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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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<S> <C>
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 Section240.14a-11(c) or
Section240.14a-12
SILICON STORAGE TECHNOLOGY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
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the offsetting fee was paid previously. Identify the previous
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(1) Amount Previously Paid:
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SILICON STORAGE TECHNOLOGY, INC.
1171 SONORA COURT
SUNNYVALE, CALIFORNIA 94086
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 2000
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, will be held on Friday,
June 16, 2000 at 2:00 p.m., local time, at our offices located 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 approve an amendment to our Articles of Incorporation to increase the
authorized shares of Common Stock from 45,000,000 to 250,000,000 shares.
3. To approve our 1995 Equity Incentive Plan, as amended, to increase the
aggregate number of shares of Common Stock authorized for issuance under
such plan by 1,000,000 to 8,750,000 shares.
4. To ratify the selection of PricewaterhouseCoopers LLP as our independent
accountants for the fiscal year ending December 31, 2000.
5. 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 April 21, 2000, 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/ JEFFREY L. GARON
JEFFREY L. GARON
SECRETARY
Sunnyvale, California
May 11, 2000
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. SHARES MAY ALSO BE
VOTED ON ELECTRONICALLY VIA THE INTERNET. 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
JUNE 16, 2000
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, for use at the
Annual Meeting of Shareholders to be held on Friday, June 16, 2000 at
2:00 p.m., local time, 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 our offices at 1156 Sonora Court, Sunnyvale,
California 94086. We intend to mail this proxy statement, accompanying proxy
card, and the 1999 Annual Report (which includes the Annual Report on
Form 10-K) on or about May 11, 2000, to all shareholders entitled to vote at the
Annual Meeting. If your shares are held in a bank or brokerage account, you may
be eligible to vote your proxy electronically. Please refer to the enclosed
voting form for instructions.
SOLICITATION
We 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. We 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 our directors, officers, or other regular employees. No
additional compensation will be paid to our directors, officers, or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of our Common Stock at the close of business on
April 21, 2000, will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on April 21, 2000, we had outstanding and entitled to
vote 29,569,081 shares of Common Stock.
Each holder of record of our Common Stock on such date will be entitled to
one vote for each share held on all matters to be voted upon. With respect to
the election of directors, shareholders may exercise cumulative voting rights.
Under cumulative voting, each holder of Common Stock will be entitled to five
(5) votes for each share held. Each shareholder may give one candidate, who has
been nominated prior to voting, all the votes such shareholder is entitled to
cast or may distribute such votes among as many such candidates as such
shareholder chooses. However, no shareholder will be entitled to cumulate votes
unless the candidate's name has been placed in nomination prior to the voting
and at least one shareholder has given notice at the meeting, prior to the
voting, of his or her intention to cumulate votes. Unless the proxyholders are
otherwise instructed, shareholders, by means of the accompanying proxy, will
grant the proxyholders discretionary authority to cumulate votes.
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.
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VOTING ELECTRONICALLY VIA THE INTERNET
Shareholders may vote via the Internet. Specific instructions to be followed
by any registered shareholder interested in voting via the Internet are set
forth on our web site, www.ssti.com, under Investor/Financial Information. The
Internet voting procedures are designed to authenticate the shareholder's
identity and to allow shareholders to vote their shares and confirm that their
instructions have been properly recorded.
If your shares are registered in the name of a bank or brokerage firm and
you have not elected to receive your Annual Report and Proxy Statement over the
Internet, you may be eligible to vote your shares electronically over the
Internet. A large number of banks and brokerage firms are participating in the
ADP Investor Communication Services Online program. This program provides
eligible shareholders to review a paper copy of the annual report and proxy
statement the opportunity to vote via the Internet. If your bank or brokerage
firm is participating in ADP's program, your voting form will provide
instructions. If your voting form does not reference Internet information,
please complete and return the paper proxy card in the self-addressed postage
paid envelope provided.
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 our
Secretary at our 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
Pursuant to Rule 14a-8 of the Securities and Exchange Commission, proposals
of shareholders that are intended to be presented at our 2001 Annual Meeting of
Shareholders must be received by us not later than Tuesday, January 9, 2001 in
order to be included in the proxy statement and proxy relating to the Annual
Meeting. Pursuant to our bylaws, shareholders who wish to bring matters or
proposed nominees for director at our 2001 Annual Meeting of Shareholders must
provide specified information to us between January 16, 2001 and February 15,
2001. Shareholders are also advised to review our bylaws, which contain
additional requirements with respect to advance notice shareholder proposals and
director nominations.
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PROPOSAL 1
ELECTION OF DIRECTORS
There are five nominees for the five Board positions presently authorized in
our 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 one of our directors, all five having been elected by the
shareholders.
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.
The candidates receiving the highest number of affirmative votes of the
shares entitled to be voted will be elected to our Board of Directors. The names
of the nominees and certain information about them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------------------------------------------------------
<S> <C> <C>
Bing Yeh (1)(4)............. 49 President, Chief Executive Officer and Director
Yaw Wen Hu.................. 50 Senior Vice President, Operations and Process
Development and Director
Tsuyoshi Taira (1)(2)(3).... 61 President, Tazan International, Inc. and Asia Links
Media and Director
Yasushi Chikagami 61
(1)(2)(3)................. Director, GVC Corporation and Director
Ronald Chwang (1)(2)(3)..... 51 President, Acer Technology Ventures Management LLC and
Director
</TABLE>
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(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Stock Option Committee.
(4) Sole Member of Non-Officer Stock Option Committee.
BING YEH, one of our co-founders, has served as President, Chief Executive
Officer and been a member of the board of directors since our inception in 1989.
Prior to that, Mr. Yeh served as a senior research and development manager of
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 of Intel
Corporation. He was a Ph.D. candidate in Applied Physics and earned an Engineer
degree at Stanford University. Mr. Yeh holds an M.S. and a B.S. in Physics from
National Taiwan University.
YAW WEN HU, PH.D., joined us in 1993 as Vice President, Technology
Development. In 1997, he was given additional responsibility of wafer
manufacturing and, in August 1999, he became Vice President, Operations and
Process Development. In January 2000, he was promoted to Senior Vice President,
Operations and Process Development. Mr. Hu has been a member of our board of
directors since September 1995. From 1990 to 1993, Mr. Hu served as deputy
general manager of technology development of Vitelic Taiwan Corporation. From
1988 to 1990, he served as FAB engineering manager of 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. Mr. 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.
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TSUYOSHI TAIRA has been a member of our board of directors 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 two marketing and management consulting
companies, Tazan International, Inc. and Asia Links Media. Mr. Taira holds a
B.S. from Tokyo Metropolitan University.
YASUSHI CHIKAGAMI has been a member of our board of directors 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 and Trident Microsystems, Inc. since 1993,
and also is a director of Ocean Automation Ltd. Mr. Chikagami holds a B.S. in
Agricultural Engineering from Taiwan University and a M.S. in engineering from
University of Tokyo.
RONALD CHWANG, PH.D., has been a member of our board of directors since
June 1997. Since 1998, Mr. Chwang has been the President of Acer Technology
Ventures Management LLC, a venture capital business unit of the Acer Group, a
worldwide computer, component and semiconductor manufacturer. From 1992 to 1997
he was the President and Chief Executive Officer of Acer America. Mr. Chwang has
been with Acer since 1986, serving in various executive positions. Mr. Chwang
has previously held development and management positions an Intel Corporation
and Bell Northern Research. Mr. 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.
4
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BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1999, the Board of Directors held five
regular meetings. Mr. Taira attended four of the regular meetings of the board
of directors; Mr. Chikagami attended three meetings; and Messrs. Chwang, Hu and
Mr. Yeh attended all five meetings. Attendance was either in person or by
telephonic conference. The Board has a Compensation Committee, Audit Committee,
Stock Option Committee, and a Non-Officer Stock Option Committee.
