<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTEGRATED SILICON SOLUTION, INC.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check 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.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[ISSI LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 30, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Integrated Silicon Solution, Inc., a Delaware corporation (the "Company"), will
be held on Friday, January 30, 1998 at 2:00 p.m., local time, at the Silicon
Valley Capital Club, Fairmont Plaza, 50 West San Fernando, 17th Floor, San Jose,
California, for the following purposes:
1. To elect seven (7) directors to serve for the ensuing year and
until their successors are duly elected and qualified.
2. To amend the Company's 1989 Stock Plan to increase the number of
shares available for issuance thereunder by 500,000 shares to an
aggregate of 4,987,500 shares.
3. To amend the Company's 1993 Employee Stock Purchase Plan to
increase the number of shares available for issuance thereunder
by 1,000,000 shares to an aggregate of 1,450,000 shares.
4. To ratify the appointment of Ernst & Young, LLP as independent
auditors for the Company for the 1998 fiscal year.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing matters are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on December 1, 1997
are entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope for that purpose. Any stockholder attending the meeting
may vote in person even if he or she has returned a proxy.
FOR THE BOARD OF DIRECTORS
/s/ Gary L.Fischer
Gary L. Fischer
Secretary
Santa Clara, California
December 29, 1997
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
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<PAGE> 3
INTEGRATED SILICON SOLUTION, INC.
2231 LAWSON LANE
SANTA CLARA, CALIFORNIA 95054-3311
(408) 588-0800
PROXY STATEMENT FOR 1998
ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Integrated Silicon Solution, Inc. (the "Company") for use at the Annual Meeting
of Stockholders to be held on Friday, January 30, 1998 at 2:00 p.m., local time,
or at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Silicon Valley Capital Club, Fairmont Plaza, 50 West San
Fernando, 17th Floor, San Jose, California.
These proxy solicitation materials were mailed on or about December 29,
1997 to all stockholders of record on December 1, 1997 (the "Record Date").
INFORMATION CONCERNING SOLICITATION AND VOTING
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company at the above address of the Company, written notice of revocation or
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person.
VOTING AND SOLICITATION
Proxies properly executed, duly returned to the Company and not revoked,
will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted as the management of the
Company may propose. If any matter not described in this Proxy Statement is
properly presented for action at the meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote according to their best
judgment.
Each stockholder is entitled to one vote for each share of Common Stock
on all matters presented at the meeting. The required quorum for the transaction
of business at the Annual Meeting is a majority of the votes eligible to be cast
by holders of shares of Common Stock issued and outstanding on the Record Date.
Shares that are voted "FOR," "AGAINST," "WITHHELD" OR "ABSTAIN" are treated as
being present at the meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Annual Meeting (the "Votes Cast") with
respect to such matter. Abstentions will have the same effect as a vote against
a proposal. Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but such
non-votes will not be counted for purposes of determining the number of Votes
Cast with respect to the particular proposal on which a broker has expressly not
voted. Thus, a broker non-vote will not effect the outcome of the voting on a
proposal.
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<PAGE> 4
The cost of soliciting proxies will be borne by the Company. The Company
may also reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and employees, without additional compensation, personally
or by telephone or telegram.
RECORD DATE
Stockholders of record at the close of business on December 1, 1997 are
entitled to notice of the meeting and to vote at the meeting.
PRINCIPAL SHARE OWNERSHIP
At the Record Date, 17,965,831 shares of the Company's Common Stock,
$.0001 par value per share, were issued and outstanding and no shares of the
Company's Preferred Stock, $.0001 par value per share, were issued and
outstanding. As of December 1, 1997, there was no entity known by the Company to
be the beneficial owner of more than 5% of the Company's Common Stock.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals by stockholders of the Company which such stockholders intend
to present at the Company's 1999 Annual Meeting of Stockholders must be received
by the Company no later than August 31, 1998 so that they may be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
A board of seven (7) directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's seven (7) nominees named below, all
of whom are presently directors of the Company. If any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for the nominee designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominees will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next Annual Meeting of
Stockholders or until the director's successor has been elected and qualified.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The seven (7) candidates receiving the highest number of "FOR" votes
shall be elected to the Company's Board of Directors. An abstention will have
the same effect as a vote withheld for the election of directors.
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<PAGE> 5
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW:
<TABLE>
<CAPTION>
Name of Nominee Age Principal Occupation
- --------------- --- --------------------
<S> <C> <C>
Jimmy S. M. Lee .............. 42 Chief Executive Officer, President and
Chairman of the Board of the Company
Kong-Yeu Han ................. 42 Executive Vice President, General
Manager, Taiwan and Director of the
Company
Pauline Lo Alker ............. 55 President and Chief Executive Officer,
Network Peripherals, Inc.
Diosdado P. Banatao .......... 51 Chairman of S3 Incorporated
Li-Bu Tan .................... 38 General Partner of Walden Group
Hide L. Tanigami ............ 47 President and Chief Executive Officer,
Marubun USA Corporation
Chun Win Wong ................ 62 Vice Chairman, Wearnes Technology Pte.,
Ltd.
</TABLE>
Except as set forth below, each nominee has been engaged in his or her
principal occupation described above during the past five (5) years. There are
no family relationships among any directors or executive officers of the
Company.
Jimmy S.M. Lee has served as Chief Executive Officer, President and a
director of the Company since he co-founded the Company in October 1988. He has
also served as a director of ISSI-Taiwan since September 1990. From 1985 to
1988, Mr. Lee was engineering manager at International CMOS Technology, Inc., a
semiconductor company, and from 1983 to 1985, he was a design manager at
Signetics Corporation, a semiconductor company. Prior thereto, Mr. Lee was a
project manager at Toshiba Semiconductor Corporation and a design engineer at
National Semiconductor Corporation. Mr. Lee holds an M.S. degree in electrical
engineering from Texas Tech University and a B.S. degree in electrical
engineering from National Taiwan University.
Kong-Yeu Han has served as the Company's Executive Vice President since
April 1995, as General Manager, ISSI-Taiwan since September 1990 and as a
director of the Company since he co-founded the Company in October 1988. He has
also served as a director of ISSI-Taiwan since September 1990. From October 1988
to September 1990, he also served as Vice President, Engineering of the Company.
From 1985 to 1988, Mr. Han was design engineering manager at Vitelic
Corporation, a semiconductor company, and from 1984 to 1985 he was a staff
engineer at Signetics Corporation. From 1980 to 1984, Mr. Han was a senior
engineer at Advanced Micro Devices and its subsidiary Monolithic Memories, Inc.
("MMI"), both of which are semiconductor companies. Mr. Han holds an M.S. degree
in electrical engineering from the University of California, Santa Barbara and a
B.S. degree in electrical engineering from National Taiwan University.
Pauline Lo Alker was appointed to serve as a director of the Company in
April 1997. Since 1991, Ms. Alker has been President and Chief Executive Officer
of Network Peripherals, Inc., which specializes in high performance workgroup
networking solutions. In 1984 she founded Counterpoint Computers, Inc., a
developer and manufacturer of high-performance UNIX multiprocessor computers,
which was acquired by Acer, Inc. in 1987. She served first as President of
Acer's Network Computing Division Counterpoint, then became President of Acer
America's Sales and Marketing. Ms. Alker holds B.A. degrees in mathematics and
music from Arizona State University. She also serves as a director of Network
Peripherals, Inc. and Tektronix, Inc.
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<PAGE> 6
Diosdado P. Banatao has served as a director of the Company since July
1993. Since January 1992, he has been Chairman of the Board of S3 Incorporated,
a semiconductor company that he founded. He also served as President and Chief
Executive Officer of S3 from 1989 to January 1992. From 1984 to 1988, Mr.
Banatao held various executive level positions at Chips & Technologies, Inc., a
semiconductor company that he co-founded, most recently serving as Vice
President and General Manager of the Advanced Products Operation. Mr. Banatao
holds an M.S. degree in electrical engineering from the Mapua Institute of
Technology in the Philippines.
