<PAGE> 1
SCHEDULE 14(a) INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant \x\
Filed by a Party other than the Registrant \ \
Check the appropriate box:
\ \ Preliminary Proxy Statement
\x\ Definitive Proxy Statement
\ \ Definitive Additional Materials
\ \ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
TRIDENT MICROSYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
TRIDENT MICROSYSTEMS, INC.
189 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CA 94043
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
\x\ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
PAID UPON FILING OF PRELIMINARY PROXY STATEMENT.
\ \ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
\ \ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and
state how it was determined.
\ \ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
[LOGO]
October 28, 1996
Dear Stockholder:
This year's annual meeting of stockholders will be held on Thursday,
December 12, 1996 at 9:00 a.m. local time, at Trident Microsystems, Inc., 380
North Bernardo Avenue, Mountain View, California. You are cordially invited to
attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
which describe the formal business to be conducted at the meeting, follow this
letter.
After reading the Proxy Statement, please promptly mark, sign, and
return the enclosed proxy in the prepaid envelope to assure that your shares
will be represented. Your shares cannot be voted unless you date, sign, and
return the enclosed proxy or attend the annual meeting in person. Regardless of
the number of shares you own, your careful consideration of, and vote on, the
matters before our stockholders are important.
A copy of the Company's 1996 Annual Report is also enclosed.
The Board of Directors and Management look forward to seeing you at the
annual meeting.
Very truly yours,
/s/ Frank C. Lin
FRANK C. LIN
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE> 3
TRIDENT MICROSYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 1996
To The Stockholders:
Please take notice that the annual meeting of the stockholders of
Trident Microsystems, Inc. (the "Company"), will be held on December 12, 1996,
at 9:00 a.m. at Trident Microsystems, Inc., 380 North Bernardo Avenue, Mountain
View, California, for the following purposes:
1. To elect two Class I directors to hold offices for a
three-year term and until their successors are elected and
qualified.
2. To consider and vote upon a proposal to ratify the appointment
of Price Waterhouse LLP as the Company's independent public
accountants for the fiscal year ending June 30, 1997.
3. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on October 21, 1996 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at the principal office of Trident Microsystems, Inc.
By order of the Board of Directors
/s/ James T. Lindstrom
James T. Lindstrom
Vice President, Finance, Chief Financial Officer
and Secretary
Mountain View, California
October 28, 1996
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD
IN THE ACCOMPANYING POST-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN
PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SOLICITATION AND VOTING OF PROXIES.............................................................................. 1
INFORMATION ABOUT TRIDENT MICROSYSTEMS.......................................................................... 2
Stock Ownership of Certain Beneficial Owners and Management............................................ 2
Management............................................................................................. 4
EXECUTIVE COMPENSATION AND OTHER MATTERS........................................................................ 7
Summary Compensation Table............................................................................. 7
Option Grants In Last Fiscal Year...................................................................... 8
Option Exercises and Fiscal 1996 Year-End Value........................................................ 9
Aggregate Option Exercises And Fiscal Year-End Values.................................................. 9
Compensation of Directors.............................................................................. 9
Compensation Committee Interlocks and Insider Participation............................................ 10
Employment and Change of Control Arrangements.......................................................... 10
Certain Relationships and Related Transactions......................................................... 10
Section 16(a) Beneficial Ownership Reporting Compliance................................................ 10
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION....................................................................................... 11
Compensation Committee................................................................................. 11
Compensation Philosophy................................................................................ 11
Forms of Compensation.................................................................................. 12
COMPARISON OF STOCKHOLDER RETURN................................................................................ 14
Comparison of Cumulative Total Return From December 15, 1992 through
June 30, 1996.......................................................................................... 14
ELECTION OF DIRECTORS........................................................................................... 15
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS................................................... 15
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING.......................................................................................... 16
TRANSACTION OF OTHER BUSINESS................................................................................... 16
</TABLE>
i
<PAGE> 5
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TRIDENT MICROSYSTEMS, INC.