The Compensation Committee makes recommendations concerning the salaries and
benefits of all our officers and reviews general policy relating to compensation
and benefits of our employees, except for the issuance of stock options and
other awards under our equity incentive plans. The Compensation Committee is
composed of: Messrs. Taira, Chikagami, Chwang, and Yeh. The Compensation
Committee met four times during fiscal 1999. Of these four meetings, Mr. Taira
attended three meetings and Mr. Chikagami attended two meetings. Messrs. Chwang
and Yeh each attended all four meetings.
The Audit Committee meets with our independent accountants at least once
annually to review the results of the annual audit and to discuss our financial
statements. The Audit Committee recommends to the Board whether the independent
accountants are 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: Messrs. Taira, Chikagami, and Chwang. The Audit Committee met
three times during fiscal 1999. Of these three meetings, Mr. Taira attended two
meetings; Mr. Chikagami attended no meetings, and Mr. Chwang attended all three
meetings.
The Stock Option Committee administers the issuance of stock options and
other awards under our 1995 Equity Incentive Plan. The Stock Option Committee is
composed of three non-employee directors: Messrs. Taira, Chikagami and Chwang.
The Stock Option Committee met three times during fiscal 1999 and acted by
unanimous written consent six times during fiscal 1999. Messrs. Taira and
Chikagami each attended two meetings and Mr. Chwang attended all three meetings.
The Non-Officer Stock Option Committee administers the issuance of stock
options consisting of not more than 12,000 shares per stock option grant under
the Company's 1995 Equity Incentive Plan to non-officer employees. The
Non-Officer Stock Option Committee is composed of Mr. Yeh, our President and
Chief Executive Officer. The Non-Officer Stock Option Committee acted by
unanimous written consent nineteen times during fiscal 1999.
5
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PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to shareholder approval, an
amendment to our Amended and Restated Articles of Incorporation to increase our
authorized number of shares of Common Stock from 45,000,000 shares to
250,000,000 shares. As amended, Article III, Paragraph A of our Amended and
Restated Articles of Incorporation shall read in its entirety as follows:
"The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares the Corporation shall have the
authority to issue is 250,000,000 shares of Common Stock, without
par value, and 7,000,000 shares of Preferred Stock, without par
value."
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to our currently outstanding Common Stock. Adoption
of the proposed amendment and the issuance of the Common Stock would not affect
the rights of the holders of our currently outstanding Common Stock, except for
effects incidental to increasing the number of shares of our Common Stock
outstanding, such as dilution of the earnings per share and voting rights of
current holders of Common Stock. If the amendment is adopted, it will become
effective upon the filing of an Amended and Restated Articles of Incorporation
with the Secretary of State of the State of California.
In addition to the 29,041,304 shares of Common Stock outstanding at
March 31, 2000, we have currently reserved 4,678,616 shares for issuance upon
exercise of options and rights under our stock option and stock purchase plans.
If Proposal 3 is approved, the number of shares reserved under our stock option
and stock purchase plans will be 5,678,616.
Although at present the Board of Directors has no other plans to issue the
additional shares of Common Stock, it desires to have such shares available to
provide additional flexibility to use our capital stock for business and
financial purposes in the future. The additional shares may be used, without
further shareholder approval, for various purposes including, without
limitation, raising capital, providing equity incentives to employees, officers
or directors, establishing strategic relationships with other companies and
expanding our business or product lines through the acquisition of other
businesses or products.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by us to oppose a
hostile takeover attempt or delay or prevent changes in our control or
management. For example, without further shareholder approval, the Board of
Directors could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current Board
of Directors. In addition, if a person or group of persons attempted a hostile
takeover of us, such shares could be issued in connection with our Share
Purchase Rights Plan, which would allow shareholders (other than the hostile
parties) to purchase our Common Stock at a discount to the then current market
price, which would have a dilutive effect on the hostile parties. Although this
proposal to increase the authorized Common Stock has been prompted by business
and financial considerations and not by the threat of any hostile takeover
attempt (nor is the Board of Directors currently aware of any such attempts
directed at us), nevertheless, shareholders should be aware that approval of the
proposal could facilitate future efforts by us to deter or prevent changes in
our control, including transactions in which the shareholders might otherwise
receive a premium for their shares over then current market prices.
The affirmative vote of the holders of a majority of the shares of the
Common Stock will be required to approve this amendment to our Amended and
Restated Articles of Incorporation. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
6
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PROPOSAL 3
APPROVAL OF 1995 EQUITY INCENTIVE PLAN, AS AMENDED
In October 1995, the Board of Directors adopted, and the shareholders
subsequently approved, our 1995 Equity Incentive Plan as an amendment and
restatement of our 1990 Stock Option Plan. As a result of a series of
amendments, as of March 31, 2000, there were 7,750,000 shares reserved for
issuance under the Incentive Plan. In April 2000, our Board amended the
Incentive Plan, subject to shareholder approval, to increase the aggregate
number of shares of Common Stock authorized for issuance under the Incentive
Plan by 1,000,000 shares to 8,750,000 shares.
As of March 31, 2000, options to purchase a total of approximately 3,238,000
(net of cancelled or expired options) shares were outstanding under the
Incentive Plan. In addition, options to purchase 707,000 (plus any shares that
might in the future be returned to the plan as a result of cancellations or
expiration of options) shares remained available for future grant under the
Incentive Plan. During fiscal 1999, under the Incentive Plan, we granted to all
current executive officers as a group, options to purchase 132,000 shares at
exercise prices of $3.00 to $13.25 per share, and granted to all employees
(excluding executive officers) as a group, options to purchase 869,000 shares at
exercise prices of $2.41 to $24.88 per share.
Shareholders are requested in this Proposal 3 to approve the Incentive Plan,
as amended. If the shareholders fail to approve this Proposal 3, options granted
under the Incentive Plan after the Annual Meeting in excess of the existing
share reserve may not qualify as performance-based compensation and, in some
circumstances, we may be denied a business expense deduction for compensation
recognized in connection with the exercise of these stock options.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the meeting will be required to
approve the Incentive Plan, as amended. For purposes of this vote, abstentions
will be counted toward the tabulation of votes counted and will have the same
effect as negative votes. Broker non-votes are counted towards a quorum, but
will not be counted for any purpose in determining whether this matter has been
approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
7
<PAGE>
The essential features of the Incentive Plan are outlined below:
GENERAL
The Incentive Plan provides for the grant or issuance of incentive stock
options to employees and nonstatutory stock options, restricted stock purchase
awards, stock bonuses and stock appreciation rights to consultants, employees,
officers and employee directors. To date only incentive stock options and
nonstatutory stock options have been awarded under the Incentive Plan. Incentive
stock options granted under the Incentive Plan are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. Nonstatutory stock options granted under the
Incentive Plan are intended not to qualify as incentive stock options under the
Code. See "Federal Income Tax Information" for a discussion of the tax treatment
of the various awards included in the Incentive Plan.
PURPOSE
The Incentive Plan was adopted to provide a means by which selected officers
and employees of and consultants to us and our affiliates could be given an
opportunity to receive our stock, to assist in retaining the services of
employees holding key positions, to secure and retain the services of persons
capable of filling such positions and to provide incentives for such persons to
exert maximum efforts for our success. All of our 306 employees as of March 31,
2000 and our consultants are eligible to participate in the Incentive Plan.
ADMINISTRATION
The Incentive Plan is administered by our Board of Directors. The Board has
the power to construe and interpret the Incentive Plan and, subject to the
provisions of the Incentive Plan, to determine the persons to whom and the dates
on which awards will be granted, what type of award will be granted, the number
of shares to be subject to each award, the time or times during the term of each
award within which all or a portion of such award may be exercised, the exercise
price, the type of consideration and other terms of the award. The Board of
Directors is authorized to delegate administration of the Incentive Plan to a
committee composed of not fewer than two members of the Board. As used herein
with respect to the Incentive Plan, the "Board" refers to the Stock Option
Committee as well as to the Board of Directors itself.