Lip-Bu Tan has served as a director of the Company since March 1990. Mr.
Tan was also a director of ISSI-Taiwan from July 1992 until July 1993. Mr. Tan
is a General Partner of the Walden Group of venture capital funds and serves as
President of International Venture Capital Investment Corporation ("IVCIC"). Mr.
Tan holds an M.S. degree in business administration from the University of San
Francisco and a B.S. degree from Nanyang University. He has also served as a
director of Creative Technology Ltd., a multimedia products company, Eltech
Electronics, Ltd., a contract manufacturing company, and Premisys
Communications, Inc., a telecommunications company, since 1990, 1988 and 1990,
respectively.
Hide L. Tanigami was appointed to serve as a director of the Company on
December 3, 1997. Since January 1996, Mr. Tanigami has been President and Chief
Executive Officer of Marubun USA Corporation, an electronic components trading
company. Since April 1993, he has also been President and Chief Executive
Officer of Technology Matrix, Inc., an intellectual property company that
coordinates technology development and licensing in Japan. From October 1985
until March 1994, Mr. Tanigami was a co-founder and Vice President of Corporate
Development at Catalyst Semiconductor, Inc. He also serves as a director of
Catalyst Semiconductor, Inc. and was a director of Nexcom Technology, Inc. until
its acquisition by ISSI in December 1997. Mr. Tanigami holds an M.A. degree in
applied linguistics from San Francisco State University and a B.A. degree from
Kansai University of Foreign Studies.
Chun Win Wong has served as a director of the Company since December
1994. Mr. Wong was also a director of the Company from March 1991 to May 1994
and a director of ISSI-Taiwan from March 1991 until July 1993. Since April 1994,
Mr. Wong has been Vice Chairman of Wearnes Technology Pte, Ltd. ("Wearnes") and
since 1983, he has been Group General Manager of Wearnes Brothers, Limited,
Singapore, the parent company of Wearnes, both of which are multinational
electronics companies. He was also Managing Director of Wearnes from 1983 to
1994. From 1970 to 1980, Mr. Wong was Chief Executive Officer of Industrial
Electronics and Engineers Limited, an electronics company which he founded. Mr.
Wong holds a degree in electrical and control engineering from the Royal
Melbourne Institution of Technology in Australia and a degree from the
Manchester College of Science & Technology in England. He has also served as a
director of Advanced Logic Research, Inc. since 1985.
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<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of December 1, 1997 (i) by each director of the Company, (ii) by
the Company's Chief Executive Officer and the two other executive officers of
the Company during fiscal 1997 (such officers are collectively referred to as
the "Named Executive Officers"), and (iii) by all current directors and
executive officers as a group:
<TABLE>
<CAPTION>
Beneficial Ownership
---------------------
Name Number Percent
- ---- ------ -------
<S> <C> <C>
Jimmy S.M. Lee(1) ............................... 481,180 2.7
Kong-Yeu Han(2) ................................. 385,063 2.1
Gary L. Fischer(3) .............................. 95,865 *
Diosdado Banatao(4) ............................. 74,792 *
Pauline Lo Alker(5) ............................. 1,875 *
Lip-Bu Tan(6) ................................... 378,090 2.1
Hide L. Tanigami(7) ............................. -- --
ChunWin Wong(8) ................................. 549,670 3.1
All directors and executive officers
as a group (8 persons)(9) ..................... 1,966,535 10.7
</TABLE>
- -------------
* Less than 1%
(1) Includes 83,501 shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1997. Also includes 51,000 shares
held by Mr. Lee as custodian for his minor children.
(2) Includes 125,939 shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1997. Also includes 40,000 shares
held by Mr. Han as custodian for his minor children.
(3) Includes 92,155 shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1997. Also includes 1,500 shares
held by Mr. Fischer's children.
(4) Represents shares issuable upon exercise of options which are exercisable
within 60 days of December 1, 1997.
(5) Represents shares issuable upon exercise of options which are exercisable
within 60 days of December 1, 1997.
(6) Includes 5,625 shares issuable upon exercise of options held by Mr. Tan
which are exercisable within 60 days of December 1, 1997, and 359,433
shares held by IVCIC. Mr. Tan is President of IVCIC and may be deemed to be
a beneficial owner of the shares held by such entity.
(7) Mr. Tanigami did not beneficially own any shares of Common Stock as of
December 1, 1997. In connection with his appointment to the Board on
December 3, 1997, Mr. Tanigami was granted an option to purchase 2,500
shares of Common Stock. This option will vest monthly over a twelve month
period commencing on the date of grant.
(8) Includes 7,292 shares issuable upon exercise of options held by Mr. Wong
which are exercisable within 60 days of December 1, 1997. Also includes an
aggregate of 537,378 shares held by Wearnes Technology Pte. Ltd. and United
Wearnes Technology Pte. Ltd. Mr. Wong is the Managing Director of Wearnes
and may be deemed to be a beneficial owner of the shares held by such
entities.
(9) Includes 391,179 shares issuable upon the exercise of options which are
exercisable within 60 days of December 1, 1997. See notes 1 through 8
above.
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<PAGE> 8
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven (7) meetings during
fiscal 1997.
The Audit Committee, consisting of Messrs. Tan and Wong, held three (3)
meetings for fiscal 1997. The Audit Committee reviews the financial statements
and the internal financial reporting system and controls of the Company with the
Company's management and independent auditors, recommends resolutions for any
dispute between the Company's management and its auditors, and reviews other
matters relating to the relationship of the Company with its auditors.
The Compensation Committee, consisting of Messrs. Banatao and Tan, held
three (3) meetings for fiscal 1997. Mr. Wong was also a member of the
Compensation Committee until April 24, 1997. The Compensation Committee makes
recommendations to the Board of Directors regarding the Company's executive
compensation policies and administers the Company's stock option plans and
employee stock purchase plan.
The Board of Directors currently has no nominating committee or
committee performing a similar function.
Each director, other than Messrs. Banatao and Wong, attended at least
75% of the aggregate of (i) the total number of meetings of the Board of
Directors held during fiscal 1997 and (ii) the total number of meetings held by
all committees of the Board of Directors during fiscal 1997 on which such
director served. Messrs. Banatao and Wong attended 56% and 70%, respectively, of
the aggregate of the total number of meetings of the Board of Directors held
during fiscal 1997 and the total number of meetings held by all committees of
the Board during fiscal 1997 on which such director served. Ms. Alker attended
each meeting of the Board of Directors held during fiscal 1997 during such time
that she was a director.
COMPENSATION OF DIRECTORS
Non-employee directors receive $1,000 for attendance at each Board
meeting and are reimbursed for all reasonable expenses incurred by them in
attending Board and Committee meetings. In addition, each non-employee director
is eligible to participate in the Company's 1995 Director Stock Option Plan (the
"Director Plan"). Under the Director Plan, each non-employee director is
automatically granted a nonstatutory option to purchase 2,500 shares of Common
Stock upon the date upon which such person first becomes a non-employee
director. In addition, each director who has been a non-employee director for at
least six (6) months will automatically receive a nonstatutory option to
purchase 2,500 shares of Common Stock upon such director's annual reelection to
the Board by the stockholders. Options granted under the Director Plan have a
term of ten (10) years unless terminated sooner upon termination of the
optionee's status as a director or otherwise pursuant to the Director Plan. The
exercise price of each option granted under the Director Plan is equal to the
fair market value of the Common Stock on the date of grant. Options granted
under the Director Plan are subject to cumulative monthly vesting over a twelve
(12) month period commencing at the date of grant. On February 4, 1997, Messrs.
Tan, Wong and Banatao were each granted an option under the Director Plan to
purchase 2,500 shares of Common Stock at an exercise price of $7.125 per share.
