price Waterhouse LLP as independent accountants
of the Company for the fiscal year ending December 29, 1997.
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 March 14, 1997 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 28, 1997
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 Tuesday, May 13,
1997, 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 3939 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 28, 1997
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 14, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting.
At the Record Date, 81,600,800 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.
<PAGE>5
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.
- 2 -
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.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at the Company's 1998 Annual Meeting must be
received by the Company no later than December 28, 1997 in order to be included
in the proxy statement and form of proxy relating to that meeting.
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<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(1) PRINCIPAL OCCUPATION SINCE
- ------------------- -------- ---------------------------------- ----------
T.J. Rodgers 49 President and Chief Executive 1982
Officer of the Company
Pierre R. Lamond 66 General Partner, Sequoia Partners 1983
Fred B. Bialek 63 Business Consultant 1991
Eric A. Benhamou 41 President and Chief Executive 1993
Officer of 3COM Corporation
John C. Lewis 61 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.
- 4 -
<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 September 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, Pinnacle Systems, Inc.
and Infinity Financial Technology, 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 December 30, 1996. During fiscal 1996, 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 1996.
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, as
amended (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 seven meetings during fiscal 1996.
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<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") 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 becomes
exercisable over a five-year period in annual installments of 16,000 shares,
with the first such installment exercisable one year from the outside
director's election to the Board. The Subsequent Options become exercisable
five years after the date on which they are granted in annual installments of
4,000 shares, with the first such installments exercisable one year from the
date of grant. 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."
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<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 the Record Date 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
----------------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER PERCENT
- ------------------------------------------------- ------------- -------------
DIRECTORS
T.J. Rodgers(1) 1,731,730 2.1%
Pierre R. Lamond(2) 217,254 *
Fred B. Bialek(3) 316,836 *
Eric A. Benhamou(4) 60,000 *
John C. Lewis(5) 74,000 *
NAMED OFFICERS
J. Daniel McCranie(6) 41,031 *
Antonio L. Alvarez(7) 121,934 *
Emmanuel Hernandez(8) 122,116 *
Lothar Maier(9) 128,204 *
All directors and executive officers at fiscal
year end as a group (9 persons)(10) 2,813,105 3.5%
* Less than 1%.
(1) Mr. Rodgers is also President and Chief Executive Officer of the Company.
Includes options to purchase 1,182,593 shares of Common Stock exercisable
within 60 days of the Record Date.
(2) Includes 177,254 shares held by the Lamond Living Trust. Also includes
options held by Mr. Lamond to purchase 40,000 shares of Common Stock
exercisable within 60 days of the Record Date.
(3) Represents options to purchase 316,836 shares of Common Stock exercisable
within 60 days of the Record Date.
(4) Represents options to purchase 60,000 shares of Common Stock exercisable
within 60 days of the Record Date.
<PAGE>10
(5) Represents options to purchase 74,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(6) Represents options to purchase 41,031 shares of Common Stock exercisable
within 60 days of Record Date.
(7) Represents options to purchase 121,934 shares of Common Stock exercisable
within 60 days of the Record Date.
(8) Includes shares transferred to his children of 6,075 and options to
purchase 115,470 shares of Common Stock exercisable within 60 days of the
Record Date.
(9) Includes options to purchase 121,032 shares of Common Stock exercisable
within 60 days of the Record Date.
(10) Includes options held by executive officers and directors of the Company
to purchase an aggregate of 2,072,896 shares of Common Stock exercisable
within 60 days of the Record Date.