189 NORTH BERNARDO AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
The accompanying proxy is solicited by the Board of Directors of
Trident Microsystems, Inc., a Delaware corporation ("Trident" or the "Company")
for use at the Annual Meeting of Stockholders to be held December 12, 1996, or
any adjournment thereof, for the purposes set forth in the accompanying Notice
of Annual Meeting. The date of this Proxy Statement is October 28, 1996, the
approximate date on which this Proxy Statement and the accompanying form of
proxy were first sent or given to stockholders.
SOLICITATION AND VOTING OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to soliciting stockholders by mail through its regular employees, the
Company will request banks and brokers, and other custodians, nominees and
fiduciaries, to solicit their customers who have stock of the Company registered
in the names of such persons and will reimburse them for their reasonable,
out-of-pocket costs. The Company may use the services of its officers,
directors, and others to solicit proxies, personally or by telephone, without
additional compensation.
Only stockholders of record as of the close of business on October 21,
1996, will be entitled to vote at the meeting and any adjournment thereof. As of
that date, there were 12,627,974 shares of common stock of the Company, par
value $.001 per share ("Common Stock"), issued and outstanding. Stockholders may
vote in person or by proxy. Each holder of shares of Common Stock is entitled to
one (1) vote for each share of stock held on the proposals presented in this
Proxy Statement. The Company's By-Laws provide that a majority of all of the
shares of the stock entitled to vote, whether present in person or represented
by proxy, shall constitute a quorum for the transaction of business at the
meeting.
All valid proxies received prior to the meeting will be voted. All
shares represented by a proxy will be voted, and where a stockholder specifies
by means of the proxy a choice with respect to any matter to be acted upon, the
shares will be voted in accordance with the specification so made. If no choice
is indicated on the proxy, the shares will be voted in favor of the proposal. A
stockholder giving a proxy has the power to revoke his or her proxy, at any time
prior to the time it is voted, by delivering to the Secretary of the Company a
written instrument revoking the proxy or a duly executed proxy with a later
date, or by attending the meeting and voting in person.
An annual report for the fiscal year ended June 30, 1996 is enclosed
with this Proxy Statement.
1
<PAGE> 6
INFORMATION ABOUT TRIDENT MICROSYSTEMS, INC.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information, as of August 31,
1996, with respect to the beneficial ownership of the Company's Common Stock by
(i) all persons known by the Company to be the beneficial owners of more than 5%
of the outstanding Common Stock of the Company, (ii) each director and
director-nominee of the Company, (iii) the Chief Executive Officer and the four
other most highly compensated executive officers of the Company as of June 30,
1996, whose salary and incentive compensation for the fiscal year ended June 30,
1996 exceeded $100,000, and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
SHARES OWNED (1)
NAME AND ADDRESS OF NUMBER PERCENTAGE
BENEFICIAL OWNERS OF SHARES OF CLASS
----------------- -------- --------
<S> <C> <C>
Twentieth Century Companies, Inc.(2) 900,000 7.15%
4500 Main Street
P.O. Box 418210
Kansas City, MO 64141-9210
Attn: David H. Reinmiller
Glen M. Antle(3) ................... 32,000 *
Shyur-Jen Paul Chien (4) ........... 283,505 2.25%
Yasushi Chikagami(5) ............... 132,877 1.05%
Charles A. Dickinson(6) ............ 19,150 *
Frank C. Lin(7) .................... 1,353,897 10.75%
c/o Trident Microsystems, Inc.
189 North Bernardo Avenue
Mountain View, CA 94043
Leonard Y. Liu(8) .................. 15,712 *
Millard Phelps(9) .................. 2,756 *
Jung-Herng Chang(10) ............... 124,418 *
Peter Jen(11) ...................... 91,970 *
James T. Lindstrom(12) ............. 139,000 1.10%
Richard Silverman(13) .............. 55,000 *
Executive officers and directors
as a group (11 persons)(14) ........ 2,250,105 17.86%
</TABLE>
- ------------------------------------
* Less than 1%
(1) Except as otherwise noted, the persons named in the table have the sole
voting and investment power with respect to all shares shown as
beneficially owned by them, subject to the information contained in the
footnotes to this table.