Upon her initial appointment to the Board on April 24, 1997, Ms. Alker was
granted an option under the Director Plan to purchase 2,500 shares of Common
Stock at an exercise price of $7.125 per share. Upon his initial appointment to
the Board on December 3, 1997, Mr. Tanigami was granted an option under the
Director Plan to purchase 2,500 shares of Common Stock at an exercise price of
$8.6875 per share. In addition, on July 8, 1997, the
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<PAGE> 9
Board approved special option grants for each non-employee director of the
Company. Specifically, Ms. Alker and Mr. Banatao were each granted an option
under the Company's 1989 Stock Plan (the "Stock Plan") to purchase 20,000 shares
of Common Stock and Messrs. Tan and Wong were each granted an option to purchase
10,000 shares of Common Stock, in each case at an exercise price of $7.875 per
share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists
of Messrs. Banatao and Tan, neither of whom has been or is an officer or an
employee of the Company. Mr. Wong was also a member of the Compensation
Committee until April 24, 1997. No member of the Compensation Committee or
executive officer of the Company has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The members of the Compensation Committee of the board of Directors are
Messrs. Banatao and Tan. Mr. Wong was also a member of the Compensation
Committee until April 24, 1997. All such members are non-employee directors. The
Compensation Committee reviews compensation levels of senior management and
recommends salaries and other compensation paid to senior management to the
Company's Board of Directors for approval.
Compensation Philosophy. The Company's executive pay programs are
designed to attract and retain executives who will contribute to the Company's
long-term success, to reward executives for achieving both short and long-term
strategic Company goals, to link executive and stockholder interests through
equity-based plans, and to provide a compensation package that recognizes
individual contributions and Company performance. A meaningful portion of each
executive's total compensation is intended to be variable and to relate to and
be contingent upon Company performance. The Company's compensation philosophy is
that cash compensation must be competitive with other semiconductor companies of
comparable size in order to help motivate and retain existing staff and provide
a strong incentive to achieve specific Company goals. The Company believes that
the use of stock options as a long-term incentive links the interests of the
employees to that of the stockholders and motivates key employees to remain with
the Company to a degree that is critical to the Company's long-term success.
Components of Executive Compensation. The two key components of the
Company's senior management compensation program in fiscal 1997 were base salary
and long-term incentives, represented by the Company's stock option program. The
Compensation Committee utilizes an industry recognized independent annual survey
of companies to determine whether the Company's senior management compensation
is within the competitive range. Base salary is set for each senior manager
commensurate with that person's level of responsibility and within the
parameters of companies of comparable size within the semiconductor industry.
Mr. Jimmy Lee's base salary was increased by $10,800 to $267,800 in October
1997.
It is the policy of the Company, and the members of the Committee
believe that it is consistent with practices of comparable companies in the
industry, that bonus compensation should comprise a meaningful portion of the
annual total compensation of senior management. Due to the declining market
conditions in fiscal 1997, no bonuses were approved for the executive officers
for fiscal 1997 except that Mr. Fischer received a bonus of $10,000.
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<PAGE> 10
Stock options are generally granted when a senior manager joins the
Company and additional options may be granted from time-to-time thereafter. The
options granted to each senior manager vest over a four (4) year period. In
addition to the stock option program, senior managers are eligible to
participate in the Company's 1993 Employee Stock Purchase Plan.
In December 1996, the Company's Board of Directors approved an option
exchange program whereby all employees that held options with exercise prices in
excess of $16.75 per share were offered the opportunity to exchange such options
for new options at $9.25 per share ($10.125 per share for executive officers),
which was the fair market value of the Common Stock on the date of the exchange
program. In order to participate in the option exchange program, employees were
required to forfeit three (3) months vesting. The Board undertook this action in
light of the then recent reduction in the trading price of the Company's Common
Stock and in consideration of the importance to the Company of retaining its
employees by offering them appropriate equity incentives. The Board also
considered the highly competitive environment for obtaining and retaining
qualified employees and the overall benefit to the Company's stockholders from a
highly motivated group of employees.
Other elements of executive compensation include participation in
Company-wide medical and dental benefits and the ability to defer compensation
pursuant to a 401 (k) plan, and a non-qualified deferred compensation program.
The Company does not match annual contributions under the 401 (k) plan at this
time.
The Compensation Committee has considered the potential impact of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Section"). The Section disallows a tax deduction
for any publicly-held corporation for individual compensation exceeding $1
million in any taxable year for any of the Named Executive Officers, unless such
compensation is performance-based. Since the cash compensation of each of the
Named Executive Officers is below the $1 million threshold and the Compensation
Committee believes that any options granted under the Company's Stock Plan will
meet the requirements of being performance-based, the Compensation Committee
believes that the Section will not reduce the tax deduction available to the
Company. The Company's policy is to qualify, to the extent reasonable, its
executive officers' compensation for deductibility under applicable tax laws.
However, the Compensation Committee believes that its primary responsibility is
to provide a compensation program that will attract, retain and reward the
executive talent necessary to the Company's success. Consequently, the
Compensation Committee recognizes that the loss of a tax deduction could be
necessary in some circumstances.
Mr. Jimmy Lee receives no other material compensation or benefits not
provided to all executive officers.
Compensation Committee of the Board of Directors
Diosdado P. Banatao
Lip-Bu Tan
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<PAGE> 11
PROPOSAL TWO:
APPROVAL OF AMENDMENT TO 1989 STOCK PLAN
The Company's Board of Directors and stockholders have previously
adopted and approved the Company's Stock Plan. A total of 4,487,500 shares of
Common Stock are presently reserved for issuance under the Stock Plan. In
October 1997, the Board of Directors approved an amendment to the Stock Plan,
subject to stockholder approval, to increase the shares reserved for issuance
thereunder by 500,000 shares, bringing the total number of shares issuable under
the Stock Plan to 4,987,500. As of December 15, 1997, 52,187 shares were
available for future issuance under the Stock Plan. The Company also has a
Nonstatutory Stock Plan which provides for the grant of nonstatutory stock
options to non-executive officer employees. As of December 15, 1997, 741,075
shares were available for future issuance under the Nonstatutory Stock Plan.
At the Annual Meeting, the stockholders are being requested to consider
and approve the proposed amendment to the Stock Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 500,000 shares,
bringing the total number of shares issuable under the Stock Plan to 4,987,500.
The Board believes that the amendment will enable the Company to continue its
policy of widespread employee stock ownership as a means to motivate high levels
of performance and to recognize key employee accomplishments.
For a description of the principal features of the Stock Plan, see
"Appendix A -- Description of the 1989 Stock Plan."
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The approval of the amendment to the Stock Plan requires the affirmative
vote of a majority of the Votes Cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT TO THE STOCK PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
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<PAGE> 12
PROPOSAL THREE:
APPROVAL OF AMENDMENT TO 1993 EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors and stockholders have previously
adopted and approved the Company's 1993 Employee Stock Purchase Plan (the
"Purchase Plan") which was activated in February 1995. A total of 450,000 shares
of Common Stock are presently reserved for issuance under the Purchase Plan. In
October 1997, the Board of Directors approved an amendment to the Purchase Plan,
subject to stockholder approval, to increase the shares reserved for issuance
thereunder by 1,000,000 shares, bringing the total number of shares issuable
under the Purchase Plan to 1,450,000 shares. Employee participation in the
Purchase Plan has been very broad-based. Approximately 74% of the Company's
eligible employees are participating in the purchase period which began on
August 1, 1997. The Board believes that the amendment will enable the Company to
continue its policy of widespread employee stock ownership as a means to
motivate high levels of performance.
At the Annual Meeting, the stockholders are being requested to consider
and approve the proposed amendment to the Purchase Plan to increase the number
of shares of Common Stock reserved for issuance thereunder by 1,000,000 shares,
bringing the total number of shares issuable under the Purchase Plan to
1,450,000.
