<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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
INTEGRATED SILICON SOLUTIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] 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.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 7, 2000
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 Monday, February 7, 2000 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 five (5) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To amend the Company's 1993 Employee Stock Purchase Plan to
increase the number of shares available thereunder by 250,000 shares to an
aggregate of 1,700,000 shares.
3. To ratify the appointment of Ernst & Young, LLP as independent
auditors for the Company for the 2000 fiscal year.
4. 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 10, 1999
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
January 6, 2000
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE> 3
INTEGRATED SILICON SOLUTION, INC.
2231 LAWSON LANE
SANTA CLARA, CALIFORNIA 95054-3311
(408) 588-0800
------------------------
PROXY STATEMENT FOR 2000
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 Monday, February 7, 2000 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 January 6, 2000
to all stockholders of record on December 10, 1999 (the "Record Date").
INFORMATION CONCERNING SOLICITATION AND VOTING
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it 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.
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 10, 1999 are
entitled to notice of the meeting and to vote at the meeting.
<PAGE> 4
PRINCIPAL SHARE OWNERSHIP
At the Record Date, 20,407,713 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 10, 1999, the following entity was known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------------------
NAME OF 5% BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
--------------------------- ---------------- ----------------
<S> <C> <C>
Dimensional Fund Advisors................................... 1,129,400 5.5%
1299 Ocean Avenue, 11th floor
Santa Monica, CA 90401-1038
</TABLE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders of the Company may submit proper proposals for inclusion in
the Company's proxy statement and for consideration at the next annual meeting
of its stockholders by submitting their proposals in writing to the Secretary of
the Company in a timely manner. In order to be included in the Company's proxy
materials for the annual meeting of stockholders to be held in the year 2001,
stockholder proposals must be received by the Secretary of the Company no later
than September 7, 2000, and must otherwise comply with the requirements of Rule
14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In addition, the Company's Bylaws establish an advance notice procedure
with regard to stockholder nominations for the election of directors. For
nominations to be properly brought before the meeting by a stockholder, such
stockholder must provide written notice delivered to the Secretary of the
Company at least 90 days in advance of the annual meeting, which notice must
contain specified information concerning the nominee. A copy of the full text of
the Bylaw provision discussed above may be obtained by writing to the Secretary
of the Company. All notices of proposals by stockholders, whether or not
included in the Company's proxy materials, should be sent to Integrated Silicon
Solution, Inc., 2231 Lawson Lane, Santa Clara, California 95054, Attention:
Corporate Secretary.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's 2001 Annual Meeting which is not eligible for
inclusion in the proxy statement and form of proxy relating to that meeting, the
stockholder must do so no later than November 21, 2000. If such a stockholder
fails to comply with the foregoing notice provision, the proxy holders will be
allowed to use their discretionary voting authority when the proposal is raised
at the 2001 Annual Meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
A board of five (5) directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's five (5) 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.
2
<PAGE> 5
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The five (5) candidates receiving the highest number of "FOR" votes shall
be elected to the Company's Board of Directors. An abstention will have the same
effect as a vote withheld for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED BELOW:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
--------------- --- --------------------
<S> <C> <C>
Jimmy S. M. Lee........................... 44 Chief Executive Officer, President and
Chairman of the Board of the Company
Pauline Lo Alker.......................... 57 President and Chief Executive Officer,
Amplify.net, Inc.
Lip-Bu Tan................................ 40 General Partner of Walden Group
Hide L. Tanigami.......................... 49 President and Chief Executive Officer,
Marubun USA Corporation
Chun Win Wong............................. 64 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 Integrated Silicon Solution-Taiwan Inc. 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. Mr. Lee
also serves as Chairman of the Board of NexFlash Technologies, Inc. since
October 1998.
Pauline Lo Alker was appointed to serve as a director of the Company in
April 1997. Since June 1998, Ms. Alker has been President, Chief Executive
Officer and Chairman of the Board of Amplify.net, Inc., a start-up company
specializing in software solutions for internet/intranet providers. From 1991
until 1998, Ms. Alker was President and Chief Executive Officer of Network
Peripherals, Inc., a workgroup networking solutions company. 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 Tektronix Corporation, a test equipment company.
