SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Sec. 240.14a-11(c) or Sec. 240.14a-12
SILIC0N STORAGE TECHNOLOGY, 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)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
- - ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
SILICON STORAGE TECHNOLOGY, INC.
1171 Sonora Court
Sunnyvale, California 94086
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 23, 1997
TO THE SHAREHOLDERS OF SILICON STORAGE TECHNOLOGY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Silicon
Storage Technology, Inc., a California corporation ("the Company"), will be held
on Wednesday, July 23, 1997 at 2:00 p.m., local time, at the offices of the
Company at 1156 Sonora Court, Sunnyvale, California 94086 for the following
purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors of the Company for its fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 27, 1997, as
the record date for the determination of shareholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Michael J. Praisner
-----------------------
MICHAEL J. PRAISNER
Secretary
Sunnyvale, California
June 6, 1997
- - --------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
- - --------------------------------------------------------------------------------
<PAGE>
SILICON STORAGE TECHNOLOGY, INC.
1171 Sonora Court
Sunnyvale, California 94086
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
July 23, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Silicon Storage Technology, Inc., a California corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held on Wednesday, July 23, 1997
at 2:00 p.m., local time, (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at the Company's
offices at 1156 Sonora Court, Sunnyvale, California 94086. The Company intends
to mail this proxy statement, accompanying proxy card, 1996 Annual Review and
Annual Report on Form 10-K on or about June 6, 1997, to all shareholders
entitled to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to shareholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, or personal
solicitation by directors, officers, or other regular employees of the Company.
No additional compensation will be paid to directors, officers, or other regular
employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on May 27,
1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on May 27, 1997 the Company had outstanding and entitled to
vote 23,023,650 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes. Abstentions and broker non-votes are counted
towards a quorum but are not counted for any purposes in determining whether a
matter is approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive offices, 1171
Sonora Court, Sunnyvale, California 94086, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
Shareholder Proposals
Proposals of shareholders that are intended to be presented at the
Company's 1998 Annual Meeting of Shareholders must be received by the Company
not later than Friday, February 6, 1998 in order to be
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<PAGE>
included in the proxy statement and proxy relating to the Annual Meeting.
Shareholders are also advised to review the company's bylaws, which contain
additional requirements with respect to advance notice shareholder proposals and
director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are five nominees for the five Board positions presently authorized
in the Company's Bylaws. Each director to be elected will hold office until the
next annual meeting of shareholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Each
nominee listed below is currently a director of the Company, four having been
elected by the shareholders, and one nominee, Dr. Ronald Chwang, having been
elected to the Board by the Board of Directors effective June 1, 1997.
Shares represented by the executed proxies will be voted, if authority to
do so is not withheld, for the election of the five nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected and management has no reason to believe that any
nominee will be unable to serve.
<TABLE>
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. The names of the nominees and certain
information about them are set forth below:
<CAPTION>
Name Age Principal Occupation/Position Held with the Company
- - ---------------------------------- ------ -----------------------------------------------------
<S> <C> <C>
Bing Yeh(1)(4) .................. 46 President and Chief Executive Officer
Yaw Wen Hu ..................... 46 Vice President, Technology Development and
Wafer Manufacturing
Tsuyoshi Taira(1)(2)(3) ......... 58 President, Tazan International, Inc.
Yasushi Chikagami(1)(2)(3) ...... 58 Director, GVC Corporation
Ronald Chwang .................. 47 President and Chief Executive Officer,
Acer America Corporation
<FN>
- - ------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Stock Option Committee
(4) Sole Member of Non-Officers Stock Option Committee
</FN>
</TABLE>
Bing Yeh, co-founder of the Company, has served as President and Chief
Executive Officer of the Company since its inception in 1989. Prior to founding
the Company, Mr. Yeh served as a senior Research and Development manager at
Xicor, Inc., a nonvolatile memory semiconductor company. From 1981 to 1984, Mr.
Yeh held program manager and other positions at Honeywell Inc. From 1979 to
1981, Mr. Yeh was a senior development engineer of EEPROM technology at Intel
Corporation. He was a Ph.D. candidate in applied physics at Stanford University
and earned an Engineer degree in electrical engineering. Mr. Yeh holds an M.S.
and a B.S. in physics from National Taiwan University.
Yaw Wen Hu, has served the Company as Vice President, Technology
Development and Wafer Manufacturing since July 1993 and has been a director of
the Company since September 1995. From 1990 to 1993, Dr. Hu served as deputy
general manager of Technology Development at Vitelic Taiwan Corporation. From
1988 to 1990, he served as FAB engineering manager at Integrated Device
Technology, Inc. From 1985 to 1988 he was the director of Technology Development
at Vitelic Corporation. From 1978 to 1985 he worked as a senior development
engineer in Intel Corporation's Technology Development group. Dr. Hu holds a
B.S. in physics from National Taiwan University and an M.S. in computer
engineering and a Ph.D. in applied physics from Stanford University.