For a description of the principal features of the Purchase Plan, see
"Appendix B -- Description of 1993 Employee Stock Purchase Plan"
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The approval of the amendment of the Purchase Plan requires the
affirmative vote of a majority of the Votes Cast on the proposal at the Annual
Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT TO THE PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
-11-
<PAGE> 13
PROPOSAL FOUR:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young, LLP, independent
auditors, to audit the financial statements of the Company for the 1998 fiscal
year. This nomination is being presented to the stockholders for ratification at
the meeting. Ernst & Young, LLP has audited the Company's financial statements
since 1990. A representative of Ernst & Young, LLP is expected to be present at
the meeting, will have the opportunity to make a statement, and is expected to
be available to respond to appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of the Votes Cast on the proposal at
the Annual Meeting is required to ratify the Board's selection. If the
stockholders reject the nomination, the Board will reconsider its selection.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1998 FISCAL YEAR.
-12-
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation received for services
rendered to the Company and the Company's subsidiaries in all capacities during
the last three fiscal years by (i) the Company's Chief Executive Officer and
(ii) the Company's two other Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation(1) Compensation
------------------------------------------------ ------------
Fiscal Other Annual Awards All
Name and Principal Position Year Salary Bonus(2) Compensation(3) Options(4) Other
- --------------------------- ---- ------ -------- --------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.M. Lee ............ 1997 $255,741 -- -- 108,000 --
Chief Executive Officer 1996 248,205 -- -- 33,000 --
and President 1995 179,523 $200,712 -- 25,000 --
Kong-Yeu Han .............. 1997 218,417 -- $49,899 94,000 --
Executive Vice President 1996 219,229 -- 50,307 30,000 --
and General Manager, Taiwan 1995 167,693 184,218 51,418 25,000 --
Gary L. Fischer ........... 1997 181,954 10,000 -- 50,000
Executive Vice President 1996 170,000 -- -- 12,000 --
and Chief Financial Officer 1995 142,500 120,000 -- 25,000 --
</TABLE>
- -------------------
(1) Excludes perquisites and other personal benefits which for each Named
Executive Officer did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for such officer.
(2) Includes bonus awards earned for performance in the fiscal year noted even
though such amounts are payable in subsequent years. Excludes bonus awards
paid in the fiscal year noted but earned in prior years.
(3) In fiscal 1997, 1996 and 1995, includes $49,899, $50,307 and $51,418,
respectively, for housing allowance and rent allowance in connection with
Mr. Han's relocation to Taiwan.
(4) Options granted in fiscal 1997 include options previously granted in fiscal
1996 that were repriced in fiscal 1997.
-13-
<PAGE> 15
OPTION GRANTS IN FISCAL YEAR 1997
The following table sets forth certain information concerning grants of
stock options to each of the Named Executive Officers during the fiscal year
ended September 30, 1997.
<TABLE>
<CAPTION>
Individual Grants(1)
------------------------------------------------
% of Total
Options
Granted to
Employees Exercise Potential Realizable Value at
Options in Fiscal Base Price Expiration Annual Rates of Stock Price
Name Granted Year Per Share Date Appreciation for Option Term(2)
- -------------- -------- ---------- ---------- ---------- -------------------------------
5% 10%
-------- --------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.M. Lee ...... 39,000 1.7% $9.25 11/08/06 $226,874 $574,943
33,000(3) 1.5 10.125 12/06/06 210,129 532,509
36,000 1.5 8.00 07/11/07 181,122 458,998
Kong-Yeu Han ........ 34,000 1.5 9.25 11/08/06 197,787 501,232
30,000(3) 1.3 10.125 12/06/06 191,027 484,099
30,000 1.3 8.00 07/11/07 150,935 382,498
Gary L. Fischer ..... 18,000 0.8 9.25 11/08/06 104,711 265,358
12,000(3) 0.1 10.125 12/06/06 76,411 193,640
20,000 0.9 8.00 07/11/07 100,623 254,999
</TABLE>
- -------------------
(1) Each of these options was granted pursuant to the Stock Plan and is subject
to the terms of such plan. These options were granted at an exercise price
equal to the fair market value of the Company's Common Stock as determined
by the Board of Directors of the Company on the date of grant and, as long
as the optionee maintains continuous employment with the Company, vest over
a four year period at the rate of one-fourth of the shares on the first
anniversary of the date of grant and 1/48th of the remaining shares per
month thereafter.
(2) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the hypothetical gains or "option spreads" that
would exist for the respective options. These gains are based on assumed
rates of annual compounded stock price appreciation of 5% and 10% from the
date the option was granted over the full option term. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Commission
and do not represent the Company's estimate or projection of future
increases in the price of its Common Stock.
(3) Represents options previously granted in fiscal 1996 and repriced in fiscal
1997.
-14-
<PAGE> 16
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning options
exercised by the Named Executive Officers in fiscal 1997, and exercisable and
unexercisable stock options held by each of the Named Executive Officers as of
September 30, 1997.
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
-----------------------------------------------------------
Value of Unexercised In-the-
Number of Unexercised Money Options at
Options at Fiscal Year End Fiscal Year End(1)
-------------------------- ----------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------- ------ -------- ------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.M. Lee ..... 38,000 $263,450 124,479 101,021 $354,120 $209,242
Kong-Yeu Han ....... -- -- 110,730 88,270 786,258 179,367
Gary L. Fischer .... -- -- 82,612 53,438 439,862 119,326
</TABLE>
- -------------------
(1) The value of an "in the money" option represents the difference between the
exercise price of such option and the fair market value of the Company's
Common Stock at September 30, 1997, multiplied by the total number of
shares subject to the option.
TEN-YEAR OPTION REPRICINGS
The following table sets forth certain information with respect to the
Company's exchange of outstanding options with the Named Executive Officers in
December 1996. For further information with respect to such option exchange, see
"Report of the Compensation Committee of the Board of Directors."
<TABLE>
<CAPTION>
Number of Length of
Securities Market Original
Underlying Price Exercise Option Term
Options/ of Stock at Price at Time Remaining at
SARs Time of of Repricing New Date of
Repriced or Repricing or or Exercise Repricing or
Name Date Amended Amendment Amendment Price Amendment
- -------------- -------- ----------- ------------ ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.M. Lee ........ 12/06/96 33,000 $10.125 $26.00 $10.125 9 years
Chief Executive Officer
and President
Kong-Yeu Han .......... 12/06/96 30,000 10.125 26.00 10.125 9 years
Executive Vice
President and General
Manager, Taiwan
Gary L. Fischer ....... 12/06/96 12,000 10.125 26.00 10.125 9 years
Executive Vice
President and Chief
Financial Officer
</TABLE>
-15-
<PAGE> 17
COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
The following graph sets forth the Company's total cumulative
stockholder return compared to the Standard & Poor's 500 Index and the Standard
& Poor's Semiconductor Index for the period February 3, 1995 (the date of the
Company's initial public offering) through September 30, 1997. Total stockholder
return assumes $100 invested at the beginning of the period in the Common Stock
of the Company, the stocks represented in the Standard & Poor's 500 Index and
the stocks represented in the Standard & Poor's Semiconductor Index,
respectively. Total return also assumes reinvestment of dividends; the Company
has paid no dividends on its Common Stock.
Historical stock price performance should not be relied upon as
indicative of future stock price performance.