ELIGIBILITY
Incentive stock options may be granted under the Incentive Plan only to our
employees, including our officers, and employees of our affiliates. Consultants
and employees, including our officers, are eligible to receive awards other than
incentive stock options under the Incentive Plan. Directors who are not salaried
employees or consultants of ours or our affiliates are not eligible to
participate in the Incentive Plan.
No option may be granted under the Incentive Plan to any person who, at the
time of the grant, owns, or is deemed to own, stock possessing more than 10% of
the total combined voting power of our stock or the stock of any of our
affiliates, unless the option exercise price is at least 110% of the fair market
value of the stock subject to the option on the date of grant, and the term of
the option does not exceed five years from the date of grant. For incentive
stock options granted under the Incentive Plan, the aggregate fair market value,
determined at the time of grant, of the shares of Common Stock with respect to
which such options are exercisable for the first time by an optionee during any
calendar year under all such plans may not exceed $100,000.
8
<PAGE>
SHARES SUBJECT TO THE INCENTIVE PLAN
Subject to shareholder approval of this Proposal 3, an aggregate of
8,750,000 shares of our Common Stock is reserved for issuance under the
Incentive Plan. If awards granted under the Incentive Plan expire or otherwise
terminate without being exercised, the Common Stock not purchased pursuant to
such awards again becomes available for issuance under the Incentive Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
Incentive Plan. Individual option grants may be more restrictive as to any or
all of the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the Incentive Plan may not be less than the fair market value of the
Common Stock subject to the option on the date of the option grant, and in some
cases, see the section entitled "Eligibility" above, may not be less than 110%
of such fair market value. The exercise price of nonstatutory options under the
Incentive Plan is determined by the Board. At March 31, 2000 the closing price
of our Common Stock as reported on the Nasdaq National Market was $73.875 per
share.
In the event of a decline in the value of our Common Stock, the Board has
the authority to offer employees the opportunity to replace outstanding higher
priced options, whether incentive or nonstatutory, with new lower priced
options. We have provided that opportunity to employees in the past. To the
extent required by Section 162(m), an option re-priced under the Incentive Plan
is deemed to be cancelled and a new option granted. The Board also has the
authority to include as part of an option agreement a provision entitling the
optionee to a further option in the event that the optionee exercises his or her
option by surrendering other shares of Common Stock as payment of the exercise
price.
The exercise price of options granted under the Incentive Plan must be paid
either: (1) in cash at the time the option is exercised; (2) at the discretion
of the Board, (a) by delivery of other shares of our Common Stock, or
(b) pursuant to a deferred payment arrangement; or (3) in any other form of
legal consideration acceptable to the Board.
OPTION EXERCISE. Options granted under the Incentive Plan may become
exercisable in cumulative increments, or vest, as determined by the Board.
Shares covered by currently outstanding options under the Incentive Plan
typically vest either at the rate of 25% on the first anniversary of the grant
and 1/48th per month (25% per year) thereafter during the optionee's employment
or service as a consultant (hire-on grants and promotion grants) OR monthly over
a twelve month period (performance grants and stock replenishment grants).
Shares covered by options granted in the future under the Incentive Plan may be
subject to different vesting terms. The Board has the power to accelerate the
time during which an option may be exercised, and certain other events such as a
change in our ownership may accelerate the vesting of options. In addition,
options granted under the Incentive Plan may permit exercise prior to vesting,
but in such event the optionee may be required to enter into an early exercise
stock purchase agreement that allows us to repurchase shares not yet vested at
their exercise price should the optionee leave our employ before vesting. To the
extent provided by the terms of an option, an optionee may satisfy any federal,
state or local tax withholding obligation relating to the exercise of such
option by a cash payment upon exercise, by authorizing us to withhold a portion
of the stock otherwise issuable to the optionee, by delivering already-owned
shares of our stock or by a combination of these means.
TERM. The maximum term of options under the Incentive Plan is ten years,
except that in certain cases see the section above entitled "Eligibility", the
maximum term is five years. Options under the Incentive Plan terminate three
months after the optionee ceases to be an employee, director or consultant of
ours or any of our affiliates, unless (1) the termination of employment as an
employee, director or consultant is due to such person's permanent and total
disability, as defined in the Code, in which case the option may, but need not,
provide that it may be exercised at any time within one year of such
termination;
9
<PAGE>
(2) the optionee dies while an employee, director or consultant of ours or any
of our affiliates, or within three months after termination of such employment
as an employee, director, or consultant, in which case the option may, but need
not, provide that it may be exercised, to the extent the option was exercisable
at the time of the optionee's death, within eighteen months of the optionee's
death by the person or persons to whom the rights to such option pass by will or
by the laws of descent and distribution; or (3) the option by its terms
specifically provides otherwise. Individual options by their terms may provide
for exercise within a longer period of time following termination of employment
or the consulting or director relationship. The option term also may be extended
in the event that exercise of the option within these periods is prohibited for
specified reasons.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
PURCHASE PRICE; PAYMENT. The purchase price under each stock purchase
agreement will be determined by the Board. The purchase price of stock pursuant
to a stock purchase agreement must be paid either: (1) in cash at the time of
purchase; (2) at the discretion of the Board, according to a deferred payment or
other arrangement with the person to whom the Common Stock is sold; or (3) in
any other form of legal consideration that may be acceptable to the Board in its
discretion. Eligible participants may be awarded stock pursuant to a stock bonus
agreement in consideration of past services actually rendered to us or for our
benefit.
REPURCHASE. Shares of the Common Stock sold or awarded under the Incentive
Plan may, but need not, be subject to a repurchase option in favor of us in
accordance with a vesting schedule determined by the Board. In the event a
person ceases to be an employee of or ceases to serve as a director of or
consultant to us or one of our affiliates, we may repurchase or otherwise
reacquire any or all of the shares of the Common Stock held by that person that
have not vested as of the date of termination under the terms of the stock bonus
or restricted stock purchase agreement between us and such person.
STOCK APPRECIATION RIGHTS
The Board may grant stock appreciation rights to employees or directors of,
or consultants to, us or our affiliates. The Incentive Plan authorizes three
types of stock appreciation rights.
TANDEM STOCK APPRECIATION RIGHTS. Tandem stock appreciation rights are tied
to an underlying option and require the holder to elect whether to exercise the
underlying option or to surrender the option for an appreciation distribution
equal to the market price of the vested shares purchasable under the surrendered
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of tandem stock appreciation rights must be
made in cash. Tandem stock appreciation rights tied to incentive stock options
may be granted to employees only.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent stock appreciation rights
are tied to an underlying option and are exercised automatically at the same
time the underlying option is exercised. The holder receives an appreciation
distribution equal to the market price of the vested shares purchased under the
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of concurrent stock appreciation rights must
be made in cash. Concurrent stock appreciation rights tied to incentive stock
options may be granted to employees only.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent stock appreciation
rights are granted independently of any option and entitle the holder to receive
upon exercise an appreciation distribution equal to the market price of a number
of shares equal to the number of share equivalents to which the holder is vested
under the independent stock appreciation right less the fair market value of
such number of shares of stock on the date of grant of the independent stock
appreciation rights. Appreciation distributions payable upon exercise of
independent stock appreciation rights may, at the Board's discretion, be made in
cash, in shares of the Common Stock or a combination thereof.