2
<PAGE>
Tsuyoshi Taira, has been a director of the Company since July 1993. Mr.
Taira served as a member of the board of directors of Atmel Corporation from
1987 to 1992. Mr. Taira served as president of Sanyo Semiconductor Corporation
from 1986 to 1993. Mr. Taira was Chairman of the Sanyo Semiconductor Corporation
from 1993 to 1996. Mr. Taira left the Sanyo Semiconductor Corporation in August,
1996. Mr. Taira currently owns and runs a marketing and management consulting
company, Tazan International, Inc. Mr. Taira holds a B.S. from Tokyo
Metropolitan University.
Yasushi Chikagami, has been a director of the Company since September 1995.
Mr. Chikagami has been Chairman of Keian Corporation, a personal computer and PC
peripheral distributor, since 1993. Mr. Chikagami has also served as director of
GVC Corporation (a company incorporated in the Republic of China) and Trident
Microsystems, Inc. since 1993. Mr. Chikagami holds a B.S. in agricultural
engineering from Taiwan University and a M.S. in engineering from University of
Tokyo.
Ronald Chwang, has been a director of the Company since June 1997. Dr.
Chwang has been President and Chief Executive Officer of Acer America
Corporation, a subsidiary of The Acer Group, a worldwide computer manufacturer,
since 1992 and has served The Acer Group in various capacities since 1986. Dr.
Chwang has previously held development and management positions at Intel
Corporation and Bell Northern Research. Dr. Chwang holds a B.S. in engineering
from McGill University and a Ph.D. in electrical engineering from the University
of Southern California.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Board Committees and Meetings
During the year ended December 31, 1996, the Board of Directors held six
meetings. The Board has an Audit Committee, Compensation Committee, Stock Option
Committee, and a Non-Officers Stock Option Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is composed of two non-employee
directors: Mssrs. Taira and Chikagami. Mr. Michael Hsu was a member of the Audit
Committee and the Board of Directors until his resignation in October, 1996. The
Audit Committee met once during fiscal 1996.
The Compensation Committee makes recommendations concerning the salaries
and benefits of all officers of the Company and reviews general policy relating
to compensation and benefits of employees of the Company, except for the
issuance of stock options and other awards under the Company's equity incentive
plans. The Compensation Committee is composed of two non-employee directors:
Mssrs. Taira and Chikagami and one employee director: Mr. Yeh. Mr. Michael Hsu
was a member of the Compensation Committee and the Board of Directors until his
resignation in October, 1996. The Compensation Committee met once during fiscal
1996.
The Stock Option Committee administers the issuance of stock options and
other awards under the Company's equity incentive plans. The Stock Option
Committee is composed of two non-employee directors: Mssrs. Taira and Chikagami.
Mr. Michael Hsu was a member of the Stock Option Committee and the Board of
Directors until his resignation in October, 1996. The Stock Option Committee met
twice during year 1996.
The Non-Officers Stock Option Committee was established in April 9, 1996
and administers the issuance of stock options and other awards under the
Company's equity incentive plans to non-officer employees. The Non-Officers
Stock Option Committee is composed of one employee director: Mr. Yeh. The
Non-Officers Stock Option Committee acted by unanimous written consent ten times
during fiscal 1996. During the year ended December 31, 1996, each Board member
attended, in person or by telephonic communication, 75% or more of the aggregate
of the meetings of the Board and of the committees on which he served, held
during the period for which he was a director or committee member, respectively.
3
<PAGE>
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending December 31, 1997 and
has further directed that management submit the selection of independent
auditors for ratification by the shareholders at the Annual Meeting. Coopers &
Lybrand L.L.P. has audited the Company's financial statements since 1991.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Shareholder ratification of the selection of Coopers & Lybrand L.L.P. as
the Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Coopers & Lybrand
L.L.P. to the shareholders for ratification as a matter of good corporate
practice. If the shareholders fail to ratify the selection, the Audit Committee
and the Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board in their discretion may
direct the appointment of different independent auditors at any time during the
year if they determine that such a change would be in the best interests of the
Company and its shareholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Coopers & Lybrand L.L.P.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 30, 1997 by: (i) each director and
each nominee for director; (ii) each of the executive officers named in the
Summary Compensation Table employed by the Company in that capacity on April 30,
1997; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
Beneficial Ownership(1)
-----------------------------------
Beneficial Owner Number of Shares Percent of Total
---------------- ---------------- ----------------
Bing Yeh(2) .......................... 3,640,000 15.7%
c/o Silicon Storage Technology, Inc.