Lip-Bu Tan has served as a director of the Company since March 1990. Mr.
Tan was also a director of Integrated Silicon Solution-Taiwan, Inc. 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, since 1990.
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 July 1998, he has also been President and Chief Executive Officer
of Global Sourcing, Inc., a consulting company. 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 also serves as a director of
NexFlash Technologies, Inc. and as a director of Integrated Silicon
Solution-Taiwan, Inc., both since October 1998. Mr. Tanigami holds an
3
<PAGE> 6
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.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of December 10, 1999 (i) by each director of the Company, (ii)
by the Company's Chief Executive Officer and the four other executive officers
of the Company during fiscal 1999 (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)........................................... 470,639 2.3
Kong-Yeu Han(2)............................................. 457,091 2.2
Gary L. Fischer(3).......................................... 11,792 *
Tom Doczy(4)................................................ 60,192 *
Paul Jei-Zen Song(5)........................................ 48,632 *
Pauline Lo Alker(6)......................................... 20,417 *
Lip-Bu Tan(7)............................................... 360,256 1.8
Hide L. Tanigami(8)......................................... 13,779 *
Chun Win Wong(9)............................................ 566,336 2.8
All directors and executive officers as a group (9
persons)(10).............................................. 2,009,134 9.7
</TABLE>
- ---------------
* Less than 1%
(1) Includes 128,828 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999. Also includes 51,000
shares held by Mr. Lee as custodian for his minor children.
(2) Includes 114,326 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999. Also includes 40,000
shares held by Mr. Han as custodian for his minor children.
(3) Includes 11,792 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999.
(4) Includes 59,730 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999.
(5) Includes 9,665 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999.
(6) Represents 20,417 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999.
(7) Includes 14,791 shares issuable upon exercise of options held by Mr. Tan
which are exercisable within 60 days of December 10, 1999. Also includes
152,100 shares held by Walden Capital Partners II and 183,333 shares held
by IVCIC. Mr. Tan is a General Partner of Walden Group and President of
IVCIC and may be deemed to be a beneficial owner of the shares held by such
entity.
4
<PAGE> 7
(8) Represents 7,500 shares issuable upon exercise of options which are
exercisable within 60 days of December 10, 1999.
(9) Includes 18,958 shares issuable upon exercise of options held by Mr. Wong
which are exercisable within 60 days of December 10, 1999. 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.
(10) Includes 386,007 shares issuable upon the exercise of options which are
exercisable within 60 days of December 10, 1999. See notes 1 through 9
above.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven (7) meetings during fiscal
1999.
The Audit Committee, consisting of Messrs. Tan and Wong, held one (1)
meeting during fiscal 1999. 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 Mr. Tan and Ms. Alker, held zero
(0) meetings during fiscal 1999. 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, except for Mr. Wong, attended at least 75% of the aggregate
of (i) the total number of meetings of the Board of Directors held during fiscal
1999 and (ii) the total number of meetings held by all committees of the Board
of Directors during fiscal 1999 on which such director served. Mr. Wong attended
43% of the total number of meetings of the Board of Directors and 100% of the
total number of meetings of committees on which he served during fiscal 1999.
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 10,000 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 January 29, 1999, Messrs.
Tan, Wong and Tanigami and Ms. Alker were each granted an option under the
Director Plan to purchase 2,500 shares of Common Stock at an exercise price of
$3.25 per share. In addition, on October 29, 1998, Messrs. Tan, Wong and
Tanigami and Ms. Alker were each granted an option under the 1998 ISSI-Taiwan
Stock Plan to purchase 100,000 shares of Common Stock at an exercise price of
New Taiwan (NT) $24 per share. These stock options vest one-third annually on
the anniversary of the date of grant. The options expire upon the earlier of ten
(10) years from the date of grant unless terminated sooner upon termination of
the optionee's status as a director.
5
<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
Mr. Tan and Ms. Alker, neither of whom has been or is an officer or an employee
of the Company. No member of the Compensation Committee or executive officer of
the Company has a relationship that would constitute an interlocking
relationship with executive officers or directors of another entity.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The members of the Compensation Committee of the board of Directors are Mr.