2
<PAGE> 7
(2) Based on a Schedule 13G filed with the Securities and Exchange
Commission on February 12, 1996. Twentieth Century Companies, Inc.
("TCC") wholly owns Investors Research Corporation ("IRC"). IRC is
deemed to be the beneficial owner of 900,000 shares of the outstanding
common stock of the Company as a result of its status as an investment
advisor to six investment companies registered under Section 8 of the
Investment Company Act and to several institutional investors. One such
investment company, Twentieth Century Investors, Inc. ("TCI") owns
900,000 shares of the outstanding common stock of the Company. As a
result of its control of IRC, TCC is deemed to beneficially own and
have sole power to vote and dispose of all such shares of Trident
common stock owned by IRC. In addition, James E. Stowers, Jr. controls
TCC by virtue of his beneficial ownership of a majority of the voting
stock of TCC. As a consequence of such control of TCC, Mr. Stowers is
deemed to beneficially own and have sole power to vote and dispose of
all of the shares deemed to be beneficially owned by IRC. Mr. Stowers,
TCC and IRS all disclaim beneficial ownership of all 900,000 shares of
the Company.
(3) Includes 20,000 shares subject to options exercisable by Mr. Antle
within sixty days of August 31, 1996.
(4) Includes 10,000 shares subject to options exercisable by Mr. Chien
within sixty days of August 31, 1996.
(5) Includes 5,000 shares held by a joint tenant account for wife, son and
daughter. Also includes 7,877 shares subject to options exercisable by
Mr. Chikagami within sixty days of August 31, 1996.
(6) Includes 18,750 shares subject to options exercisable by Mr. Dickinson
within sixty days of August 31, 1996.
(7) Includes 85,000 shares subject to options exercisable by Mr. Lin within
sixty days of August 31, 1996. Also includes 14,978 shares held by Mr.
Lin's eldest son and 29,956 shares held by custodian for the benefit of
Mr. Lin's two other minor children.
(8) Includes 5,712 shares subject to options exercisable by Mr. Liu within
sixty days of August 31, 1996.
(9) Includes 1,301 shares subject to options exercisable by Mr. Phelps
within sixty days of August 31, 1996.
(10) Includes 87,500 shares subject to options exercisable by Mr. Chang
within sixty days of August 31, 1996.
(11) Includes 55,000 shares subject to options exercisable by Mr. Jen within
sixty days of August 31, 1996.
(12) Includes 55,000 shares subject to options exercisable by Mr. Lindstrom
within sixty days of August 31, 1996.
(13) Includes 25,000 shares subject to options exercisable by Mr. Silverman
within sixty days of August 31, 1996.
(14) Includes 371,140 shares subject to options within sixty days of August
31, 1996.
3
<PAGE> 8
MANAGEMENT
Directors. This section sets forth the ages and backgrounds of the
Company's current Directors, including the Class I nominees to be elected at
this meeting.
<TABLE>
<CAPTION>
POSITIONS DIRECTOR
NAME AGE WITH THE COMPANY SINCE
- ---- --- ---------------- --------
<S> <C> <C> <C>
Class I Directors nominated for
election at the 1996 Annual Meeting
of Stockholders:
Charles A. Dickinson 72 Director 1993
Yasushi Chikagami 57 Director 1994
Class II Directors whose terms
expire at the 1997 Annual Meeting
of Stockholders:
Shyur-Jen Paul Chien 45 Director 1989
Leonard Y. Liu 55 Director 1994
Millard Phelps 68 Director 1995
Class III Directors whose terms
expire at the 1998 Annual Meeting
of Stockholders:
Frank C. Lin 51 President, Chief Executive Officer 1987
and Chairman of the Board of Directors
Glen M. Antle 58 Director 1992
</TABLE>
Mr. Dickinson has served as a Director of the Company since June 1993.
From March 1994 until September 1996, Mr. Dickinson served as the Chairman of
the Board of Directors of Solectron Corporation, an electronics manufacturing
company, and from November 1993 to February 1, 1996 as its President, Europe.