1171 Sonora Court
Sunnyvale, CA 94086
Ching S. Jenq ........................ 1,980,000 8.5
13030 Cumbra Vista Court
Los Altos Hills, CA 94022
Tseng Family Trust .................... 1,570,000 6.8
Dtd 12/26/96, Carter and Su
Hwa Tseng, trustees
22, R&D Road 2
Hsin-Chu Science Park
Taiwan, R.O.C. 30077
Thomas A. Freeze ...................... - -
Michael J. Praisner(3) ................ 75,064 *
Isao Nojima(4) ...................... 310,464 1.3
Yaw Wen Hu(5) ........................ 271,198 1.2
David Sweetman(6) .................... 110,000 *
Amy Yuen(7) .......................... 99,822 *
Tsuyoshi Taira(8) .................... 9,000 *
Yasushi Chikagami(8) .................. 9,000 *
Ronald Chwang ........................ - -
All executive officers and directors as
a group (ten persons)(9) ............ 4,524,548 19.5%
- - ------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of the Company's Common Stock.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the Securities
& Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table, and subject to community property laws where
applicable, the Company believes that each of the shareholders named in
this table above has sole voting and investment power with respect to the
shares of Common Stock shown as beneficially owned. Percentage of
beneficial ownership is based on 23,196,709 shares of the Company's Common
Stock outstanding as of April 30, 1997 adjusted as required by rules
promulgated by the SEC.
(2) Includes (i) 1,160,000 shares held by the Yeh Family Trust U/D/T dated
August 14, 1995, of which Mr. Yeh and his wife are trustees and (ii)
2,480,000 shares held by the Yeh 1995 Children's Trust U/T/A dated July 31,
1995 (the "Children's Trust") of which Su-Wen Y. Liu and Yeon-Hong Chan are
trustees. Mr. Yeh disclaims beneficial ownership of the shares held by the
Children's Trust.
(3) Includes 73,333 shares issuable subject to options exercisable on or before
June 30, 1997.
(4) Includes 281,000 shares issuable subject to options exercisable on or
before June 30, 1997.
(Footnotes continued on next page.)
5
<PAGE>
(Footnotes continued from previous page.)
(5) Includes (i) 5,000 shares held by each of Dr. Hu's two minor children and
(ii) 217,467 shares issuable subject to options exercisable on or before
June 30, 1997.
(6) Includes 70,000 shares issuable subject to options exercisable on or before
June 30, 1997.
(7) Includes 35,334 shares issuable subject to options exercisable on or before
June 30, 1997.
(8) Includes 9,000 shares issuable subject to options exercisable on or before
June 30, 1997.
(9) Includes 695,134 shares subject to stock options held by directors and
executive officers as a group exercisable on or before June 30, 1997. See
footnotes (4) through (9).
Compliance with the Reporting Requirements of Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
Compensation of Directors
Directors do not currently receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for certain travel-related expenses in connection with attendance at
Board and committee meetings in accordance with Company policy.
Each non-employee director of the Company receives stock option grants
under the 1995 NonEmployee Directors' Stock Option Plan ("the Directors' Plan").
Only non-employee directors of the Company are eligible to receive options under
the Directors' Plan. Options granted under the Directors' Plan are intended by
the Company not to qualify as incentive stock options under the Internal Revenue
Code of 1986, as amended (the "Code").
Option grants under the Directors' Plan are non-discretionary. Pursuant to
the terms of the Directors' Plan, each director who was serving on the date of
the Company's initial public offering was granted on such date an option to
purchase 24,000 shares of the Company's Common Stock. In addition, each
non-employee director subsequently elected to the Board will automatically be
granted an option to purchase 24,000 shares of the Company's Common Stock. On
the date of each annual meeting of shareholders commencing with the 1997 Annual
Meeting, each member of the Company's Board of Directors who is not an employee
of the Company is automatically granted under the Directors' Plan, without
further action by the Company, the Board of Directors or the shareholders of the
Company, an option to purchase up to 6,000 shares of Common Stock of the
Company. No other options may be granted at any time under the Directors' Plan.