Tan and Ms. Alker. 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 1999 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.
Messrs. Lee, Han and Fischer received no salary adjustment in fiscal 1999. Mr.
Doczy's base annual salary was increased by $5,000 to $145,000 in April 1999,
and in May 1999, his base salary was increased to $160,000. Mr. Song's base
annual salary was increased by $5,670 to $147,420 in April 1999.
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. The Company has paid bonuses in the past. No
bonuses for executive officers were awarded in fiscal 1999.
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.
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
6
<PAGE> 9
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
Lip-Bu Tan
Pauline Alker
PROPOSAL TWO:
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 "ESPP"). A
total of 1,450,000 shares of Common Stock are presently reserved for issuance
under the ESPP. In October 1999, the Board of Directors approved an amendment to
the ESPP, subject to stockholder approval, to increase the shares reserved for
issuance thereunder by 250,000 shares, bringing the total number of shares
issuable under the ESPP to 1,700,000. As of December 10, 1999, 706,822 shares
were available for future issuance under the ESPP.
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the ESPP to increase the number of shares of
Common Stock reserved for issuance thereunder by 250,000 shares, bringing the
total number of shares issuable under the ESPP to 1,700,000. The Board believes
that the amendment will enable the Company to provide employees with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions.
For a description of the principal features of the ESPP, see "Appendix
A -- Description of the 1993 Employee Stock Purchase Plan."
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The approval of the amendment to the ESPP 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 ESPP TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER.
PROPOSAL THREE:
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 2000 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.
7
<PAGE> 10
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 2000 FISCAL YEAR.
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 four other Named Executive Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------------------------------- ------------
FISCAL OTHER ANNUAL AWARDS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3) OPTIONS(4)
--------------------------- ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Jimmy S.M. Lee........................ 1999 $258,267 -- -- 176,390
Chief Executive Officer 1998 257,395 -- -- --
and President 1997 255,741 -- -- 108,000
Kong-Yeu Han(5)....................... 1999 234,446 -- 44,741 151,075
Executive Vice President and 1998 204,780 -- 45,640 --
General Manager, Taiwan 1997 218,417 -- 49,899 94,000
Gary L. Fischer....................... 1999 184,885 -- -- 109,750
Executive Vice President and 1998 185,554 -- -- --
Chief Financial Officer 1997 181,954 10,000 -- 50,000
Thomas Doczy.......................... 1999 152,930 -- -- 108,500
Vice President Sales and Marketing
Paul Jei-Zen Song..................... 1999 146,661 -- -- 78,044
Vice President Engineering
</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 1999, 1998 and 1997, includes $44,741, $45,640 and $49,899,
respectively, for housing allowance and rent allowance in connection with
Mr. Han's relocation to Taiwan.
(4) Includes options previously granted that were repriced in fiscal 1999.
(5) Mr. Han is no longer an executive officer of the Company.