<TABLE>
<CAPTION>
Date ISSI SP50 SPBCC
- --------- ------- ------- -------
<S> <C> <C> <C>
03-Feb-95 100.000 100.000 100.000
31-Mar-95 184.211 104.611 106.943
28-Apr-95 202.632 107.536 120.992
31-May-95 213.816 111.441 130.873
30-Jun-95 275.000 113.812 148.644
31-Jul-95 363.158 117.429 161.705
31-Aug-95 261.842 117.391 160.029
29-Sep-95 196.053 122.098 160.952
31-Oct-95 164.803 121.490 157.120
30-Nov-95 126.316 126.477 138.667
29-Dec-95 88.076 128.684 124.728
31-Jan-96 86.184 132.881 117.726
29-Feb-96 71.053 133.802 120.701
29-Mar-96 69.737 134.861 117.464
30-Apr-96 87.500 136.673 137.428
31-May-96 78.618 139.796 145.584
28-Jun-96 60.526 140.112 135.731
31-Jul-96 53.947 133.702 131.612
30-Aug-96 46.711 136.217 141.995
30-Sep-96 60.197 143.597 169.515
31-Oct-96 42.763 147.349 186.129
29-Nov-96 52.632 158.161 220.188
31-Dec-96 45.395 154.759 223.917
31-Jan-97 51.645 164.249 277.277
28-Feb-97 48.026 165.222 250.190
31-Mar-97 45.066 158.182 248.233
30-Apr-97 38.158 167.420 270.209
30-May-97 51.316 177.227 271.661
30-Jun-97 39.967 184.928 253.411
31-Jul-97 61.842 199.375 322.117
29-Aug-97 76.974 187.922 322.534
30-Sep-97 58.553 197.911 326.432
</TABLE>
-16-
<PAGE> 18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of filings under Section 16 (a) of
the Securities Exchange Act of 1934, as amended, received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 1997, all Section 16 filing requirements were met, except that Mr. Lee
filed one late Form 4.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors of the Company may recommend.
THE BOARD OF DIRECTORS
Santa Clara, California
December 29, 1997
-17-
<PAGE> 19
APPENDIX A
DESCRIPTION OF THE 1989 STOCK PLAN
General. The Company's 1989 Stock Plan (the "Stock Plan") was adopted by
the Board of Directors and approved by the stockholders in 1989. The Stock Plan
authorizes the Board, or one or more committees which the Board may appoint from
among its members (the "Committee"), to grant stock options or stock purchase
rights. Prior to the proposed amendment to the Stock Plan to be voted on at the
Annual Meeting, a total of 4,487,500 shares of Common Stock are presently
reserved for issuance under the Stock Plan. Options granted under the Stock Plan
may be either Incentive Stock Option ("ISOs") as defined in Section 422 of the
Code, or Nonstatutory Stock Options ("NSOs"), as determined by the Board or the
Committee.
Purpose. The general purpose of the Stock Plan is to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to Employees and Consultants of the Company and its
Subsidiaries and to promote the success of the Company's business.
Administration. The Stock Plan may be administered by the Board or the
Committee. Subject to the other provisions of the Stock Plan, the Board or the
Committee has the authority to: (i) interpret the Stock Plan and apply its
provisions; (ii) prescribe, amend or rescind rules and regulations relating to
the Stock Plan; (iii) select the persons to whom Options are to be granted; (iv)
determine the number of shares to be made subject to each Option; (v) determine
whether and to what extent Options are to be granted; and (vi) prescribe the
terms and conditions of each Option (including the exercise price, whether an
Option will be classified as an ISO or a NSO and the provisions of the Stock
Option or Stock Purchase Agreement to be entered into between the Company and
the grantee). All decisions, interpretations and other actions of the Board or
Committee shall be final and binding on all holders of Options and on all
persons deriving their rights therefrom.
Eligibility. The Stock Plan provides that Options and Stock Purchase Rights
may be granted to the Company's Employees and Consultants (as such terms are
defined in the Stock Plan). ISOs may be granted only to Employees. Any Optionee
who owns more than 10% of the combined voting power of all classes of
outstanding stock of the Company or any Parent or Subsidiary is not eligible for
the grant of an ISO unless the Exercise Price of the Option is at least 110% of
the fair market value of the Common Stock on the date of grant.
The Stock Plan provides that no employee shall be granted, in any fiscal
year of the Company, options and stock purchase rights to purchase more than
250,000 shares of Common Stock. In connection with an employee's initial
employment, the employee may be granted options or stock purchase rights to
purchase up to an additional 250,000 shares of Common Stock.
Terms and Conditions of Options. Each Option granted under the Stock Plan
is evidenced by a written stock option agreement between the Optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The Board determines the exercise price of
Options to purchase shares of Common Stock at the time the Options are granted.
However, excluding Options issued to 10% Stockholders, the exercise price under
an ISO must not be less than 100% of the fair market value of the Common Stock
on the date the Option is granted. Generally, the fair market value shall be the
closing sales price for such stock
A-1
<PAGE> 20
(or the closing bid, if no sales were reported) as quoted on the Nasdaq National
Market on the last market trading day prior to the date of determination.
(b) Form of Consideration. The means of payment for shares issued
upon exercise of an Option is specified in each stock option agreement and
generally may be made by cash, check, promissory note, other shares of Common
Stock of the Company owned by the Optionee, delivery of an exercise notice
together with irrevocable instructions to a broker to deliver the exercise price
to the Company from the sale or loan proceeds, reduction in the amount of any
Company liability to the Optionee, or by a combination thereof.
(c) Exercise of the Option. Each stock option agreement will specify
the term of the Option and the date when the Option is to become exercisable.
However, in no event shall an Option granted under the Stock Plan be exercised
more than ten (10) years after the date of grant. Moreover, in the case of an
ISO granted to a 10% Stockholder, the term of the Option shall be for no more
than five (5) years from the date of grant.
(d) Termination of Continuous Status. In the event of termination of
an Optionee's Continuous Status as an Employee or Consultant with the Company
(as the case may be), such Optionee may, but only within thirty (30) days (or
within such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and such time period not exceeding ninety (90) days) after
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise his
Option to the extent that Optionee was entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(e) Disability. In the even of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(f) Death. In the event of the death of an Optionee while Optionee is
an Employee or Consultant, the Option may be exercised at any time within twelve
(12) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death. To the extent
that Optionee was not entitled to exercise the Option at the date of death, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(g) Termination of Options. Each stock option agreement will specify
the term of the Option and the date when all or any installment of the Option is
to become exercisable. Notwithstanding the foregoing, however, the term of an
ISO shall not exceed ten (10) years from the date of grant. No Options may be
exercised by any person after the expiration of its term.
A-2
<PAGE> 21
(h) Nontransferability of Options. An Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
(i) Value Limitation. If the aggregate Fair Market Value of all
shares of Common Stock subject to an Optionee's ISO which are exercisable for
the first time during any calendar year under all plans of the Company or any
Parent or Subsidiary exceeds $100,000, such excess Options shall be treated as
NSOs.
(j) Buyout Provisions. The Board or Committee may at any time offer
to buy out for a payment in case of shares, an Option previously granted, based
on such terms and conditions as the Board or Committee shall establish and
communicate to the Optionee at the time that such offer is made.
Stock Purchase Rights. The Stock Plan permits the Company to grant rights
to purchase Common Stock either alone or in combination with other awards
granted under the Stock Plan or in combination with cash awards made outside of
the Stock Plan. After the Board or Committee determines that it will offer Stock
Purchase Rights under the Stock Plan, it shall advise the offeree in writing of
the terms, conditions and restrictions related to the offer, including the
number of shares that the offeree shall be entitled to purchase, the price to be
paid (which price shall not be less than 50% of the Fair Market Value of the
Shares as of the date of the offer) and the time within which the offeree must
accept such offer, which shall in no event exceed ninety (90) days from the date
upon which the Board or Committee made the determination to grant the Stock
Purchase Right. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Board or Committee.
Unless the Board or Committee determines otherwise, the Restricted Stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with the
Company for any reason (including death or disability). The purchase price for
shares repurchased pursuant to the Restricted Stock purchase agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Board or Committee may determine.
Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Stock Plan but as
to which no Options have yet been granted or which have been returned to the
Stock Plan upon cancellation or expiration of an Option, as well as the price
per share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for an any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the Optionee, at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously
A-3
<PAGE> 22
exercised, the Option will terminate immediately prior to the consummation of
such proposed action. In the event of a merger of the Company with or into
another corporation, the Option may be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. If the Board
makes an Option fully exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
Amendments, Suspensions and Termination of the Option Plan. The Board may
amend, suspend or discontinue the Stock Plan at any time, but no amendment,
alteration, suspension or discontinuation shall be made which would impair the
rights of any Optionee under any grant theretofore made, within his or her
consent; provided, however, that stockholder approval is required for any
amendment to the extent necessary to comply with Section 422 of the Code, or any
other applicable rule or statute. In any event, the Stock Plan will terminate
automatically in 1999.