The exercise price of options granted under the Directors' Plan is 100% of the
fair market value of the Common Stock subject to the option on the date of the
option grant. Options granted under the Directors' Plan become exercisable over
a period of four years from the date of grant in forty-eight equal monthly
installments commencing on the date one month after the date of grant of the
option, provided that the optionee has, during the entire period prior to such
vesting date, continuously served as a non-employee director or employee of or
consultant to the Company or any affiliate of the Company, whereupon such option
shall become fully exercisable in accordance with its terms with respect to that
portion of the shares represented by that installment. The term of options
granted under the Directors' Plan is ten years. In the event of a merger of the
Company with or into
6
<PAGE>
another corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving the Company, the vesting of each option
will accelerate and the option will terminate if not exercised prior to the
consummation of the transaction. At April 30, 1997, options (net of canceled or
expired options) covering an aggregate of 48,000 shares had been granted under
the Directors' Plan and 102,000 shares of the Company's Common Stock remained
available for grant under the Directors' Plan.
During the fiscal year 1996, no options were granted to non-employee
directors under the Directors' Plan. Commencing with the 1997 Annual Meeting of
Shareholders each member of the Company's Board of Directors will receive an
annual amount of 6,000 shares under the Directors' Plan. As of April 30, 1997,
no options had been exercised under the Directors' Plan.
Compensation of Executive Officers
<TABLE>
Summary of Compensation
The following table shows for the fiscal years ended December 31, 1996 and
December 31, 1995 compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and the Company's other five most highly compensated
executive officers at December 31, 1996 (the "Named Executive Officers"):
<CAPTION>
Annual Compensation Long-Term Compensation All Other
---------------------- ------------------------- --------------
Salary Bonus Securities Underlying Compensation
Name and Principal Position Year ($) ($)(1) Stock Options (#) ($)(2)
- - ---------------------------------- ------- ---------- --------- ------------------------- --------------
<S> <C> <C> <C> <C> <C>
Bing Yeh 1996 195,000 78,682 - 2,592
President and Chief Executive 1995 128,690 40,824 - -
Officer
Michael J. Praisner 1996 132,000 38,324 - 712
Vice President, Finance and 1995 37,919 - 200,000 -
Administration, Chief Financial
Officer and Secretary
Yaw-Wen Hu 1996 132,000 40,814 - 1,792
Vice President, Technology 1995 115,121 18,281 2,800 -
Development and Wafer
Manufacturing
Isao Nojima 1996 135,000 41,851 - 1,072
Vice President, Memory Design 1995 115,500 18,492 3,000 -
and Product Engineering
David Sweetman 1996 130,000 39,325 - 1,200
Vice President, Quality and 1995 110,256 17,226 - -
Customer Support
Amy Yuen 1996 138,000 45,163 - 4,032
Vice President, Operations 1995 114,736 23,164 104,000 -
- - ------------
<FN>
(1) Bonuses received pursuant to the Company's profit sharing plan (see Report
of the Compensation Committee of the Board of Directors on Executive
Compensation).
(2) Includes other compensation for travel time, new hire referrals, amounts
paid by the Company for supplemental term life insurance, etc.
</FN>
</TABLE>
7
<PAGE>
Stock Option Grants and Exercises
The Company grants options to its executive officers under the 1995 Equity
Incentive Plan (the "Incentive Plan"). In October, 1995, the Board of Directors
amended and restated its 1990 Stock Option Plan and increased the number of
shares reserved for issuance under the Incentive Plan to 6,000,000 shares. The
Incentive Plan provides for grants of incentive stock options to employees
(including executive officers and employee directors) and nonstatutory stock
options, restricted stock purchase awards, stock bonuses, and stock appreciation
rights to employees (including officers and employee directors) and consultants
of the Company. The Incentive Plan is presently administered by the Stock Option
Committee and the Non-Officer Stock Option Committee, which determines the
recipients and types of awards to be granted, including the exercise price,
number of shares subject to the award, and the exercisability thereof. As used
herein with respect to the Incentive Plan, the "Board" refers to the Stock
Option Committee and the Non-Officer Stock Option Committee as well as to the
Board of Directors itself. As of April 30, 1997, options to purchase a total of
1,675,000 shares were outstanding under the Incentive Plan and options to
purchase 1,171,000 shares remained available for grant thereunder.
The term of a stock option granted under the Incentive Plan generally may
not exceed ten years. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors, but, in the case of an incentive
stock option, cannot be less than 100% of the fair market value of the Common
Stock on the date of grant or, in the case of 10% shareholders, not less than
110% of the fair market value of the Common Stock on the date of grant. Options
granted to employees under the Incentive Plan generally vest at the rate of 25%
of the shares subject to option on the first annual anniversary of the date of
hire and 1/48th of such shares at the end of each calendar month thereafter.
Certain initial option grants to officers under the Incentive Plan vest at the
rate of 20% of the shares subject to option on the first annual anniversary of
the date of hire and 1/60th of such shares at the end of each calendar month
thereafter.