8
<PAGE> 11
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth information concerning grants of stock
options and repricing of options to each of the Named Executive Officers during
the fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ANNUAL RATES
OPTIONS OF STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES OR BASE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------
NAME GRANTED YEAR SHARE DATE 5% 10%
---- ------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.M. Lee................... 13,390 0.4% $2.8125 10/12/08 $23,684 $ 60,019
36,000(3) 1.1 3.1562 12/02/08 71,457 181,086
11,350(3) 0.4 3.1562 12/02/08 22,529 57,092
27,650(3) 0.9 3.1562 12/02/08 54,883 139,084
33,000(3) 1.0 3.1562 12/02/08 65,502 165,996
650(3) -- 3.1562 12/02/08 1,290 3,270
24,350(3) 0.8 3.1562 12/02/08 48,333 122,485
30,000 1.0 2.875 04/29/09 54,242 137,460
Kong-Yeu Han..................... 12,075 0.4% $2.8125 10/12/08 $21,358 $ 54,125
30,000(3) 1.0 3.1562 12/02/08 59,548 150,905
13,720(3) 0.4 3.1562 12/02/08 27,233 69,014
20,280(3) 0.6 3.1562 12/02/08 40,254 102,012
30,000(3) 1.0 3.1562 12/02/08 59,548 150,905
3,000(3) 0.1 3.1562 12/02/08 5,955 15,091
6,400(3) 0.2 3.1562 12/02/08 12,703 32,193
15,600(3) 0.5 3.1562 12/02/08 30,965 78,471
20,000 0.6 2.8750 04/29/09 36,161 91,640
Gary L. Fischer.................. 4,750 0.2% $2.8125 10/12/08 $ 8,402 $ 21,291
20,000(3) 0.6 3.1562 12/02/08 39,698 100,603
3,680(3) 0.1 3.1562 12/02/08 7,305 18,511
14,320(3) 0.5 3.1562 12/02/08 28,424 72,032
3,000(3) 0.1 3.1562 12/02/08 5,955 15,091
9,000(3) 0.3 3.1562 12/02/08 17,864 45,272
4,475(3) 0.1 3.1562 12/02/08 8,883 22,510
20,525(3) 0.7 3.1562 12/02/08 40,740 103,244
15,000 0.5 2.5630 03/29/09 24,166 61,252
15,000 0.5 2.8750 04/29/09 27,121 68,730
Thomas Doczy..................... 3,500 0.1% $2.8125 10/12/08 $ 6,191 $ 15,688
21,750(3) 0.7 3.1562 12/02/08 43,172 109,406
5,000(3) 0.2 3.1562 12/02/08 9,925 25,151
10,000(3) 0.3 3.1562 12/02/08 19,849 50,302
15,000(3) 0.5 3.1562 12/02/08 29,774 75,453
12,000(3) 0.4 3.1562 12/02/08 23,819 60,362
8,500(3) 0.3 3.1562 12/02/08 16,872 42,756
1,500(3) -- 3.1562 12/02/08 2,977 7,545
4,250(3) 0.1 3.1562 12/02/08 8,436 21,378
12,000 0.4 2.8125 10/12/08 21,225 53,789
15,000 0.5 2.5630 03/29/09 24,166 61,252
Paul Jei-Zen Song................ 3,544 0.1% $2.8125 10/12/08 $ 6,269 $ 15,886
12,500(3) 0.4 3.1562 12/02/08 24,811 62,877
10,000(3) 0.3 3.1562 12/02/08 19,849 50,302
7,454(3) 0.2 3.1562 12/02/08 14,796 37,495
12,000(3) 0.4 3.1562 12/02/08 23,819 60,362
2,546(3) 0.1 3.1562 12/02/08 5,054 12,807
15,000 0.5 2.8125 10/12/08 26,531 67,236
15,000 0.5 2.5630 03/29/09 24,166 61,252
</TABLE>
- ---------------
(1) Each of these options was granted pursuant to the authorized stock plans and
is subject to the terms of such plans. 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
9
<PAGE> 12
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 1/48 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 that were repriced in fiscal 1999.
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 1999, and exercisable and
unexercisable stock options held by each of the Named Executive Officers as of
September 30, 1999.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
---------------------------------------------------------
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jimmy S.M. Lee............... -- $ -- 107,579 68,811 $720,680 $466,463
Kong-Yeu Han................. -- -- 97,867 53,208 655,582 359,792
Gary L. Fischer.............. 65,000 285,155 1,584 49,416 10,544 342,044
Thomas Doczy................. 10,000 71,376 51,041 47,459 340,947 328,924
Paul Jei-Zen Song............ 35,420 133,629 1,333 41,291 8,873 288,899
</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, 1999, multiplied by the total number of shares
subject to the option.
10
<PAGE> 13
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 1998.