10
<PAGE>
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Incentive Plan or subject
to any award granted under the Incentive Plan, through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise, the Incentive Plan and
awards outstanding thereunder will be appropriately adjusted as to the class and
the maximum number of shares subject to such plan and the class, number of
shares and price per share of stock subject to such outstanding awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The Incentive Plan provides that, in the event of our dissolution or
liquidation, specified type of merger or other corporate reorganization, to the
extent permitted by law, any surviving corporation will be required to either
assume awards outstanding under the Incentive Plan or substitute similar awards
for those outstanding under the Incentive plan, or such outstanding awards will
continue in full force and effect. In the event that any surviving corporation
declines to assume or continue awards outstanding under the Incentive Plan, or
to substitute similar awards, then, with respect to awards held by persons then
performing services as employees, directors, or consultants, the time during
which such awards may be exercised will be accelerated and the awards terminated
if not exercised during such time. The acceleration of an award in the event of
an acquisition or similar corporate event may be viewed as an anti-takeover
provision, which may have the effect of discouraging a proposal to acquire or
otherwise obtain control of us.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Incentive Plan without shareholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Incentive Plan will terminate on April 12, 2009.
The Board also may amend the Incentive Plan at any time or from time to
time. However, no amendment will be effective unless approved by our
shareholders within twelve months before or after its adoption by the Board if
the amendment would: (1) modify the requirements as to eligibility for
participation (to the extent such modification requires shareholder approval in
order for the Incentive Plan to satisfy Section 422 of the Code, if applicable,
or Rule 16b-3 of the Securities Exchange Act of 1934, as amended); (2) increase
the number of shares reserved for issuance upon exercise of options; or
(3) change any other provision of the Plan in any other way if such modification
requires shareholder approval in order to comply with Rule 16b-3 or satisfy the
requirements of Section 422 of the Code. The Board may submit any other
amendment to the Incentive Plan for shareholder approval, including, but not
limited to, amendments intended to satisfy the requirements of Section 162(m) of
the Code regarding the exclusion of performance-based compensation from the
limitation on the deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the Incentive Plan, an incentive stock option may not be transferred
by the optionee other than by will or by the laws of descent and distribution
and, during the lifetime of an optionee, an option may be exercised only by the
optionee. A nonstatutory stock option or an independent stock appreciation right
may not be transferred except by will or by the laws of descent and distribution
or pursuant to a "qualified domestic relations order." In any case, an optionee
may designate in writing a third party who may exercise the option in the event
of the optionee's death. No rights under a stock bonus or restricted stock
purchase agreement are transferable except where required by law or expressly
authorized by the terms of the applicable stock bonus or restricted stock
purchase agreement. A tandem stock appreciation right or concurrent stock
appreciation right may be transferred only by the methods applicable to the
underlying
11
<PAGE>
option. In addition, any shares subject to repurchase by us under an early
exercise stock purchase agreement may be subject to restrictions on transfer
which the Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the Incentive Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or to
us by reason of the grant or exercise of an incentive stock option. However, the
exercise of an incentive stock option may be subject the optionee to an
alternative minimum tax liability.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be a long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods,
a "disqualifying disposition," at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on the
length of time the stock was held. Capital gains currently are generally subject
to lower tax rates than ordinary income. The maximum long-term capital gains
rate for federal income tax purposes is currently 20% while the maximum ordinary
income rate is effectively 39.6% at the present time. Slightly different rules
may apply to optionees who acquire stock subject to certain repurchase options
or who are subject to Section 16(b) of the Securities Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, we generally will be entitled, subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code and
the satisfaction of a tax reporting obligation, to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
Incentive Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or to us by reason of the
grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, we are required to
withhold from regular wages or supplemental wage payments an amount based on the
ordinary income recognized. Subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code and the satisfaction of a reporting
obligation, we generally will be entitled to a business expense deduction equal
to the taxable ordinary income realized by the optionee. Upon disposition of the
stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the option.
Such gain or loss will be long-term or short-term depending on the length of
time the stock was held. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Securities Exchange Act.
RESTRICTED STOCK AND STOCK BONUSES. Restricted stock and stock bonuses
granted under the Incentive Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award, the
recipient normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value over the purchase price, if any. However, to the
extent the stock is subject to certain types of vesting restrictions, the
taxable event will be delayed until the vesting restrictions lapse unless the
recipient elects to be taxed on receipt of
12
<PAGE>
the stock. Generally, with respect to employees, we are required to withhold
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section 162(m)
of the Code and the satisfaction of a tax reporting obligation, we generally
will be entitled to a business expense deduction equal to the taxable ordinary
income realized by the recipient. Upon disposition of the stock, the recipient
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock, if any, plus any
amount recognized as ordinary income upon acquisition (or vesting) of the stock.
Such gain or loss will be long-term or short-term depending on the length of
time the stock was held from the date ordinary income is measured. Slightly
different rules may apply to persons who are subject to Section 16(b) of the
Exchange Act.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation right
the fair market value of the shares (or cash in lieu of shares) received must be
treated as compensation taxable as ordinary income to the recipient in the year
of such exercise. Generally, with respect to employees, we are required to
withhold from the payment made on exercise of the stock appreciation right or
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section 162(m)
of the Code and the satisfaction of a reporting obligation, we will be entitled
to a business expense deduction equal to the taxable ordinary income recognized
by the recipient.
POTENTIAL LIMITATION ON OUR DEDUCTIONS. Section 162(m) of the Internal
Revenue Code denies a deduction to any publicly held corporation for
compensation paid to a covered employee in a taxable year to the extent that
non-performance-based compensation paid to such a covered employee exceeds
$1 million. It is possible that compensation attributable to awards under the
Incentive Plan, when combined with all other types of compensation received by a
covered employee from us, may cause this limitation to be exceeded in any
particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m) of the Code,
compensation attributable to stock options and stock appreciation rights will
qualify as performance-based compensation, provided that: (1) the stock award
plan contains a per-employee limitation on the number of shares for which stock
options and stock appreciation rights may be granted during a specified period;
(2) the per-employee limitation is approved by the shareholders; (3) the award
is granted by a compensation committee comprised solely of "outside directors;"
and (4) the exercise price of the award is no less than the fair market value of
the stock on the date of grant. Restricted stock and stock bonuses qualify as
performance-based compensation under these Treasury regulations only if:
(1) the award is granted by a compensation committee comprised solely of
"outside directors;" (2) the award is granted, or exercisable, only upon the
achievement of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain; (3) the
compensation committee certifies in writing prior to the granting, or
exercisability, of the award that the performance goal has been satisfied; and
(4) prior to the granting, or exercisability, of the award, shareholders have
approved the material terms of the award, including the class of employees
eligible for such award, the business criteria on which the performance goal is
based, and the maximum amount, or formula used to calculate the amount, payable
upon attainment of the performance goal.
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<PAGE>
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as our
independent accountants for the fiscal year ending December 31, 2000 and has
further directed that management submit the selection of independent accountants
for ratification by the shareholders at the Annual Meeting.
PricewaterhouseCoopers LLP has audited our financial statements since 1991.
Representatives of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP as
our independent accountants is not required by our bylaws or otherwise. However,
the Board is submitting the selection of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP. Even if the
selection is ratified, the Audit Committee and the Board in their discretion may
direct the appointment of different independent accountants at any time during
the year if they determine that such a change would be in our best interests and
the best interests of our 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 PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
14
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of our Common Stock as of March 31, 2000, by:
- each of the executive officers listed in the "Summary Compensation Table;"
- each director; and
- all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Beneficial ownership also includes shares of
Common Stock subject to options that are currently exercisable or exercisable
within 60 days of March 31, 2000. These shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each other
person. Percentage of ownership is based on 29,590,167 shares of Common Stock
outstanding on March 31, 2000. Unless otherwise indicated, the address of each
of the individuals named below is: c/o Silicon Storage Technology, 1171 Sonora
Court, Sunnyvale, CA 94086.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------
SHARES ISSUABLE PURSUANT TO NUMBER OF SHARES
OPTIONS EXERCISABLE WITHIN (INCLUDING NUMBER SHOWN
NAME 60 DAYS OF MARCH 31, 2000 IN FIRST COLUMN) PERCENTAGE OF TOTAL
- ---- --------------------------- ----------------------- -------------------
<S> <C> <C> <C>
Bing Yeh (1).................... 1,041 3,661,041 12.4%
Michael Briner (2).............. 94,000 162,027 *
Yaw Wen Hu (3).................. 193,378 349,686 1.2%
Derek Best...................... 5,833 28,333 *
Isao Nojima..................... 189,226 258,690 *
Tsuyoshi Taira.................. 42,615 42,615 *
Yasushi Chikagami............... 1,592 42,615 *
Ronald Chwang................... 11,178 31,813 *
All executive officers and
directors as a group
(10 persons).................. 548,863 4,689,463 15.6%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
our Common Stock.