No option may be transferred by the optionee other than by will or the laws
of descent or distribution or, in certain limited instances, pursuant to a
qualified domestic relations order. An optionee, whose relationship with the
Company or any related corporation ceases for any reason (other than by death or
permanent and total disability), may exercise options in the three-month period
following cessation (unless such options terminate or expire sooner by their
terms) or in such longer period as may be determined by the Board.
Shares subject to options which have lapsed or terminated may again be
subject to options granted under the Incentive Plan. Furthermore, the Board may
offer to exchange new options for existing options, with the shares subject to
the existing option again becoming available for grant under the Incentive Plan.
In the event of a decline in the value of the Company's Common Stock, the Board
has the authority to offer optionees the opportunity to replace outstanding
higher priced options with new lower priced options.
On September 11, 1996 the Board of Directors approved an offer to employees
of the Company to reprice outstanding stock options granted prior to that date
with an exercise price above $7.125 per share (the "1996 Repricing Program").
Under the 1996 Repricing Program, approximately 276,500 option grants were
converted into repriced options grants with an exercise price of $7.125 per
share (based on the closing price as reported on the Nasdaq National Market on
such date). As consideration for the repriced options, the repriced options vest
on a date that is six months after the date such option would have vested had
the option not been converted by the employee exercising this conversion right.
The 1996 Repricing Program terminated on September 11, 1996. No Named Executive
Officer received repriced option grants pursuant to the 1996 Repricing Program.
On April 23, 1997 the Board of Directors approved an offer to employees of
the Company to reprice outstanding options granted prior to that date with an
exercise price above $3.125 per share (the "1997 Repricing Program"). Under the
1997 Repricing Program, as of April 28, 1997, 844,750 option grants were
converted into repriced option grants with an exercise price of $3.125 (based on
the closing price as reported on the Nasdaq National Market on such date). As
consideration for the grant of repriced options, optionees are prohibited from
exercising the repriced options for a period of three months
8
<PAGE>
<TABLE>
following the initial vest date of such repriced options. The 1997 Repricing
Program terminated on April 28, 1997. The following Named Executive Officers
received repriced option grants pursuant to the 1997 Repricing Program:
<CAPTION>
Number of Securities Market Price of Length of Original
Underlying Options Stock at Time Option Term Remaining
Repriced or of Repricing or New Exercise at Date of Repricing
Name Date Amended (#) Amendment ($) Price ($) or Amendment
- - ---------------------- ---------- ----------------------- ------------------ --------------- -----------------------
<S> <C> <C> <C> <C> <C>
Isao Nojima ......... 4/28/97 24,420 4.875 3.125 117 months
David Sweetman ...... 4/28/97 25,640 4.875 3.125 117 months
Yaw Wen Hu ......... 4/28/97 25,640 4.875 3.125 117 months
Amy Yuen ............ 4/28/97 15,260 4.875 3.125 117 months
</TABLE>
Stock options, stock bonuses and stock appreciation rights are awarded by
the Company in accordance with a vesting schedule determined by the Board. The
purchase of price of such awards will be at least 85% of the fair market value
of the Common Stock on the date of grant. Stock bonuses may be awarded in
consideration for past services without a purchase payment. Stock appreciation
rights authorized for issuance under the Incentive Plan may be tandem stock
appreciation rights, concurrent stock appreciation right or independent stock
appreciation rights.
Upon any merger or consolidation in which the Company is not the surviving
corporation, all outstanding awards under the Incentive Plan shall either be
assumed or substituted by the surviving entity. If the surviving entity
determines not to assume or substitute such awards, the time during which such
awards may be exercised shall be accelerated and the awards terminated if not
exercised prior to the merger or consolidation. The Incentive Plan will
terminate in June 2000, unless terminated sooner by the Board of Directors.
<TABLE>
The following table sets forth certain information for the fiscal year
ended December 31, 1996 regarding options held at year-end and exercised by the
Named Executive Officers. For the fiscal year ended December 31, 1996, the
Company did not grant any stock options to the Named Executive Officers.
Aggregated Option Exercises in Fiscal 1996, and Fiscal Year-End Option Values
<CAPTION>
Number (#) of Securities $ Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Acquired $ Value Options at December 31, 1996 December 31, 1996
Name On Exercise (#) Realized(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
- - ---------------------------- ------------------ -------------- ------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Bing Yeh .................. - - - -
Michael J. Praisner ...... - - 53,334/146,666 $ 204,003/$560,997
Isao Nojima ............... - - 245,000/90,000 $1,145,225/$420,750
Yaw Wen Hu ............... 2,000 $24,200 195,466/85,334 $ 913,664/$398,936
Amy Yuen .................. 38,000 $366,650 17,834/64,166 $ 82,107/$294,143
David Sweetman ............ 50,000 $369,375 46,000/104,000 $ 212,750/$481,000
- - ------------
<FN>
(1) Based on the fair market value of the Company's Common Stock on the date of
exercise minus the exercise price, multiplied by the number of shares
underlying the option.