Mr. Dickinson is currently a member of the Board of Directors of Solectron
Corporation. From March 1989 to November 1993, Mr. Dickinson was self employed
as a business consultant. Mr. Dickinson is also a Director of Vermont
Microsystems, Inc., a computer graphics company.
Mr. Chikagami has served as a Director of the Company since April 1994.
From 1974 to January 1996, Mr. Chikagami has served as Chairman of the EI-EN
Group, a group of private companies located in Asia engaged in the electronics
components and computer peripherals business. Since January 1996, Mr. Chikagami
has served as Chairman of KEIAN Corporation, a computer and communications
component company, operating in Japan. Mr. Chikagami has also served as Vice
Chairman of Eastern Computer Group Co. in China since 1988. He was also a
founder of GVC Corporation, a publicly held Taiwanese company engaged in
activities including the manufacture of electronics components and computer
peripherals. Mr. Chikagami is also a director of Silicon Storage Technology,
Inc.
Mr. Chien has served as a Director of the Company since December 1989.
Since January 1995, he has served as the Vice President of Sales and Marketing
of Vanguard International Semiconductor Corp., an integrated circuit
manufacturing company. From January 1994 to December 1994, he served as Senior
Director, Business Development of Taiwan Semiconductor Manufacturing Company,
Ltd. ("TSMC"), an integrated circuit manufacturing company that provides chip
fabrication services to the
4
<PAGE> 9
Company. From July 1991 to January 1994 Mr. Chien served as Senior Director of
Corporate Marketing/Sales Service of TSMC. From May 1988 to July 1991, Mr. Chien
was a Director of Engineering at TSMC's wholly-owned subsidiary, TSMC U.S.A.
Dr. Liu has served as a Director of the Company since October 1994.
Since June 1995, he has served as President, Chief Executive Officer and
Chairman of the Board of Directors of Walker Interactive Systems, a high-end
financial software company. From January 1993 to March 1995, he served as Chief
Operating Officer and a Director of Cadence Design Systems, Inc., an integrated
circuit design software company. From April 1989 through May 1992, he served as
President of Acer Group Worldwide and as Chairman of the Board of Directors and
Chief Executive Officer of Acer America Corporation, a computer manufacturing
company. Dr. Liu was appointed to the Board of Directors of the Company by the
remaining Directors on the Board in October 1994 to fill an existing vacancy.
Mr. Phelps has served as a Director of the Company since September
1995. Since September 1984, he has served as a senior technology analyst and
since May 1994 also as an advisory director of Hambrecht & Quist, an investment
banking firm. Mr. Phelps serves on Trident's Board in an individual capacity and
not as a representative of Hambrecht & Quist. Mr. Phelps is also a director of
DSP Group, Inc., a semiconductor engineering services company.
Mr. Lin founded the Company and has served as President, Chief
Executive Officer and Chairman of the Board of Directors of the Company since
July 1987. From June 1984 to July 1987, he was Vice President of Engineering at
Genoa Systems, Inc., a graphics chipset design company that he co-founded. Mr.
Lin is also a director of United Integrated Circuits Corporation, a Taiwanese
company jointly formed by Trident, UMC and a number of other fabless
semiconductor companies to build and manage a semiconductor manufacturing
facility located in Taiwan, Republic of China.
Mr. Antle has served as a Director of the Company since July 1992. From
February 1991 to June 1993, he served as Chairman of the Board of Directors of
PiE Design Systems, an electronic design automation company, and from August
1992 to June 1993 as its Chief Executive Officer. In June 1993, PiE merged into
Quickturn Design Systems, Inc., also an electronic design automation company,
and Mr. Antle has served as Chairman of the Board of Directors of Quickturn
since that date. From June 1989 to February 1991 Mr. Antle was retired. Mr.
Antle was a co-founder of ECAD, Inc., now Cadence Design Systems, Inc., and
served as its Co-Chairman of the Board of Directors from May 1988 to June 1989
and as Chairman of the Board of Directors and Chief Executive Officer from
August 1982 to May 1988. Mr. Antle is also a director of Compass Design
Automation, a company providing EDA tools and libraries.