- 7 -
<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 December 30, 1996:
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
NAME AND SECURITIES ALL OTHER
PRINCIPLE UNDERLYING COMPENSATION
POSITION YEAR SALARY(1) BONUS(2) OTHER(4) OPTIONS (#) (5)
- ---------------- ---- --------- -------- -------- ----------- ------------
T.J. Rodgers 1996 $278,976 $ 3,750(3) -- 300,000 --
President, 1995 $278,884 $236,813 -- 200,000 --
Chief Executive 1994 $278,911 $109,253 -- 300,000 --
Officer and
Director
J. Daniel 1996 $259,345 $ 1,250 -- 52,500 $600
McCranie 1995 $268,212 $219,793 -- -- $208
Vice President, 1994 $267,747 $ 86,128 -- 200,000 --
Marketing and
Sales
Antonio Alvarez 1996 $196,285 $ 1,250 -- 94,500 --
Vice President, 1995 $195,625 $160,043 $11,775 146,930 --
Research and 1994 $196,180 $ 70,208 -- 38,250 --
Development
Lothar Maier 1996 $180,265 $ 1,250 $88,027 52,500 $454
Vice President, 1995 $184,730 $157,317 $61,354 160,060 $450
Wafer Manufac- 1994 $163,196 $ 64,047 $35,274 86,000 $550
turing, and
President
Cypress Semi-
conductor
(Minnesota) Inc.
Emmanuel 1996 $180,265 $ 1,250 -- 52,500 $600
Hernandez 1995 $171,685 $162,167 -- 116,458 --
Vice President, 1994 $159,458 $ 59,994 -- 58,000 --
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. 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. No bonuses were earned under the 1996 key
employee bonus plan; however, bonuses earned in the fourth quarter of
fiscal 1995 were paid in fiscal 1996 and were dependent upon each
employee's continuous status as an employee of the Company at the time of
such payout.
(3) Represents cash bonus of $2,500 under the Company's Patent Award program.
(4) Represents cash payout of PTO earned of $11,775 for Mr. Alvarez and $10,385
for Mr. Maier and annual compensation paid in connection with Mr. Maier's
relocation of $77,642.
(5) Represents that portion of the Company's contribution toward the purchase
of computers made pursuant to its Computer Program, which is available to
all employees.
- 8 -
<PAGE>13
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 1996
INDIVIDUAL GRANTS
# 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 300,000 5.5% $10.75 10/24/06 $2,028,185 $5,139,819
J. Daniel
McCranie 52,500 1.0 $10.75 10/24/06 354,932 899,468
Antonio L.
Alvarez 94,500 1.7 $10.75 10/24/06 638,878 1,619,043
Lothar Maier 52,500 1.0 $10.75 10/24/06 354,932 899,468
Emmanuel
Hernandez 52,500 1.0 $10.75 10/24/06 354,932 899,468
______________
(1) Options granted under the Company's 1994 Stock Option Plan typically have a
10-year term, vest over a five-year period of employment and have an
exercise price equal to market value on the date of grant.
(2) Options to purchase an aggregate of 5,428,029 shares of Common Stock of the
Company were granted to employees during the fiscal year ended December 30,
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. Annual compounding results in total appreciation of 63% (at
5% per year) and 159% (at 10% per year). If the price of the Company's
Common Stock were to increase at such rates from the price at 1996 year end
($14.50 per share) over the next ten years, the resulting stock prices at
5% and 10% appreciation would be $23.62 and $37.61, respectively.
- 9 -
<PAGE>14
The following table shows, for each of the Named Officers, information
concerning options exercised during fiscal 1996 and the value of options held
at fiscal year end:
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND
FISCAL 1996 YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR END:
ACQUIRED ON VALUE ---------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE
- ------------------ ----------- ----------- --------------- -----------------
T.J. Rodgers 100,000 $1,025,000 1,182,593 568,335
J. Daniel McCranie 50,000 214,000 41,031 326,822
Antonio L. Alvarez 0 0 121,934 215,764
Lothar Maier 0 0 121,032 198,560
Emmanuel Hernandez 0 0 115,470 161,488
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT FISCAL YEAR END($)(1):
---------------------------
NAME EXERCISED UNEXERCISED
- ------------------ ------------ --------------
T.J. Rodgers $9,172,380 $2,006,781
J. Daniel McCranie 275,866 2,027,494
Antonio L. Alvarez 819,979 841,074
Lothar Maier 752,443 810,684
Emmanuel Hernandez 687,730 659,208
____________________
(1) Calculated by determining the difference between the fair market value of
the securities underlying the options at December 30, 1996 ($14.50) and the
exercise price of the options.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OVERVIEW
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
GOALS OF THE COMPANY'S COMPENSATION PROGRAM
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.