(2) Based on the closing price of the Company's Common Stock ($4.825) on
December 31, 1996 as reported on the Nasdaq National Market minus the
exercise price, multiplied by the number of shares underlying the option.
</FN>
</TABLE>
Employee Stock Purchase Plan
In October, 1995, the Board of Directors adopted the Employee Stock
Purchase Plan (the "Purchase Plan") covering an aggregate of 850,000 shares of
Common Stock. The Purchase Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
Under the Purchase Plan, the Board of Directors may authorize participation by
eligible employees, including officers, in periodic offerings following the
adoption of the Purchase Plan. The offering period for any offering will be no
more than 27 months. The Company concluded two six month offering periods during
1996: on January 31, 1996 and on July 31, 1996.
9
<PAGE>
Employees are eligible to participate if they are employed by the Company,
or an affiliate of the Company designated by the Board of Directors, for at
least 20 hours per week and are employed by the Company or a subsidiary or the
Company designated by the Board for at least five months per calendar year.
Employees who participate in an offering can have up to 10% of their earnings
withheld pursuant to the Purchase Plan. The amount withheld will then be used to
purchase shares of the Common Stock on specified dates determined by the Board
of Directors. The price of Common Stock purchased under the Purchase Plan will
be equal to 85% of the lower of the fair market value of the Common Stock on the
commencement date of each offering period to the specified purchase date.
Employees may end their participation in the offering at any time during the
offering period. Participation ends automatically on termination of employment
with the Company.
In the event of a merger, reorganization, or consolidation or liquidation
to involving the Company in which the Company is not a surviving corporation,
the board of Directors has discretion to provide that each right to purchase
Common Stock will be assumed or an equivalent right substituted by the successor
corporation, or the Board may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to such merger or other transaction. The Purchase Plan will terminate at
the Board's direction. The Board has the authority to amend or terminate the
Purchase Plan, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase Common Stock.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors and is composed of Mssrs. Taira
and Chikagami neither of whom are currently officers or employees of the
Company, and Bing Yeh, President and Chief Executive Officer; and, the Stock
Option Committee which consists of Mssrs. Taira and Chikagami, each a
non-employee director of the Company.
The Company's executive compensation program is designed to retain and
reward executives who are responsible for leading the Company in achieving its
business objectives. All decisions by the Compensation Committee relating to the
salary compensation of the Company's executive officers, with the exception of
the Chief Executive Officer, are reviewed by the full Board; and, all stock
option awards by the Stock Option Committee to the executive officers of the
Company are reviewed by the full Board. The salary compensation of the Chief
Executive Officer is established by the non-employee members of the Compensation
Committee, Mssrs. Taira and Chikagami. This report is submitted by the
Compensation Committee and the Stock Option Committee and addresses the
Company's compensation policies for the fiscal year ended December 31, 1996 as
they affect Bing Yeh, in his capacity as President and Chief Executive Officer
of the Company, and the other executive officers of the Company.
Compensation Philosophy
The objectives of the executive compensation program are to (i) align
compensation with the Company's business objectives and individual performance,
(ii) motivate and reward high levels of performance, (iii) recognize and reward
the achievement of team and individual goals, and (iv) enable the Company to
attract, retain and reward executive officers who contribute to the long-term
success of the Company.
The Company's executive compensation philosophy is to tie a significant
portion of executive compensation to the performance of the Company and
attainment of goals and objectives by individual executive officers and is based
on the following:
- - ------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "1933
Act"), or the Securities Exchange Act of 1934 (the "1934 Act"), that might
incorporate future filings, including this Proxy Statement, in whole or in
part, the following report and Performance Graph on page 13 shall not be
incorporated by reference into any such filings.
10
<PAGE>
- The Committees regularly compares its executive compensation practices
with those of other companies in the industry and sets its compensation
guidelines based on this review. The Company's base annual salaries for
its executives are generally in the mid-range of those paid to executives
of comparable companies in the semiconductor industry. The Compensation
Committee and the Stock Option Committee seek, however, to provide its
executives with opportunities for higher compensation through profit
sharing and stock options.
- The Committees believe that an executive compensation program that ties
profit sharing awards to performance and achievement of the Company's
stated goals serves both as an influential motivator to its executives and
as an effective instrument for aligning their interests with those of the
shareholders of the Company.