Meetings of the Board of Directors. During the fiscal year ended June
30, 1996, the Board of Directors held four (4) meetings. Except for Shyur-Jen
Paul Chien, all directors attended at least 75% of the aggregate of the number
of meetings of the Board of Directors and of the committees of the Board of
Directors on which such director served during fiscal 1996.
The Company does not have a standing Nominating Committee, but does
have an Audit Committee and a Compensation Committee.
The Audit Committee's function is to review, with the Company's
independent public accountants, management and the Board of Directors, the
Company's financial reporting processes and internal financial controls. The
Audit Committee reviews the results of the examination of the Company's
financial statements by the independent public accountants and the independent
public accountants' opinion. The Audit Committee also approves all professional
services performed by the independent public accountants, recommends the
retention of the independent public accountants to the Board of Directors,
subject to ratification by the stockholders, and periodically reviews the
Company's accounting policies and internal accounting and financial controls.
During fiscal 1996, the Audit Committee was composed of Glen M. Antle and Kurt
R. Jaggers until October 1995, when
5
<PAGE> 10
Millard Phelps replaced Mr. Jaggers. The Audit Committee held four (4) meetings
during the fiscal year ended June 30, 1996.
The Compensation Committee's primary function is to review and
recommend salary levels of, to approve bonus plans for, and approve stock option
grants to executive officers, and to set the compensation of the Chief Executive
Officer. During fiscal 1996, the Compensation Committee was composed of
Shyur-Jen Paul Chien and Charles A. Dickinson, and, from August 1995 to April
1996, also included Leonard Y. Liu. The Compensation Committee held three (3)
meetings during the fiscal year ended June 30, 1996.
6
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation
of the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company as of June 30, 1996 during the
fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994. Amounts under
the caption "Bonus" are amounts earned for performance during the fiscal year
including amounts paid after the end of the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term ALL OTHER
Annual Compensation Compensation COMPENSATION
------------------ ------------------ ------------
Awards
NAME AND PRINCIPAL Options
POSITION Year Salary Bonus (Shares)
------------------ ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Frank C. Lin 1996 $315,791 $ 150,318 50,000 $ -0-
President and Chief 1995 $335,882 $ 406,728 50,000 $ -0-
Executive Officer 1994 $233,464 $ 88,000 200,000(1) $ -0-
James T. Lindstrom 1996 $178,783 $ 34,458 20,000 $ -0-
Vice President, Finance, 1995 $154,455 $ 97,253 25,000 $ -0-
Chief Financial Officer 1994 $146,745 $ 30,000 40,000(2) $ -0-
and Secretary
Peter Jen 1996 $162,783 $ 87,300 30,000 $ -0-
Vice President, Worldwide 1995 $133,974 $ 41,250 45,000 $ 33,983
Sales and Asia Operations 1994 $117,995 $ 5,000 60,000(3) $ 56,250
Jung-Herng Chang 1996 $172,103 $ 55,284 20,000 $ -0-
Vice President,Engineering 1995 $149,155 $ 83,474 40,000 $ -0-
1994 $130,309 $ 26,000 10,000 $ -0-
Richard Silverman 1996 $156,784 $ 45,000 20,000 $ -0-
Vice President, Marketing 1995 $128,900 $ 40,000 20,000 $ -0-
1994 $103,333 $ 22,725 40,000 $ -0-
</TABLE>
- ------------------------------------
(1) Includes options to purchase 120,000 shares which were repriced on July
14, 1993, by amendment of an option for an identical number of shares
granted in fiscal 1993.
(2) Includes options to purchase 10,000 shares which were repriced on July
14, 1993, by amendment of an option for an identical number of shares
granted in fiscal 1993.
(3) Includes options to purchase 40,000 shares which were repriced on July
14, 1993, by amendment of an option for an identical number of shares
granted in fiscal 1993.