<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............. 12/2/98 36,000 3.1562 8.00 3.1562 8 years 221 days
Chief Executive Officer 12/2/98 11,350 3.1562 9.25 3.1562 7 years 341 days
and President 12/2/98 27,650 3.1562 9.25 3.1562 7 years 341 days
12/2/98 33,000 3.1562 10.125 3.1562 8 years 4 days
12/2/98 650 3.1562 10.48 3.1562 6 years 14 days
12/2/98 24,350 3.1562 10.48 3.1562 6 years 14 days
Kong-Yeu Han............... 12/2/98 30,000 3.1562 8.00 3.1562 8 years 221 days
Executive Vice President 12/2/98 13,720 3.1562 9.25 3.1562 7 years 341 days
and General Manager, 12/2/98 20,280 3.1562 9.25 3.1562 7 years 341 days
Taiwan 12/2/98 30,000 3.1562 10.125 3.1562 8 years 4 days
12/2/98 3,000 3.1562 10.48 3.1562 6 years 14 days
12/2/98 6,400 3.1562 10.48 3.1562 6 years 14 days
12/2/98 15,600 3.1562 10.48 3.1562 6 years 14 days
Gary L. Fischer............ 12/2/98 20,000 3.1562 8.00 3.1562 8 years 221 days
Executive Vice President 12/2/98 3,680 3.1562 9.25 3.1562 7 years 341 days
and Chief Financial 12/2/98 14,320 3.1562 9.25 3.1562 7 years 341 days
Officer 12/2/98 3,000 3.1562 10.125 3.1562 8 years 4 days
12/2/98 9,000 3.1562 10.125 3.1562 8 years 4 days
12/2/98 4,475 3.1562 10.48 3.1562 6 years 14 days
12/2/98 20,525 3.1562 10.48 3.1562 6 years 14 days
Thomas Doczy............... 12/2/98 21,750 3.1562 4.00 3.1562 5 years 176 days
Vice President Sales 12/2/98 5,000 3.1562 4.00 3.1562 5 years 191 days
and Marketing 12/2/98 10,000 3.1562 7.75 3.1562 9 years 21 days
12/2/98 15,000 3.1562 8.00 3.1562 8 years 221 days
12/2/98 12,000 3.1562 9.25 3.1562 7 years 341 days
12/2/98 8,500 3.1562 9.25 3.1562 8 years 25 days
12/2/98 1,500 3.1562 9.25 3.1562 8 years 25 days
12/2/98 4,250 3.1562 4.00 3.1562 5 years 176 days
Paul Jei-Zen Song.......... 12/2/98 10,000 3.1562 8.00 3.1562 8 years 221 days
Vice President 12/2/98 7,454 3.1562 9.25 3.1562 8 years 25 days
Engineering 12/2/98 12,000 3.1562 9.25 3.1562 7 years 341 days
12/2/98 2,546 3.1562 9.25 3.1562 8 years 25 days
12/2/98 12,500 3.1562 4.00 3.1562 5 years 176 days
</TABLE>
11
<PAGE> 14
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, the Standard & Poor's
Semiconductor Index, and the Philadelphia Semiconductor Index for the period
February 3, 1995 (the date of the Company's initial public offering) through
September 30, 1999. 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, the stocks represented in the
Standard & Poor's Semiconductor Index, and the stocks represented in the
Philadelphia 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.
Indexed Stock Price Comparison
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 1999, all Section 16 filing requirements were met.
CERTAIN TRANSACTIONS
The Company uses Integrated Silicon Solution-Taiwan Inc. ("ISSI-Taiwan")
for coordinating wafer purchases, assembly, and testing for substantially all of
its inventory. In December 1998, the Company sold an additional 20% of its
remaining holdings in ISSI-Taiwan to a group of private investors resulting in a
pre-tax gain of $1.2 million. Proceeds from the transaction net of withholding
and transaction taxes totaled $6.6 million (including cash of $4.3 million and
notes receivable of $2.3 million). Effective December 31, 1998, the Company
owned approximately 43% of ISSI-Taiwan and accounted for ISSI-Taiwan on the
equity basis.
As of December 31, 1998, at the time of deconsolidation, the Company had an
accounts receivable balance of approximately $8,783,000, which included advances
to ISSI-Taiwan against future inventory purchases. For the nine months ended
September 30, 1999, the Company sold approximately $1,412,000 of
12
<PAGE> 15
memory products to ISSI-Taiwan, in which it has approximately 43% ownership. The
Company had an accounts receivable balance from ISSI-Taiwan at September 30,
1999 of approximately $1,915,000.