- The Committees also believes that a very substantial portion of the
compensation of the Company's executives should be linked to the success
of the Company's stock in the marketplace. The linkage is achieved through
the Company's stock option program which also serves to more fully align
the interests of management with those of the Company's shareholders.
Implementation of Compensation Program
Annual compensation for the Company's executives consists of three
principal elements-salary, profit sharing and stock options.
The Compensation Committee sets the base annual salary and levels of
compensation for executives by reviewing compensation for comparable positions
in the market and the historical compensation levels of the Company's
executives. Currently, the base annual salaries of the Company's executives are
at levels which the Compensation Committee believes are generally in the
midrange of those of executives of companies with which the Company compares
itself. The Compensation Committee members participate in the deliberations of
the annual salaries for all executive officers other than for compensation for
Mr. Yeh. The non-employee members of the Compensation Committee deliberate upon
and set Mr. Yeh's annual salary. Increases in annual salaries are based on a
review and evaluation of executive salary levels and the demonstrated
capabilities of the executives in managing the key aspects of a semiconductor
company, including (i) corporate partnering, patent strategy and technology
collaborations, (ii) research and development, (iii) market development and
market penetration, (iv) financial matters, including attracting capital and
financial planning, and (v) human resources.
Compensation of the Chief Executive Officer in Fiscal 1996
As discussed below, Mr. Yeh is eligible to participate in the same
executive compensation plans available to the other executive officers of the
Company. The Compensation Committee sets Mr. Yeh's total annual compensation,
including compensation derived from the Company's profit sharing program, at a
level it believes is competitive with those of other Chief Executive Officers at
other companies in the semiconductor industry, although at the middle of the
range.
Mr. Yeh earned $195,000 in 1996 as base salary. Effective January 1, 1997,
his salary was increased to $205,725 annually. In determining Mr. Yeh's salary,
the Compensation Committee reviewed various factors, including Mr. Yeh's
contributions with respect to the advancement of market development and
diversification of market penetration, corporate partnership transactions, and
the recruitment of the Company's new Chief Operating Officer, Mr. Tom Freeze, in
December, 1996. Mr. Yeh's profit sharing of $78,682 was calculated and based on
a pre-determined formula which is applied to every employee of the Company as
described below.
Profit Sharing
Bonuses are calculated for all employees, including executive officers,
twice each year using two pre-determined profit sharing-based formulas. The
first formula allocates 10% of the Company's operating profit to a profit
sharing pool provided the Company has met its twin profitability goals of both
pre-tax profits and operating profits in excess of 10% of sales. If pre-tax
profits or operating profits are less than 10% of sales, no allocation is made
to profit sharing. The second formula apportions some of the profit
11
<PAGE>
sharing pool, if any, to each employee based on the employee's length of
employment, level of performance and base salary. No bonus is paid to an
employee who has worked for the Company for less than six months. Level of
performance is a numerical value assigned in performance reviews independently
of the profit sharing program. The Company currently calculates bonuses based on
the Company's financial performance in the periods January 1 through June 30 and
July 1 through December 31.
The Company achieved its profitability goals for the period January 1, 1996
through June 30, 1996 and for the period July 1, 1996 through December 31, 1996.
All of the Named Executive Officers were eligible for and received bonuses based
on profit sharing as described above. Executive officers as a group received
aggregate profit-sharing bonuses of $284,159 for fiscal 1996 performance.
Stock Awards
Total compensation at the executive level also includes long-term
incentives offered by stock awards under the Incentive Plan. Stock awards are
designed to align the long-term interests of the Company's employees with those
of its shareholders and to assist in the retention of employees. The size of an
individual stock award is generally intended to reflect the employee's position
with the Company and his or her importance, past and future anticipated
contributions to the Company, and how many years of future service for which the
employee has nonvested options. It has been the Company's practice to fix the
exercise price of stock option grants at 100% of the fair market value per share
on the date of grant. Options are generally subject to vesting over a four or
five year period to encourage key employees to continue in the employ of the
Company.
The Stock Option Committee administers the Incentive Plan for executive
officers of the Company. The Board has delegated to the Non-Officers Stock
Option Committee the administration of the Incentive Plan for all other
employees of the Company. During fiscal 1996, no Named Executive Officer
received stock option grants because all Named Executive Officers possessed
unvested stock options grants related to future service under previous grants.
In January, 1997, an evergreen program (stock replenishment) was approved by the
Board of Directors whereby options may be granted on a smaller and more frequent
basis to both executive officers and employees in order to ensure that each
eligible employee possesses nonvested options for four years of future service.