Federal Tax Information for Stock Plan. Options granted under the Stock
Plan may be either ISOs or NSOs.
An Optionee who is granted an ISO will not recognize taxable income either
at the time the Option is granted or upon its exercise, although the exercise
may subject the Optionee to the alternative minimum tax. Upon the sale or
exchange of the shares more than two (2) years after grant of the Option and one
(1) year after exercise of the Option, 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 at the time of sale or exchange equal to
the difference between the exercise price and the lower of (i) the fair market
value of the shares on the date of exercise and (ii) the sale price of the
shares. A different rule for measuring ordinary income upon such 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 Options which do not qualify as ISOs are referred to as NSOs. An
Optionee will not recognize any taxable income at the time he or she is granted
an NSO. However, upon its exercise, the Optionee will recognize ordinary income
generally measured as the excess of the then Fair Market Value of the shares
purchased over the purchase price. Any ordinary income recognized in connection
with an Option exercise by an Optionee who is also an employee of the Company
will be subject to tax withholding by the Company. Upon resale of such shares by
the Optionee, any difference between the sales price and the Optionee's purchase
price, to the extent not recognized as ordinary income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period. The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the Optionee with respect to shares
acquired upon exercise of an NSO.
Stock purchase rights will generally be taxed in the same manner as
nonstatutory stock options. However, restricted stock is generally purchased
upon the exercise of a stock purchase right. At the time of purchase, restricted
stock is subject to a "substantial risk of forfeiture" within the meaning of
Section 83 of the
A-4
<PAGE> 23
Code. As a result, the purchaser will not recognize ordinary income at the time
of purchase. Instead, the purchaser will recognize ordinary income on the dates
when a stock ceases to be subject to a substantial risk of forfeiture. The stock
will generally cease to be subject to a substantial risk of forfeiture when it
is no longer subject to the Company's right to repurchase the stock upon the
purchaser's termination of employment with the Company. At such times, the
purchaser will recognize ordinary income measured as the difference between the
purchase price and the fair market value of the stock on the date the stock is
no longer subject to a substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% shareholder of the Company.
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 STOCK PLAN, DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE OPTION MAY RESIDE.
A-5
<PAGE> 24
Stock Plan Benefits. The Company is unable to predict the amount of
benefits that will be received by or allocated to any particular participant
under the Stock Plan. The following table sets forth the dollar amount and the
number of shares granted under the Stock Plan during the last fiscal year to (i)
each of the Company's Named Executive Officers, (ii) all executive officers as a
group, (iii) all non-employee directors as a group and (iv) all employees other
than executive officers as a group.
STOCK PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
DOLLAR
VALUE OF NUMBER OF SHARES
NAME AND POSITION GRANTS (1) GRANTED
- ------------------------------------------------------------ ---------- ---------
<S> <C> <C>
Jimmy S.M. Lee ............................................. $ 982,875 108,000
Chief Executive Officer and President
Kong-Yeu Han ............................................... 858,250 94,000
Executive Vice President and General Manager, Taiwan
Gary L. Fischer ............................................ 468,000 50,000
Executive Vice President and Chief Financial Officer
All Executive Officers as a Group (3 persons) .............. 2,309,125 252,000
All Non-employee Directors as a Group (4 persons) .......... 472,500 60,000
All Employees other than Executive Officers as a Group ..... 10,965,327 1,288,300
</TABLE>
- -------------------
(1) The dollar value of option grants under the Stock Plan was computed by
multiplying the number of shares subject to the option times the exercise
price of the option. All options granted under the Stock Plan were granted
at an exercise price equal to the fair market value of the Common Stock on
the date of grant.
A-6
<PAGE> 25
APPENDIX B
DESCRIPTION OF THE 1993 EMPLOYEE STOCK PURCHASE PLAN
General. The 1993 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in March 1993 and was activated in February
1995 in connection with the Company's initial public offering. Prior to the
proposed amendment to the Purchase Plan to be voted on at the Annual Meeting, a
total of 450,000 shares of Common Stock has been reserved for issuance under the
Purchase Plan. The purpose of the Purchase Plan is to provide employees with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions.
Administration. The Purchase Plan may be administered by the Board or a
committee appointed by the Board. All questions of interpretation or application
of the Purchase Plan are determined by the Board or its appointed committee, and
its decisions are final, conclusive and binding upon all participants.
Eligibility. Each Employee of the Company (including officers), who works
at least 20 hours per week and more than five (5) months in any calendar year,
is eligible to participate in the Purchase Plan if so employed on the first day
of an Offering Period; provided, however, that certain limitations imposed by
Section 423(b) of the Code and limitations on stock ownership as set forth in
the Purchase Plan may apply. Eligible Employees become participants in the
Purchase Plan by filing with the Company a subscription agreement authorizing
payroll deductions prior to the first day of each Offering Period unless a
different time for filing the subscription agreement has been set by the Board.
Participation in an Offering. The Purchase Plan has consecutive and
overlapping twenty-four month offering periods that begin every six months (the
"Offering Periods"). Each twenty-four month Offering Period includes four
six-month purchase periods (each a "Purchase Period"), during which payroll
deductions are accumulated and, at the end of which, shares of Common Stock are
purchased with a participant's accumulated payroll deductions. The Board has the
power to change the duration of future Offering Periods, if such change is made
at least five days prior to the scheduled beginning of the first Offering Period
to be affected. To participate in the Purchase Plan, an eligible Employee must
authorize payroll deductions pursuant to the Purchase Plan. Such payroll
deductions may not exceed 10% of a participant's compensation during the
Offering Period. Once an Employee becomes a participant in the Purchase Plan,
the Employee will automatically participate in each successive Offering Period
until such time as the Employee withdraws from the Purchase Plan or the
Employee's employment with the Company terminates. At the beginning of each
Offering Period, each participant is automatically granted an option to purchase
shares of the Company's Common Stock. The option expires at the end of the
Offering Period or upon termination of employment, whichever is earlier, but is
exercised at the end of each Purchase Period to the extent of the payroll
deductions accumulated during such Purchase Period. In no event shall a
participant be permitted to purchase during each Purchase Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the first day of the Offering Period,
subject to exceptions and limitations stated in the Purchase Plan.
Purchase Price, Shares Purchased. Shares of Common Stock may be purchased
under the Purchase Plan at a Purchase Price not less than 85% of the lesser of
the Fair Market Value of the Common Stock on (i) the first day of the Offering
Period or (ii) the last day of the Purchase Period. The Fair Market Value of the
Common Stock on any relevant date will be the closing price per share as
reported on the Nasdaq National Market (or the mean of the closing bid and asked
prices, if no sales were reported) as quoted on such exchange
B-1
<PAGE> 26
or reported in The Wall Street Journal. The number of shares of Common Stock a
participant purchases in each Offering Period is determined by dividing the
total amount of payroll deductions withheld from the participant's compensation
prior to the last day of the Purchase Period by the Purchase Price.
Termination of Employment. Termination of a participants's employment
for any reason, including disability or death, or the failure of the participant
to remain in the continuous scheduled employ of the Company for at least 20
hours per week, cancels his or her option and participation in the Purchase Plan
immediately. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of death, to the person
or persons entitled thereto as provided in the Purchase Plan.
Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or
Asset Sale.
Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares reserved under the Purchase
Plan as well as the price per share of Common Stock covered by each option under
the Purchase Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, any Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board.