(1) Includes (1) 1,150,000 shares held by the Yeh Family Trust U/D/T dated
August 14, 1995, of which Mr. Yeh and his wife are trustees and
(2) 2,480,000 shares held by the Yeh 1995 Children's Trust U/T/A dated
July 31, 1995 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. Also includes 30,000 shares purchased under an IRA account in the
name of Bing Yeh.
(2) Includes 8,000 shares held by Tammy Briner, custodian of Jeffrey Daniel
Briner (UCAUTMA).
(3) Includes 5,000 shares held by each of Mr. Hu's two minor children.
15
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of our Common Stock and other
equity securities. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended December 31, 1999, all Section 16(a) filing requirements
applicable to our officers, directors and greater than ten percent beneficial
owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Our directors do not currently receive any cash compensation from us for
their service as members of our Board of Directors, although they are reimbursed
for certain travel-related expenses in connection with attendance at Board and
committee meetings in accordance with our policy.
Each of our non-employee directors receives stock option grants under the
1995 Non-Employee Directors' Stock Option Plan. Only non-employee directors are
eligible to receive options under the Directors' Plan. Options granted under the
Directors' Plan are intended by us not to qualify as incentive stock options
under the Internal Revenue Code of 1986, as amended.
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
our initial public offering was granted on such date an option to purchase
24,000 shares of our Common Stock. In addition, each non-employee director
subsequently elected to the Board was automatically granted an option to
purchase 24,000 shares of our Common Stock, until the Directors' Plan was
amended in April 1999, at which time the amount of the initial grant upon
election to the Board of Directors was changed to an option to purchase 15,000
shares of our Common Stock. Each year, non-employee directors who have served as
directors for the prior year are granted an option to purchase 6,000 shares of
our Common Stock. 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 prior to April 1999 vest ratably
over four years from the date of grant. Options granted after April 1999 are
fully vested and exercisable upon the date of grant. The term of options granted
under the Directors' Plan is ten years. In the event of our merger with or into
another corporation or a consolidation, acquisition of assets or other
change-in-control transaction, the vesting of options issued prior to
April 1999 will accelerate and the option will terminate if not exercised prior
to the consummation of the transaction. At December 31, 1999, options, net of
canceled or expired options, covering an aggregate of 133,000 shares had been
granted under the Directors' Plan and 67,000 shares of our Common Stock remained
available for grant under the Directors' Plan.
During 1999, we granted options under the Directors' Plan covering 6,000
shares to each of Messrs. Taira, Chikagami, and Chwang at an exercise price of
$10.69 per share based on the closing sales price reported in the Nasdaq
National Market on the date of grant. As of December 31, 1999, 16,000 options
had been exercised under the Directors' Plan at a weighted average exercise
price of $3.04 per share, and 90,000 options were exercisable at a
weighted-average exercise price of $9.17 per share.
16
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended December 31, 1999,
December 31, 1998 and December 31, 1997, compensation awarded or paid to, or
earned by our Chief Executive Officer and our four other most highly compensated
executive officers at December 31, 1999. Amounts under the column "All Other
Compensation" include compensation for travel time and amounts paid by us on
behalf of the executive officers for supplemental life insurance.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ---------------------
------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS COMPENSATION
- --------------------------- -------- -------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Bing Yeh............................... 1999 $232,199 $101 30,000 $ 86
President and Chief Executive Officer 1998 $221,905 -- -- $ 600
1997 $207,121 -- -- $1,480
Michael Briner......................... 1999 $201,774 $435 10,000 $ 86
Vice President, Products 1998 $187,739 -- -- --
1997 $ 26,939 -- -- --
Yaw Wen Hu............................. 1999 $177,760 $101 32,802 $ 86
Senior Vice President, Operations and 1998 $149,297 -- 15,262 --
Process Development 1997 $137,280 -- 25,640(1) $ 280
Derek Best............................. 1999 $170,154 $101 22,328 $ 86
Vice President, Sales and Marketing 1998 $162,097 -- 26,483 $2,960
1997 $ 90,417 -- -- --
Isao Nojima............................ 1999 $155,685 $976 27,224 $ 86
Vice President, Advanced Development 1998 $148,601 -- 9,768 $ 260
1997 $141,353 -- 24,420(1) --
</TABLE>
- ------------------------
(1) Stock option grant, net of impact of repriced stock options.
17
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the fiscal year ended December 31, 1999,
information regarding options granted to, exercised by, and held at year end by
the executive officers listed in the "Summary Compensation Table" above.
1999 STOCK OPTION GRANTS
The exercise price of each option was equal to the fair market value of our
Common Stock on the date of grant. Mr Yeh's option was equal to 110% of the fair
market value of our Common Stock on the date of grant. The exercise price may be
paid in cash, in shares of our Common Stock valued at fair value on the exercise
date or through a cashless exercise procedure involving a same-day sale of the
purchased shares.
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange Commission
and does not represent our prediction of our stock price performance. The
potential realizable values at 5% and 10% appreciation are calculated by:
- multiplying the number of shares of Common Stock subject to a given option
by the exercise price per share;
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options; and
- subtracting from that result the aggregate option exercise price.
The shares listed in the following table under "Number of Securities
Underlying Option Granted" are subject to vesting. Certain of the stock options
listed in the table vest over a four-year period, 25% after one year and 2.083%
per month thereafter. Each of the options has a ten-year term, subject to
earlier termination if the optionee's service with us ceases. Under certain
circumstances following a change of control, the vesting of such option grants
may accelerate and become immediately exercisable. See Proposal 3 for a
description of our 1995 Equity Incentive Plan and for a description of the
material terms of this plan. Please also see the Report of the Compensation
Committee of the Board of Directors on Executive Compensation below for further
discussion of the material terms of certain of these options.
Percentages shown under "Percent of Total Options Granted in 1999" are based
on 1,000,831 options granted to our employees and directors during 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF APPRECIATION FOR
UNDERLYING TOTAL OPTIONS OPTION TERM
OPTION GRANTED IN EXERCISE EXPIRATION ---------------------
NAME GRANTED 1999 PRICE DATE 5% 10%
- ---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bing Yeh......................... 30,000 3.00% $ 3.30 1/11/09 $62,261 $157,781
Michael Briner................... 10,000 1.00% $ 3.00 1/11/09 $18,867 $ 47,812
Yaw Wen Hu....................... 10,000 1.00% $ 3.00 1/11/09 $18,867 $ 47,812
12,802 1.28% $ 7.09 7/1/09 $57,082 $144,658
10,000 1.00% $13.25 9/24/09 $83,329 $211,171
Derek Best....................... 10,000 1.00% $ 3.00 1/11/09 $18,867 $ 47,812
12,328 1.23% $ 7.09 7/1/09 $54,969 $139,302
Isao Nojima...................... 7,500 0.75% $ 3.00 1/11/09 $14,150 $ 35,859
19,724 1.98% $ 7.09 7/1/09 $87,947 $222,874
</TABLE>
18
<PAGE>
Amounts shown under the column "Value Realized" are based on the closing
sales price of our Common Stock on the date of exercise as reported on the
Nasdaq National Market less the exercise price. Amounts shown under the column
"Value of Unexercised In-the-Money Options at December 31, 1999" are based on
the closing price of our Common Stock ($41.25) on December 31, 1999, as reported
on the Nasdaq National Market, without taking into account any taxes that may be
payable in connection with the transaction, multiplied by the number of shares
underlying the option, less the exercise price payable for these shares.