The Company intends to grant options to executive officers on a routine basis as
part of this evergreen program.
Limitations on Deduction of Compensation Paid to Certain Named Executive
Officers
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
executive officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The statute containing this law and the applicable Treasury regulations
offer a number of transitional exceptions to this deduction limit for
pre-existing compensation plans, arrangements and binding contracts. As a
result, the Compensation Committee believes that at the present time it is quite
unlikely that the compensation paid to any Named Executive Officer in a taxable
year which is subject to the deduction limit will exceed $1 million. Therefore,
the Compensation Committee has not yet established a policy for determining
which forms of incentive compensation awarded to its Named Executive Officers
shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and Treasury regulations.
Compensation Committee
Bing Yeh
Tsuyoshi Taira
Yasushi Chikagami
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Compensation Committee of the Board of Directors is composed of the
following persons: Bing Yeh, Tsuyoshi Taira and Yasushi Chikagami. Of these
Directors, Mr. Yeh is also an officer of the Company. In addition, see Mr.
Taira's biography describing his relationship to Sanyo Semiconductor
Corporation, a major supplier to the Company, during part of 1996.
12
<PAGE>
Performance Measurement Comparison(1)
The following chart shows the total shareholder return of an investment of
$100 in cash on November 21, 1995 for (i) the Company's Common Stock, (ii) the
Nasdaq Stock Market-U.S. Index, and (iii) the Hambrecht & Quist Semiconductor
Index. All values assume reinvestment of the full amount of all dividends and
are calculated as of December 31 of each year.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Total Return - Data Summary
SSTI
Cumulative Total Return
----------------------------
11/21/95 12/95 12/96
Silicon Storage Techn Inc SSTI 100 147 54
NASDAQ STOCK MARKET-US INAS 100 103 127
HAMBRECHT & QUIST SEMICONDUCTOR IHQS 100 91 118
- - ------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC, and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation of language in any such
filings.
13
<PAGE>
CERTAIN TRANSACTIONS
On January 31, 1996, the Company acquired a 14% interest in a Japanese
company for approximately $939,000. The president of the Japanese company is a
shareholder of the Company. In addition, this Japanese company accounted for
12.7% of the Company's net product revenues for the fiscal year ended December
31, 1996.
As a matter of policy, all transactions between the Company and any of its
officers, directors or principal shareholders will be approved by a majority of
the independent and disinterested members of the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties and will be in connection with bona fide business
purposes of the Company.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Michael J. Praisner
-----------------------
MICHAEL J. PRAISNER
Secretary
June 6, 1997
A copy of the Company's Annual Report to the Securities and Exchange Commission
on Form 10-K for the fiscal year ended December 31, 1996 is available without
charge upon written request to: Corporate Secretary, Silicon Storage Technology,
Inc., 1171 Sonora Court, Sunnyvale, California 94086.
14
<PAGE>
APPENDIX A
PROXY SILICON STORAGE TECHNOLOGY, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 23, 1997
The undersigned hereby appoints Bing Yeh and Michael J. Praisner, and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Silicon Storage Technology,
Inc. (the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of Silicon Storage Technology, Inc. to be held at the
offices of the Company at 1156 Sonora Court, Sunnyvale, California 94086 on
Wednesday, July 23, 1997 at 2:00 p.m., local time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
(Continue, and to be signed on the other side)
<PAGE>
<TABLE>
<CAPTION>
Mark your
votes as [X]
this
<S> <C> <C> <C> <C>
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES
FOR DIRECTOR LISTED BELOW AND FOR PROPOSAL 2. FOR AGAINST ABSTAIN
2. To ratify selection of Coopers &
1. To elect directors to hold office until the next Annual Meeting of Lybrand, LLP as independent [ ] [ ] [ ]
Shareholders and until their successors are elected. auditors of the Company for its
fiscal year ending December 31,
Nominees WITHHOLD 1997.
Bing Yeh, Yaw Wen Hu, FOR FOR ALL
Tsuyoshi Taira, [ ] [ ] Unless a contrary direction is indicated,
Yashushi Chikagami, this Proxy will be voted for all nominees
and Ronald Chwang listed in Proposal 1 and for Proposal 2
as more specifically described in the
To withhold authority to vote for any nominee(s), write such Proxy Statement. If specified instructions
nominee(s)' name in the space below. are indicated, this Proxy will be voted in
accordance therewith.
- - --------------------------------------------------------------
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians and attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating
title. If signer is a partnership, please
sign in partnership name by authorized
person.
Signature(s)_____________________________________ Signature if held jointly_________________________________ Date___________________
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED
STATES.
</TABLE>