- 10 -
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.
COMPONENTS OF THE COMPANY'S COMPENSATION PROGRAM
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.
<PAGE>16
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 1996, the Company did not
meet these criteria for any quarter.
The Company adopted a key employee bonus plan effective at the
beginning of fiscal year 1996, in which the Chief Executive Officer,
Company Vice Presidents and certain other key employees participated.
Plan participants would have earned bonuses (in each case a percentage
of the participant's base salary) 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 1996. Based upon the
Company's inability to meet the earnings target for 1996, no bonuses
will be awarded under the plan.
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.
- 11 -
STOCK OPTION EXCHANGE
In October 1996, the Board of Directors offered to all employees
(including officers) the opportunity to cancel outstanding stock options
with exercise prices in excess of $11.00 per share (the fair market value
of the common stock at that time) in exchange for options exercisable at
$11.00 per share which were otherwise identical to the canceled options
except that employees were restricted from exercising any vested portion
of the repriced options until April 24, 1997. The option exchange was an
acknowledgment of the importance to the Company of having equity
incentives in the hands of key employees. Stock options which are "out of
the money" provide no particular compensatory incentive if an employee is
considering alternative opportunities. The Committee decided to include
officers (excluding T.J. Rodgers) in the exchange because of the
importance of their administrative and technical leadership to the success
of the Company's business.
<PAGE>17
The following table sets forth all exchange and repricings of officer stock
options since April 1987.
TEN-YEAR OPTION REPRICING TABLE
MARKET LENGTH OF
NO. OF PRICE OF EXERCISE ORIGINAL
SECURITIES STOCK AT PRICE AT OPTION
UNDERLYING TIME OF TIME OF REMAINING
OPTIONS REPRICING REPRICING AT DATE OF
REPRICED OF OR NEW REPRICING
OR AMENDED AMENDMENT AMENDMENT EXERCISE OR
NAME DATE (#) ($) ($) PRICE($) AMENDMENT
- ---------------- -------- ---------- --------- ---------- -------- ------------
T.J. Rodgers 10/26/87 50,000 3.1250 6.0625 3.1250 9yrs., 9mos.
President, 11/21/88 80,000 4.0000 4.5625 4.0000 9yrs.,10mos.
Chief Executive 01/22/90 200,000 4.1250 6.0625 4.1250 9yrs., 3mos.
Officer and
Director
Antonio Alvarez 10/26/87 20,320 3.1250 6.0625 3.1250 9yrs., 9mos.
Vice President, 01/22/90 16,000 4.1250 5.5625 4.1250 9yrs.
Research and 01/22/90 53,000 4.1250 6.3125 4.1250 9yrs., 9mos.
Development 01/21/90 57,000 4.1250 6.3125 4.1250 9yrs., 9mos.
04/30/92 26,398 4.7500 9.2500 4.7500 9yrs., 5mos.
04/30/92 80,000 4.7500 9.2500 4.7500 9yrs., 5mos.
10/24/96 146,930 11.0000 16.1875 11.0000 9yrs.
Lothar Maier 10/26/87 10,548 3.1250 3.3750 3.1250 9yrs.
Vice President, 10/26/87 7,262 3.1250 6.0625 3.1250 9yrs., 9mos.
Wafer Manufac- 11/21/88 6,352 4.0000 6.0625 4.0000 9yrs., 4mos.
turing, and 11/21/88 11,354 4.0000 4.5625 4.0000 9yrs.,10mos.
President 01/22/90 5,000 4.1250 6.0625 4.1250 9yrs., 3mos.
Cypress Semi- 01/22/90 16,170 4.1250 5.5000 4.1250 9yrs., 7mos.
conductor 04/30/92 12,306 4.7500 7.5625 4.7500 8yrs., 9mos.