AGGREGATE OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bing Yeh............. -- -- 0 30,000 $ 0 $1,138,500
Michael Briner....... -- -- 70,000 108,000 $2,668,750 $4,118,750
Yaw Wen Hu........... 40,000 $ 174,000 216,845 52,159 $8,848,093 $1,842,039
Derek Best........... 15,000 $ 192,750 26,042 67,769 $ 993,847 $2,542,460
Isao Nojima.......... 90,000 $2,655,125 186,495 39,917 $7,600,847 $1,447,233
</TABLE>
EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK PURCHASE PLAN
In October, 1995, we adopted the 1995 Employee Stock Purchase Plan covering
an aggregate of 850,000 shares of our Common Stock. The Purchase Plan was
amended in April 1999 to increase the number of shares reserved for issuance
under the Purchase Plan to 1,200,000. As of March 31, 2000, 590,220 shares
remained available for issuance under the Purchase Plan. 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 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.
Employees are eligible to participate if they are employed by us, or one of
our affiliates designated by the Board, for at least 20 hours per week and are
employed by us or one of our affiliates 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 our Common Stock on specified
dates determined by the Board. The price of our 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 or on 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.
In the event of a merger, reorganization, or consolidation or liquidation in
which we are not the surviving corporation, the Board has discretion to provide
that each right to purchase Common Stock will be assumed or an equivalent right
substituted by the successor corporation. Alternatively, the Board may shorten
the offering period and provide for all sums collected by payroll deductions to
be applied to the purchase of Common 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.
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REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION (1)
Our executive compensation program is administered by the Compensation
Committee of the Board of Directors which is composed of Messrs. Taira,
Chikagami, and Chwang, each one of our non-employee directors and Bing Yeh, our
President and Chief Executive Officer; and, the Stock Option Committee which
consists of Messrs. Taira, Chikagami, and Chwang.
Our executive compensation program is designed to retain and reward
executives who are responsible for leading us in achieving our business
objectives. All decisions by the Compensation Committee relating to the salary
compensation of our executive officers, with the exception of our Chief
Executive Officer, are reviewed by the full Board; and, all stock option awards
by the Stock Option Committee to our executive officers 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, Messrs. Taira,
Chikagami, and Chwang. This report is submitted by the Compensation Committee
and the Stock Option Committee and addresses our compensation policies for the
fiscal year ended December 31, 1999 as they affect Bing Yeh, in his capacity as
our President and Chief Executive Officer, and our other executive officers.
COMPENSATION PHILOSOPHY
The objectives of the executive compensation program are to (1) align
compensation with our business objectives and individual performance,
(2) motivate and reward high levels of performance, (3) recognize and reward the
achievement of team and individual goals, and (4) enable us to attract, retain
and reward executive officers who contribute to our long-term success.
Our executive compensation philosophy is to tie a significant portion of
executive compensation to our performance and attainment of team and individual
goals and objectives by our executive officers and is based on the following:
-- The Committee regularly compares our executive compensation practices
with those of other companies in the semiconductor industry and other
technology-related industries and sets its compensation guidelines based
on this review. Our base annual salaries for our executives are generally
in the low to mid-range of those paid to executives of companies with
comparable revenue targets in high technology industries. The
Compensation Committee and the Stock Option Committee seek, however, to
provide our executives with opportunities for higher compensation through
profit sharing and stock options which, when we are profitable, places
total compensation at the mid-range of comparable companies.
-- The Committee believes that an executive compensation program that ties
profit sharing awards to performance and achievement of our stated goals
serves both as an influential motivator to our executives and as an
effective instrument for aligning their interests with those of our
shareholders.
-- The Committee also believes that a substantial portion of the
compensation of our executives should be linked to the success of our
stock in the marketplace. The linkage is achieved through our stock
option program which also serves to more fully align the interests of
management with those of our shareholders.
- ------------------------
(1) Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the following report and Performance
Graph shall not be incorporated by reference into any such filings.
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IMPLEMENTATION OF COMPENSATION PROGRAM
Annual compensation for our 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 our executives.
Currently, the base annual salaries of our executives are at levels which the
Compensation Committee believes are generally in the low to mid-range of those
of executives of companies with which we compare ourselves. 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 (1) corporate
partnering, patent strategy and technology collaborations, (2) research and
development, (3) market development and market penetration, (4) financial
matters, including attracting capital and financial planning, and (5) human
resources.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER IN FISCAL 1999
As discussed below, Mr. Yeh is eligible to participate in the same executive
compensation plans available to our other executive officers. The non-employee
members of the Compensation Committee set Mr. Yeh's total annual compensation,
including compensation derived from our profit sharing program, at a level it
believes is appropriate in comparison with other Chief Executive Officers at
mid-sized companies in technology-related industries with comparable revenue
targets.
Mr. Yeh earned $232,199 in 1999 as base salary. Effective January 1, 2000,
his salary was increased to $330,000 annually. In determining Mr. Yeh's salary,
the non-employee members of the Compensation Committee reviewed various factors,
including Mr. Yeh's contributions with respect to our return to profitability,
the introduction of new products, the advancement of market development and
diversification of market penetration, the development of corporate partnership
strategy, and the refinement of our overall strategic direction. No profit
sharing was earned by Mr. Yeh during 1999 due to the operating loss for that
year, however a $101 bonus was paid to Mr. Yeh in November 1999 following our
first profitable quarter since 1996. The same bonus amount was also paid to
every one of our employees at that time. Profit sharing is calculated and based
on a pre-determined formula that is applied to our employees as described below.
PROFIT SHARING
During 1999, profit sharing was calculated for all employees, including
executive officers but excluding employees in the sales and marketing
department, using two pre-determined profit sharing-based formulas. The first
formula allocates 10% of our operating profit to a profit sharing pool provided
we have met our 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 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 us for less than six
months. Level of performance is a numerical value assigned in performance
reviews independently of the profit sharing program. We currently calculate
profit sharing twice each year based on our financial performance in the periods
January 1 through June 30 and July 1 through December 31. During 2000, marketing
department employees will be included in the profit sharing calculation. A
separate bonus plan is used for employees in the sales department which is based
on performance to pre-determined sales quotas and the achievement of product
design wins. The Vice
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President of Sales and Marketing participates in our overall profit sharing plan
but not in the sales bonus plan.
As we did not achieve our profitability goals for the period January 1, 1999
through June 30, 1999 and for the period July 1, 1999 through December 31, 1999,
none of our executive officers, or any other employee, were eligible for or
received profit sharing in fiscal 1999.
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 our employees with those of our 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 and his or her
importance, past and future anticipated contributions to our business, and how
many years of future service for which the employee has non-vested options. It
has been our 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. However, the Board has, in
the past, granted options with a vesting period as short as one year.
The Stock Option Committee administers the Incentive Plan for our executive
officers. The Board has delegated to the Non-Officers Stock Option Committee the
administration of the Incentive Plan for all of our other employees for option
grants of not more than 12,000 shares per option grant. In January 1997, a stock
replenishment program 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 non-vested
options for four years of future service. Such options generally vest ratably
over a twelve-month period starting three to four years after the date of grant.
We intend to continue to grant options to our executive officers on a routine
basis as part of this stock replenishment program.