The Company purchases goods and contract manufacturing services from
ISSI-Taiwan. As of December 31, 1998, at the time of deconsolidation, the
Company had an accounts payable balance to ISSI-Taiwan of approximately
$1,947,000. Purchases of goods and services in the nine months ended September
30, 1999 were approximately $39,054,000. The Company had an accounts payable
balance to ISSI-Taiwan at September 30, 1999 of approximately $9,231,000.
In November 1998, NexFlash Technologies, Inc., a subsidiary of the Company
("NexFlash"), sold 2,009,660 shares of Series A Preferred Stock to the Company
and 669,885 shares of its Series A Preferred Stock to ISSI-Taiwan in
consideration for the grant of certain technology rights. NexFlash also sold
2,944,986 shares of its Series B Preferred Stock for an aggregate purchase price
of $7,362,465 to investors, which included 400,000 shares to ISSI-Taiwan for
$1,000,000. In connection with the NexFlash transaction, the Company issued
warrants to purchase an aggregate of 981,659 shares of ISSI Common Stock at an
exercise price of $3.76 per share to the NexFlash investors. The warrants expire
on November 4, 2000. NexFlash was formed in September 1998 as a wholly owned
subsidiary of the Company. Mr. Lee is Chairman of NexFlash.
Effective October 1, 1998, the Company transferred certain employees and
joint ownership of certain patents and related Flash technology to NexFlash. The
Company and NexFlash jointly own existing Flash related patents, and NexFlash
will continue development of Flash products. The Company owns approximately 32%
of NexFlash, and ISSI-Taiwan owns approximately 17%.
For the eleven months ended September 30, 1999, the Company sold
approximately $1,542,000 of memory products to NexFlash, in which it has
approximately 32% ownership. In addition, the Company received approximately
$167,000 in sublease income from NexFlash. The Company had an accounts
receivable balance from NexFlash at September 30, 1999 of approximately
$1,291,000.
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
January 6, 2000
13
<PAGE> 16
APPENDIX A
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 1,450,000 shares of Common Stock have 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 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 participant'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.
A-1
<PAGE> 17
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.
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
A-2
<PAGE> 18
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.
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>
NUMBER VALUE OF SHARES
NAME OF SHARES PURCHASED(1)
---- --------- ---------------
<S> <C> <C>
Jimmy S.M. Lee.............................................. 6,129 $ 29,345
Kong-Yeu Han................................................ 3,808 19,258
Gary L. Fischer............................................. 6,080 30,216
Thomas Doczy................................................ 4,635 23,323
Paul Jei-Zen Song........................................... 4,589 22,909
All executive officers as a group (5 persons)............... 25,241 125,051
All non-employee directors as a group (4 persons)........... -- --
All employees other than executive officers as a group...... 209,720 1,014,256
</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.
A-3
<PAGE> 19
INTEGRATED SILICON SOLUTION, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JIMMY S.M. LEE and GARY L. 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 February 7, 2000, at 2:00 p.m.,
local time, or any adjournment thereof. The proxies are being directed to vote
as specified below or, if no specification is made, FOR the election of
directors, FOR the proposal to amend the Company's 1993 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> 20
PROXY CARD
<TABLE>
<S> <C> <C>
FOR WITHHELD AUTHORITY
all nominees is vote for
listed (except nominees listed
as withheld)
ELECTION OF DIRECTORS
(Instruction: To withhold authority to vote for [ ] [ ]
any individual nominees, strike that
nominee's name below.)
Nominees: Jimmy S.M. Lee
Pauline Lo Alker Hide Tanigami
Lip-Bu Tan Chun Win Wong
</TABLE>
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to amend the Company's 1993 Employee Stock Purchase Plan to increase
the number of shares available for issuance thereunder by 250,000 shares to
an aggregate of 1,700,000 shares: [ ] [ ] [ ]
3. Proposal to ratify the appointment of Ernst & Young, LLP as Independent
auditors for the 2000 fiscal year: [ ] [ ] [ ]
YES NO
I plan to attend the Meeting: [ ] [ ]
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.)
</TABLE>