(Minnesota) Inc.04/30/92 406 4.7500 7.5625 4.7500 8yrs., 9mos.
04/30/92 13,070 4.7500 9.2500 4.7500 9yrs., 5mos.
04/30/92 87,694 4.7500 7.5625 4.7500 8yrs., 9mos.
04/30/92 42,714 4.7500 9.2500 4.7500 9yrs., 5mos.
10/24/96 160,060 11.0000 16.1875 11.0000 9yrs.
Emmanuel 10/24/96 116,458 11.0000 16.1875 11.0000 9yrs.
Hernandez
Vice President,
Finance and
Administration,
and Chief
Financial
Officer
- 12 -
<PAGE>18
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
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 1996, Mr. Rodgers' annualized salary was
$278,976, and he received cash bonuses of $3,750 under the Employee Profit
Sharing Plan and Patent Award program. 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 549,137 shares of Common Stock and
options to purchase 1,750,928 shares of Common Stock on December 30, 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
package may well be below industry median levels. Consistent with these
objectives, Mr. Rodgers was not awarded a bonus under the 1996 key employee
bonus plan.
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.
- 13 -
<PAGE>19
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 was 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 cancelled 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 was paid
an annualized fixed retainer of $269,346 and was granted an option to purchase
20,000 shares of the Company's Common Stock with a vesting period of five years
from the date of grant. Pursuant to the terms of the 1995 Consulting
Agreement, as amended April 1, 1996, Mr. Bialek's annual retainer was increased
to $284,160, payable in equal installments on the first day of each month and
Mr. Bialek was granted an option to purchase 20,000 shares of the Company's
Common Stock which vests five years from the date of grant. In addition, Mr.
Bialek will be 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 amended 1995 Consulting Agreement
expires on April 1, 1997, 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 December 30, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
stockholders were satisfied.
<PAGE>20
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.
- 14 -
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.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN*
EXERCISE DATE RETURN
- ---------------------------- -------------
Cypress Semiconductor Corp.
- ----------------------------
12/31/96 $164.96
12/31/95 $147.45
12/31/94 $135.04
12/31/93 $ 79.56
12/31/92 $ 54.01
12/31/91 $100.00
S & P 500 Index
- ----------------------------
12/31/96 $177.60
12/31/95 $147.67
12/31/94 $110.11
12/31/93 $111.83
12/31/92 $104.46
12/31/91 $100.00
S & P Electronic Index
- ----------------------------
12/31/96 $614.78
12/31/95 $391.78
12/31/94 $289.76
12/31/93 $249.11
12/31/92 $162.49
12/31/91 $100.00
* ASSUMES $100 INVESTED ON DECEMBER 31, 1991 IN EACH INVESTMENT. TOTAL RETURN
ASSUMES REINVESTMENT OF DIVIDENDS. PAST RESULTS ARE NOT AN INDICATION OF
FUTURE INVESTMENT RETURNS.
- 15 -
<PAGE>21
PROPOSAL TWO - 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 29, 1997 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
1997.
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 28, 1997
<PAGE>22
(Front Side of Proxy Card)
CYPRESS SEMICONDUCTOR CORPORATION
PROXY FOR 1997 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 acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 28, 1997, 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 1997 Annual
Meeting of Stockholders of CYPRESS SEMICONDUCTOR CORPORATION to be held on
Tuesday, May 13, 1997, at 10:00 a.m., local time, at its offices located at
3939 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 present 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 the
powers of said attorneys-in-fact hereunder.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>23
(Backside of Proxy Card)
[ X ] Please mark votes 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 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 R. Lamond; Fred B. Bialek; Eric A. Benhamou;
John C. Lewis:
FOR WITHHELD
[ ] [ ]
[ ] _______________________________________
For all nominees except as noted above
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR FISCAL 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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 LEFT.
(This Proxy should be marked, dated, signed by each 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.)
Signature: _______________________________________ Date: _____________________
Signature: _______________________________________ Date: _____________________