Merger or Asset Sale. In the event of any merger, consolidation,
acquisition of assets or like occurrence involving the Company, each option
under the Purchase Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event the successor corporation refuses to assume
or substitute for the options, the Board shall shorten any Purchase Periods and
Offering Periods then in progress by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods shall end on the New Exercise Date. The
New Exercise Date shall be prior to the merger, consolidation or asset sale. If
the Board shortens any Purchase Periods and Offering Periods then in progress,
the Board shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date has been changed to
the New Exercise Date and that all options will be exercised automatically on
the New Exercise Date, unless the participant has already withdrawn from the
Offering Period.
Amendment and Termination of the Plan. The Board of Directors may at
any time terminate or amend the Purchase Plan. An Offering Period may be
terminated by the Board of Directors at the end of any Purchase Period if the
Board determines that termination of the Purchase Plan is in the best interests
of the Company and its stockholders. Generally, no such termination can affect
options previously granted. No amendment shall be effective unless it is
approved by the holders of a majority of the votes cast at a duly held
stockholders' meeting, if such amendment would require stockholder approval in
order to comply with Section 423 of the Code. The Purchase Plan will terminate
in 2003.
B-2
<PAGE> 27
Withdrawal. Generally, a participant may withdraw from an Offering
Period at any time by written notice without affecting his or her eligibility to
participate in future Offering Periods. However, once a participant withdraws
from a particular Offering Period, that participant may not participate again in
the same Offering Period. To participate in a subsequent Offering Period, the
participant must deliver to the Company a new subscription agreement.
Federal Tax Information for Purchase Plan. The Purchase Plan, and the
right of participants to make purchases thereunder, is intended to qualify under
the provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the
Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition
of the shares, the participant will generally be subject to tax and the amount
of the tax will depend upon the holding period. If the shares are sold or
otherwise disposed of more than two (2) years from the first day of the Offering
Period, the participant will recognize ordinary income measured as the lesser of
(i) the excess of the fair market value of the shares at the time of such sale
or disposition over the purchase price, or (ii) an amount equal to 15% of the
fair market value of the shares as of the first day of the Offering Period. Any
additional gain will be treated as long-term capital gain. If the shares are
sold or otherwise disposed of before the expiration of this holding period, the
participant will recognize ordinary income generally measured as the excess of
the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding period(s) described above.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER
THE PURCHASE PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE
CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A
PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF ANY STATE OR FOREIGN COUNTRY IN
WHICH THE PARTICIPANT MAY RESIDE.
B-3
<PAGE> 28
Purchase Plan Benefits. The Company is unable to predict the amount of
benefits that will be received by or allocated to any particular participant
under the Purchase Plan. The following table sets forth the dollar amount and
the number of shares purchased under the Purchase Plan during the last fiscal
year to (i) each of the Company's Named Executive Officers, (ii) all executive
officers as a group, (iii) all non-employee directors as a group and (iv) all
employees other than executive officers as a group.
PURCHASE PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
DOLLAR VALUE
OF SHARES NUMBER OF SHARES
NAME AND POSITION PURCHASED(1) PURCHASED
- ----------------------------------------------------------- ------------ ----------------
<S> <C> <C>
Jimmy S.M. Lee ............................................ $ 32,885 3,068
Chief Executive Officer and President
Kong-Yeu Han .............................................. 28,302 2,642
Executive Vice President and General Manager, Taiwan
Gary L. Fischer ........................................... 23,193 2,162
Executive Vice President and Chief Financial Officer
All Executive Officers as a Group (3 persons) ............. 84,380 7,872
All Non-employee Directors as a Group (4 persons) ......... -- --
All Employees other than Executive Officers as a Group .... 1,355,825 126,324
</TABLE>
- -------------------
(1) The dollar value of shares purchased under the Purchase Plan was computed
by multiplying the number of shares purchased times the market price of the
Common Stock on the purchase date. In accordance with the terms of the
Purchase Plan, the shares of Common Stock were purchased at a price equal
to 85% of the lesser of the fair market value of the Common Stock on the
first day of the Offering Period or the last day of the Purchase Period.
B-4
<PAGE> 29
INTEGRATED SILICON SOLUTION, INC.
1989 STOCK PLAN
(AS AMENDED THROUGH OCTOBER 21, 1997)
1. Purposes of the Plan. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board
of Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Integrated Silicon Solution, Inc., a
Delaware corporation.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means
the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Company, provided that such
leave is for a period of not more than ninety (90) days, unless reemployment
upon the expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to Company policy adopted
<PAGE> 30
from time to time; or (iv) in the case of transfers between locations of the
Company or between the Company, its Subsidiaries or its successor.
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange), for the day of determination as
reported in the Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the
Plan.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee or Consultant who receives
an Option.
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1989 Stock Plan.
2
<PAGE> 31
(s) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(t) "Share" means a share of the Common Stock, as adjusted
in accordance with Section 13 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 4,987,500 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions
of the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
3
<PAGE> 32
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Options and Stock Purchase Rights may from time to time be
granted hereunder;
(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions
regarding any Option or other award and/or the shares of Common Stock relating
thereto, based in each case on such factors as the Administrator shall
determine, in its sole discretion);
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 9(f) instead of
Common Stock;
(viii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be deferred either automatically or at the election
of the participant (including providing for and determining the amount, if any,
of any deemed earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and
(x) to determine the terms and restrictions
applicable to Stock Purchase Rights and the Restricted Stock purchased by
exercising such Stock Purchase Rights.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees
or Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has
4
<PAGE> 33
been granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that in the case of an Incentive
Stock Option, the term shall be no more than ten (10) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of
5
<PAGE> 34
all classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) by
delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (7)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price; (8) any combination of the
foregoing methods of payment, (9) or such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company (Section 315(b) of the California corporation
law).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.
6
<PAGE> 35
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment. In the event of termination
of an Optionee's Continuous Status as an Employee or Consultant, such Optionee
may, but only within thirty (30) days (or within such other period of time as is
determined by the Board, with such determination in the case of an Incentive
Stock Option being made at the time of grant of the Option and such time period
not exceeding ninety (90) days) after the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise his Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions
of Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee while Optionee is an Employee or Consultant, the Option may be
exercised at any time within twelve (12) months following the date of death (but
in no event later than the expiration date of the term of such Option
7
<PAGE> 36
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee was entitled to exercise the Option at the date
of death. To the extent that Optionee was not entitled to exercise the Option at
the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
ninety (90) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the Committee
may determine.
(c) Other Provisions. The Restricted Stock purchase
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock purchase agreements
need not be the same with respect to each purchaser.
(d) Rights as a Stockholder. Once the Stock Purchase Right
is exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when
8
<PAGE> 37
his or her purchase is entered upon the records of the duly authorized transfer
agent of the Company. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option, or the Shares to be issued in connection with the Stock Purchase Right,
if any, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization, Merger or Asset
Sale. Subject to any required action by the stockholders of the Company, the
number of shares of Common Stock covered by each outstanding Option, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger of the Company with or into another
corporation, or the sale of all or substantially all of the Company's assets,
the Option shall be assumed or an
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equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. In the event that such successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Board shall, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger, the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option will terminate upon the
expiration of such period.
14. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Section 422 of
the Code (or any other applicable law or regulation, including the requirements
of the NASD or an established stock exchange), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such
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<PAGE> 39
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options and Stock Purchase Rights shall be evidenced
by written agreements in such form as the Board shall approve from time to time.
19. Stockholder Approval. Continuance of the Plan shall be subject
to approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under applicable state and federal
law.
20. Limitations. The following limitations shall apply to grants of
Options and Stock Purchase Rights to Employees.
(a) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 250,000 Shares.
(b) In connection with his or her initial employment, an
Employee may be granted Options and Stock Purchase Rights to purchase up to an
additional 250,000 Shares which shall not count against the limit set forth in
Section 20(a) above.