In addition, compensation at the executive level includes short-term
incentives offered through stock option grants that may vest from one year to
five years from the date of grant and may have performance targets attached
which may accelerate the vesting of these options. Such stock option grants are
designed to provide short-term incentives to accomplish such strategic
initiatives as the completion of product development, the successful
introduction of new products into the marketplace, and the reduction of
manufacturing and other costs needed to achieve our goals. The size of
individual stock option grants is intended to reflect the employee's position
and anticipated contribution to our business. It has been our practice to fix
the exercise price of stock option grants at 100% of the fair market value per
share on the date of grant. As required under our Incentive Plan, the exercise
price of stock option grants for officers who own more than 5% of the shares of
our outstanding stock is set at 110% of the fair market value on the date of
grant.
In January, 1999, Mr. Yeh was awarded a short-term incentive stock option
grant for 30,000 shares of Common Stock with an exercise price of $3.30, which
was 110% of the fair market value of the stock on the date of grant. The grant
is exercisable as follows: The first 10,000 shares shall be exercisable on
January 4, 2000. The remaining 20,000 shares shall be exercisable at the rate of
1/48th monthly commencing January 4, 2000; however, the following acceleration
shall apply: if we return to profitability by the end of 1999, 10,000 additional
shares will be fully exercisable on January 4, 2000; if our earnings per share
reaches $0.10 per share or higher for the year 1999, 10,000 additional shares
will be fully exercisable on January 4, 2000. We returned to profitability on a
quarterly basis during 1999 beginning with the third quarter; however, the
earnings per share target was not met. Therefore, 20,000 of Mr. Yeh's options
were exercisable on January 4, 2000 and the balance will vest over four more
years as described above.
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<PAGE>
In January 1999, our executive officers were awarded a short-term incentive
stock option grant for shares of Common Stock with an exercise price of $3.00,
which was 100% of the fair market value of the stock on the date of grant. The
options vested on the one year anniversary of the date of grant.
LIMITATIONS ON DEDUCTION OF COMPENSATION PAID TO CERTAIN NAMED EXECUTIVE
OFFICERS
Section 162(m) of the Code limits us 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 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 our 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
Ronald Chwang
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, Yasushi Chikagami, and Ronald
Chwang. Of these directors, Mr. Yeh is our President and Chief Executive
Officer.
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PERFORMANCE MEASUREMENT COMPARISON
The following chart shows the total shareholder return of an investment of
$100 in cash on November 21, 1995, for:
- our Common Stock,
- the Nasdaq Stock Market--U.S. Index, and
- the Hambrecht & Quist Semiconductor Index.
All values assume reinvestment of the full amount of all dividends and are
calculated as of December 31, 1997 and 1998 and 1999. We have never paid a cash
dividend.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SILICON STORAGE TECHNOLOGY, INC., THE NASDAQ STOCK MARKET
AND HAMBRECHT & QUIST SEMICONDUCTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARS
<TABLE>
<CAPTION>
SILICON STORAGE NASDAQ STOCK HAMBRECHT & QUIST
<S> <C> <C> <C>
TECHNOLOGY, INC. MARKET (U.S.) SEMICONDUCTORS
11/95 100 100 100
12/95 147 103 91
12/96 54 127 118
12/97 35 155 125
12/98 27 219 175
12/99 458 395 436
</TABLE>
This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not to be incorporated by reference in any of our filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934 whether made
before or after the date hereof and irrespective of any general incorporation of
language in any such filings.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 31, 1996, we acquired a 14% interest in a Japanese company for
approximately $939,000 paid in cash. In 1997, 1998 and 1999 this customer
accounted for 15.4% ($11.6 million), 14.7% ($10.2 million), and 8.1%
($10.0 million), respectfully, of our net revenues. This was the only customer
that accounted for more than 10% of our net revenues in 1997 and one of two
customers that accounted for more than 10% of our net revenues in both 1998 and
1999.
Mr. Chwang is the President of Acer Technology Ventures Management LLC, a
venture capital business unit of the Acer Group, a worldwide computer, component
and semiconductor manufacturer. Several related entities, including Acer
Corporation, are our customers. In 1997, 1998 and 1999, the combined Acer
entities accounted for 6.0% ($4.5 million), 7.3% ($5.1 million) and 6.3%
($7.9 million) of our net revenues, respectively.
Mr. Chikagami is a member of the Board of Directors of Ocean
Automation Ltd., which is one of our customers. During 1999, Ocean accounted for
0.4%, or $541,000 of our net revenues.
In January 1999, we loaned $75,000 to Derek Best, our Vice President, Sales
and Marketing. Under the terms of the promissory note, the loan will be repaid
over a three year period with interest-only payments made for the first
18 months of the loan, followed by interest and principal payments for the next
18 months and ending with a balloon payment of approximately $36,000. The note
is unsecured and bears an interest rate of 5.1%, the LIBOR rate in effect as of
the date that the note was signed.
We have entered into indemnity agreements with our executive officers and
directors which provide, among other things, that we will indemnify these
persons, under the circumstances and to the extent provided for therein, for
expenses, damages, judgments, fines and settlements he or she may be required to
pay in actions or proceedings which he or she is or may be made a party by
reason of his or her position as our director, officer or agent, and otherwise
to the full extent permitted under California law and our bylaws.
As a matter of policy, all transactions between us and any of our 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 us than could be obtained from unaffiliated third
parties and will be in connection with our bona fide business purposes.
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/ JEFFREY L. GARON
JEFFREY L. GARON
SECRETARY
May 11, 2000
A COPY OF OUR ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 IS AVAILABLE WITHOUT
CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, SILICON STORAGE
TECHNOLOGY, INC., 1171 SONORA COURT, SUNNYVALE, CALIFORNIA 94086.
25
<PAGE>
SILICON STORAGE TECHNOLOGY, INC.
1995 EQUITY INCENTIVE PLAN
ADOPTED ON OCTOBER 3, 1995
APPROVED BY THE STOCKHOLDERS NOVEMBER 1995
AMENDED BY THE BOARD OF DIRECTORS JUNE 1998
APPROVED BY THE STOCKHOLDERS JULY 1998
AMENDED BY THE BOARD OF DIRECTORS APRIL 1999
APPROVED BY THE STOCKHOLDERS JULY 1999
INTRODUCTION
This Silicon Storage Technology, Inc. 1995 Equity Incentive Plan is an
amendment and restatement of the Silicon Storage Technology, Inc. 1990 Stock
Option Plan as amended June 1998. Shares reserved for issuance under the 1990
Stock Option Plan shall hereafter be reserved for issuance, and issued, under
the terms of this 1995 Equity Incentive Plan, as amended and restated in the
form below.
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Consultants to the Company, and its Affiliates, may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, (iv) rights to purchase restricted stock, and (v)
stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "COMPANY" means Silicon Storage Technology, Inc., a California
corporation.
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(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "DISINTERESTED PERSON" means a Director: who either (i) was not during
the one year prior to service as an administrator of the Plan granted or awarded
equity securities pursuant to the Plan or any other plan of the Company or any
Affiliate entitling the participants therein to acquire equity securities of the
Company or any Affiliate except as permitted by Rule 16b-3(c)(2)(i); or (ii) is
otherwise considered to be a "disinterested person" in accordance with
Rule 16b-3(c)(2)(i), or any other applicable rules, regulations or
interpretations of the Securities and Exchange Commission.
(k) "EMPLOYEE" means any person employed by the Company or any Affiliate of
the Company. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common stock
of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange or a
national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common
stock shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last
market trading day prior to the day of determination, as reported in the
Wall Street Journal or such other source as the Board deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a share of common stock shall be the mean between the bid and asked
prices for the common stock on the last market trading day prior to the day
of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
2
<PAGE>
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(u) "PLAN" means this Silicon Storage Technology, Inc. 1995 Equity Incentive
Plan.
(v) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(w) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(x) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(y) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(z) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall
be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive
stock pursuant to a Stock Award; whether a person shall be permitted to
receive stock upon exercise of an Independent Stock Appreciation Right; and
the number of shares with respect to which a Stock Award shall be granted to
each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested
3
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Persons. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board (and references in this Plan to the Board shall
thereafter be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. Additionally, prior to the date of the
first registration of an equity security of the Company under Section 12 of the
Exchange Act, and notwithstanding anything to the contrary contained herein, the
Board may delegate administration of the Plan to any person or persons and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. Notwithstanding anything in this Section 3 to the contrary, at
any time the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply (i) prior to the date of the first registration of an
equity security of the Company under Section 12 of the Exchange Act, or (ii) if
the Board or the Committee expressly declares that such requirement shall not
apply. Any Disinterested Person shall otherwise comply with the requirements of
Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate eight million seven hundred fifty thousand
(8,750,000) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan. Shares subject
to Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees or Consultants.
(b) A Director may be eligible for benefits of the Plan only if such
Director is also an Employee at the time of the grant.
(c) A Director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of the Director as a
person to whom Stock Awards may be granted, or in the determination of the
number of shares which may be covered by Stock Awards granted to the
Director:(i) the Board has delegated its discretionary authority over the Plan
to a Committee which consists solely of Disinterested Persons; or (ii) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This
subsection 5(c) shall not apply (i) prior to the date of the first registration
of an equity security of the Company under Section 12 of the Exchange Act, or
(ii) if the Board or Committee expressly declares that it shall not apply.
(d) No person shall be eligible for the grant of an Option or an award to
purchase restricted stock if, at the time of grant, such person owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates unless the exercise price of such Option
is at least one hundred ten percent (110%) of the Fair Market Value of such
stock at the date of grant and the Option is not
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exercisable after the expiration of five (5) years from the date of grant, or in
the case of a restricted stock purchase award, the purchase price is at least
one hundred percent (100%) of the Fair Market Value of such stock at the date of
grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be determined by the Board. Notwithstanding
the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory
Stock Option) may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and any administrative interpretations or pronouncements thereunder
(a "QDRO"), and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person or any transferee pursuant to a QDRO.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem
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appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this
subsection 6(f), or (ii) the expiration of a period of three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant during which the exercise of the Option would not be in violation of
such registration requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
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(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the Board
or Committee to make or not to make grants of Options hereunder, the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(c)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; PROVIDED, HOWEVER, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 12(e) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement, but in no event shall the purchase price be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order satisfying
the requirements of Rule 16b-3 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
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(c) CONSIDERATION. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or the Committee, according to a deferred
payment or other arrangement with the person to whom the stock is sold; or
(iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights under the Plan to
Employees or Directors of or Consultants to, the Company or its Affiliates. To
exercise any outstanding Stock Appreciation Right, the holder must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Award Agreement evidencing such right. If a Stock Appreciation Right
is granted to an individual who is at the time subject to Section 16(b) of the
Exchange Act (a "Section 16(b) Insider"), the Stock Award Agreement of grant
shall incorporate all the terms and conditions at the time necessary to assure
that the subsequent exercise of such right shall qualify for the safe-harbor
exemption from short-swing profit liability provided by Rule 16b-3 promulgated
under the Exchange Act (or any successor rule or regulation). No limitation
shall exist on the aggregate amount of cash payments the Company may make under
the Plan in connection with the exercise of a Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation Rights
will be granted appurtenant to an Option, and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains. Tandem Stock
Appreciation Rights will require the holder to elect between the exercise of
the underlying Option for shares of stock and the surrender, in whole or in
part, of such Option for an appreciation distribution. The appreciation
distribution payable on the exercised Tandem Right shall be in cash (or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the Option surrender) in an amount up to the excess of
(A) the Fair Market Value (on the date of the Option surrender) of the
number of shares of stock covered by that portion of the surrendered Option
in which the Optionee is vested over (B) the aggregate exercise price
payable for such vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of
stock to which the Concurrent Right pertains. The appreciation distribution
payable on an exercised Concurrent Right shall be in cash (or, if so
provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Concurrent Right) in an amount
equal to such portion as shall be determined by the Board or the Committee
at the time of the grant
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of the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Concurrent Right) of the vested shares of stock purchased
under the underlying Option which have Concurrent Rights appurtenant to them
over (B) the aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will be
granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They
shall be denominated in share equivalents. The appreciation distribution
payable on the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Independent Right) of a number of shares of
Company stock equal to the number of share equivalents in which the holder
is vested under such Independent Right, and with respect to which the holder
is exercising the Independent Right on such date, over (B) the aggregate
Fair Market Value (on the date of the grant of the Independent Right) of
such number of shares of Company stock. The appreciation distribution
payable on the exercised Independent Right shall be in cash or, if so
provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and/or (ii) with the consent of the
affected holders of Options and/or Stock Appreciation Rights, the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than eighty-five percent (85%)
of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in
the case of an Incentive Stock Option) or, in the case of a 10% stockholder (as
described in subsection 5(c)), not less than one hundred ten percent (110%) of
the Fair Market Value) per share of stock on the new grant date. Notwithstanding
the foregoing, the Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth above if
such Option and/or Stock Appreciation Right is granted as part of a transaction
to which section 424(a) of the Code applies.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
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12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e), 7(d) or 8(b), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause the right of the Company's Board of Directors
and/or the Company's shareholders to remove any Director pursuant to the terms
of the Company's By-Laws and the provisions of the California Corporations Code,
or the right to terminate the relationship of any Consultant pursuant to the
terms of such Consultant's agreement with the Company or Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted, or
any person to whom a Stock Award is transferred pursuant to subsection 6(d),
7(b) or 8(b), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
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13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of substantially
all of the assets of the Company; (2) a merger or consolidation in which the
Company is not the surviving corporation; or (3) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then to the extent permitted by applicable law: (i) any surviving
corporation or an Affiliate of such surviving corporation shall assume any Stock
Awards outstanding under the Plan or shall substitute similar Stock Awards for
those outstanding under the Plan, or (ii) such Stock Awards shall continue in
full force and effect. In the event any surviving corporation and its Affiliates
refuse to assume or continue such Stock Awards, or to substitute similar options
for those outstanding under the Plan, then, with respect to Stock Awards held by
persons then performing services as Employees, Directors or Consultants, the
time during which such Stock Awards may be exercised shall be accelerated and
the Stock Awards terminated if not exercised prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards under the
Plan;
(ii) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval
in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of
Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
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(d) Rights and obligations under any Stock Award granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of any
one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on April 12, 2009, which shall be within
ten (10) years from the date the amended Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
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PROXY SILICON STORAGE TECHNOLOGY, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 2000
The undersigned hereby appoints Bing Yeh and Jeffrey L. Garon, 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 Friday, June 16, 2000 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.
(CONTINUED, AND TO BE AND SIGNED ON THE OTHER SIDE)
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS INDICATED
IN THIS EXAMPLE.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW
AND FOR PROPOSALS 2, 3 AND 4.
WITHHOLD
FOR FOR ALL
1. To elect directors to serve for the / / / /
ensuing year and until their
successors are elected.
NOMINEES: Bing Yeh
Yaw Wen Hu
Tsuyoshi Taira
Yasushi Chikagami
Ronald Chwang
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE(S)
NAME IN THE SPACE PROVIDED BELOW.
------------------------------------------------------------------------
FOR ABSTAIN AGAINST
2. To approve an amendment to our Articles of / / / / / /
Incorporation to increase the authorized
shares of Common Stock from 45,000,000 to
250,000,000 shares.
3. To approve our 1995 Equity Incentive Plan, / / / / / /
as amended, to increase the aggregate number
of shares of Common Stock authorized for
issuance under such plan by 1,000,000 to
8,750,000 shares.
4. To ratify the selection of PricewaterhouseCoopers / / / / / /
LLP as our independent accountants for the
fiscal year ending December 31, 2000.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature: Dated: , 2000
------------------------------------- ----------------
Signature, if jointly held Dated: , 2000
--------------------- ----------------
NOTE: Please sign exactly as your name appears hereon. If 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.