(c) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(d) If an Option or Stock Purchase Right is cancelled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the cancelled Option or
Stock Purchase Right will be counted against the limits set forth in Sections
20(a) and 20(b) above. For this purpose, if the exercise price of an Option or
Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new Option
or Stock Purchase Right.
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<PAGE> 40
INTEGRATED SILICON SOLUTION, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
(as amended through October 21, 1997)
The following constitute the provisions of the 1993 Employee Stock
Purchase Plan of Integrated Silicon Solution, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Integrated Silicon Solution, Inc.,
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings, including commissions, but exclusive of payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses, and other
compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee
of the Company for tax purposes whose customary employment with the Company is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each Purchase
Period.
<PAGE> 41
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the
date of such determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the NASDAQ
system (but not on the National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) Notwithstanding paragraphs (1) and (2), in the
case of an Offering Period commencing substantially concurrent with the
Company's initial public offering, the Fair Market Value may be determined by
the Board to be equal to the initial price to the public of shares of Common
Stock in such offering; or
(4) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(k) "Offering Period" shall mean the period of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after February 1 and
August 1 of each year and terminating on the last Trading Day in the periods
ending twenty-four (24) months later. The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
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<PAGE> 42
(o) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) which permits his or her rights to purchase stock under
all employee stock purchase plans of the Company and its subsidiaries to accrue
at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after April 1 and October 1 each year, or on such other dates
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The Board shall have the power to change the
duration of Offering Periods (including the commencement and termination dates
thereof) with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
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<PAGE> 43
(b) Payroll deductions for a participant shall commence on
the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed ten percent (10%) of the participant's Compensation during said
Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation
in the Plan as provided in Section 10 hereof, or may increase or decrease the
rate of his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to 0% at such time during any
Purchase Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any
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<PAGE> 44
withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date (except if there is
only one Purchase Period in a calendar year, in which case the dollar limit in
the preceding equation shall be $25,000 instead of $12,500), and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof, and shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of shares
will be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll
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<PAGE> 45
deductions will not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof), for any reason, including by virtue of him or
her having failed to remain an Employee of the Company for at least twenty (20)
hours per week during an Offering Period in which the Employee is a participant,
he or she will be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option will be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 14 hereof, and such participant's option will be
automatically terminated.
11. Interest. No interest shall accrue on the payroll deductions of
a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 1,450,000
Shares, subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof. If, on a given Exercise Date, the number of
Shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the Shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties. Members of the Board
who are eligible Employees are permitted to participate in the Plan, provided
that:
(1) Members of the Board who are eligible to
participate in the Plan may not vote on any matter affecting the administration
of the Plan or the grant of any option pursuant to the Plan.
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<PAGE> 46
(2) If a Committee is established to administer the
Plan, no member of the Board who is eligible to participate in the Plan may be a
member of the Committee.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves as well as the price per
share of Common Stock covered by each
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<PAGE> 47
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
option, any Purchase Periods than in progress shall be shortened by setting a
new Exercise Date (the "New Exercise Date") and any Offering Periods then in
progress shall end on the New Exercise Date. The New Exercise Date shall be
prior to the date of the Company's proposed sale or merger. If the Board sets a
new Exercise Date, the Board shall notify each participant in writing, at least
ten (10) business days prior to the New Exercise Date, that the Exercise Date
for his option has been changed to the New Exercise Date and that his option
will be exercised automatically on the New Exercise Date, unless prior to such
date he has withdrawn from the Offering Periods as provided in Section 10
hereof.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be
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<PAGE> 48
entitled to change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for each participant
properly correspond with amounts withheld from the participant's Compensation,
and establish such other limitations or procedures as the Board (or its
committee) determines in its sole discretion advisable which are consistent with
the Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. If the Fair
Market Value of the Common Stock on any Exercise Date in an Offering Period is
lower than the Fair Market Value of the Common Stock on the Enrollment Date of
such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
9
<PAGE> 49
EXHIBIT A
INTEGRATED SILICON SOLUTION, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ________________________ hereby elects to participate in the Integrated
Silicon Solution, Inc. 1993 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (1-10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete "Integrated Silicon Solution,
Inc. 1993 Employee Stock Purchase Plan." I understand that my
participation in the Employee Stock Purchase Plan is in all respects
subject to the terms of the Plan. I understand that my ability to
exercise the option under this Subscription Agreement is subject to
obtaining stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and spouse only): _______
__________________________ .
1
<PAGE> 50
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased over the price which I paid for the
shares. I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS
AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND I WILL MAKE ADEQUATE
PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF
ANY, WHICH ARISE UPON THE DISPOSITION OF THE COMMON STOCK. The Company
may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation including
any withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year and 1-year holding periods, I understand that I
will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the
lesser of (1) the excess of the fair market value of the shares at the
time of such disposition over the purchase price which I paid for the
shares, or (2) 15% of the fair market value of the shares on the first
day of the Offering Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)___________________________________________________________
(First) (Middle) (Last)
____________________________ ____________________________________________
Relationship
____________________________________________
(Address)
2
<PAGE> 51
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:____________________ ____________________________________
Signature of Employee
___________________________________
Spouse's Signature (If beneficiary
is other than spouse)
3
<PAGE> 52
EXHIBIT B
INTEGRATED SILICON SOLUTION, INC.
1993 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Integrated
Silicon Solution, Inc. 1993 Employee Stock Purchase Plan which began on
____________, 19____ (the "Enrollment Date") hereby notifies the Company that he
or she hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________________
________________________________________
________________________________________
Signature:
________________________________________
Date:__________________________
4
<PAGE> 53
PROXY
INTEGRATED SILICON SOLUTION, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JIMMY S.M. LEE and GARY FISCHER, jointly
and severally, proxies, with full power of substitution, to vote all shares of
Common Stock of Integrated Silicon Solution, Inc., a Delaware corporation, which
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held at the Silicon Valley Capital Club, Fairmont Plaza, 50 West San Fernando,
17th floor, San Jose, California, on January 30, 1998, at 2:00 p.m., local time,
or any adjournment thereof. The proxies are being directed to vote as specified
on the reverse side hereof or, if no specification is made, FOR the election of
directors, FOR the amendment of the Company's 1989 Stock Plan, FOR the amendment
of the Company's Employee Stock Purchase Plan, FOR the appointment of Ernst &
Young, LLP as independent auditors and in accordance with their discretion on
such other matters that may properly come before the meeting.
The directors recommend a FOR vote on each item.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
Please mark your
vote as this [X]
1. ELECTION OF DIRECTORS FOR WITHHOLD
all nominees AUTHORITY
listed (except) to vote for
as withheld) nominees listed
(Instruction: To withhold authority to vote
for any individual nominee, strike that
nominee's name below)
[ ] [ ]
NOMINEES: Jimmy S.M. Lee Kong-Yeu Han
Pauline Lo Alker Lip-Bu Tan
Diosdado P. Banatao Hide L. Tanigami
Chun Win Wong
FOR AGAINST ABSTAIN
2. Proposal to amend the Company's 1989 Stock Plan [ ] [ ] [ ]
to increase the number of shares available for
issuance thereunder by 500,000 shares to an
aggregate of 4,987,500 shares.
FOR AGAINST ABSTAIN
3. Proposal to amend the Company's Employee Stock [ ] [ ] [ ]
Purchase Plan to increase the number of shares
available for issuance thereunder by 1,000,000
shares to an aggregate of 1,450,000 shares.
FOR AGAINST ABSTAIN
4. Proposal to ratify the appointment of Ernst & Young [ ] [ ] [ ]
LLP as independent auditors for the 1998 fiscal year.
I plan to attend the meeting: YES NO
[ ] [ ]
</TABLE>
SIGNATURE(S) _________________________________________ DATE ___________________
(Signature(s) must be exactly as name(s) appear on this Proxy. If
signing as attorney, executor, administrator, trustee or guardian,
please give full title as such, and if signing for a corporation,
please give your title. When shares are in the names of more than
one person, each should sign this Proxy.)