7
<PAGE> 12
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the fiscal
year ended June 30, 1996 to the persons named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS IN FISCAL 1996 OPTION TERM(3)
-------------------------------- ----------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SH)(2) DATE 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. Lin 50,000 4.61% $20.49 10/4/05 $492,533 $1,391,048
James T. Lindstrom 20,000 1.85% $18.63 10/4/05 $234,263 $593,669
Peter Jen 30,000 2.77% $18.63 10/4/05 $351,395 $890,504
Jung-Herng Chang 20,000 1.85% $18.63 10/4/05 $234,263 $593,669
Richard Silverman 20,000 1.85% $18.63 10/4/05 $234,263 $593,669
</TABLE>
- ------------------------------------
(1) Generally, the right to exercise an option under the Company's 1992
Stock Option Plan (the "Option Plan") vests as to one-fourth of the
shares subject to the option on each anniversary of the date of grant.
The Option Plan permits the grant of both incentive stock options
within the meaning of Section 422 of the Internal Revenue Code, as
amended (the "Code"), and nonstatutory stock options. The exercise
price of incentive stock options must at least equal the fair market
value of the Common Stock of the Company on the date of grant. The
exercise price of nonstatutory stock options must equal at least 85% of
the fair market value of the Common Stock of the Company on the date of
grant. The exercise price of incentive stock options or nonstatutory
stock options granted to any person who at the time of grant owns stock
representing more than 10% of the voting power of all classes of stock
of the Company or any parent or subsidiary corporations must be at
least 110% of the fair market value of the Common Stock of the Company
on the date of grant and the term of such options cannot exceed five
years or five years and one day, respectively.
(2) All options were granted at or above market value on the date of grant
as determined by the Compensation Committee.
(3) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the Securities and Exchange Commission
rules. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Common Stock, overall market conditions
and the option- holders' continued employment through the vesting
period. The amounts reflected in this table may not necessarily be
achieved.
8
<PAGE> 13
OPTION EXERCISES AND FISCAL 1996 YEAR-END VALUE
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock in the fiscal year
ended June 30, 1996, and unexercised options held as of June 30, 1996, by the
persons named in the Summary Compensation Table.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT 6/30/96 MONEY OPTIONS AT 6/30/96(2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. Lin 120,000 $1,752,000.00 52,500 127,500 $341,562.50 $464,687.50
James T. Lindstrom 80,000 $1,083,437.50 18,750 76,250 $122,656.25 $382,031.25
Peter Jen 20,000 $ 366,250.00 41,250 81,250 $293,531.25 $232,656.25
Jung-Herng Chang 40,000 $ 555,000.00 50,000 80,000 $378,125.00 $424,375.00
Richard Silverman 30,000 $ 249,375.00 10,000 60,000 $ 69,375.00 $290,000.00
</TABLE>
- ------------------------------------
(1) Company stock options generally vest one-fourth on the first
anniversary of the date of grant and one-fourth per year thereafter.
These options are exercisable only to the extent vested.
(2) The value of the unexercised in-the-money options is based on the
closing price of the Company's Common Stock on June 30, 1996 ($12.625
per share) and is net of the exercise price of such options.
COMPENSATION OF DIRECTORS
Board members other than the Company's outside directors receive no
compensation for attending Board meetings, except for reimbursement of certain
expenses in connection with attendance at Board meetings and Committee meetings.
The Company's outside directors receive $10,000 per year as an annual retainer.
In addition, each outside director receives $1,250 for each Board or Committee
Meeting attended in person, and $750 for each Board or Committee Meeting
attended by phone.
The Company's 1994 Outside Directors Stock Option Plan (the "Outside
Directors Plan") provides that each non-employee director (an "Outside
Director") holding office on the effective date of the plan shall automatically
receive a grant of an option to purchase 5,000 shares of the Company's Common
Stock either on the effective date of the Outside Directors Plan, if such
Outside Director did not already hold a Company stock option, or on the day
immediately following the first annual meeting of the stockholders of the
Company subsequent to the effective date of the Outside Directors Plan at which
such Outside Director is reelected to the Board, if such Outside Director holds
any Company stock options on the effective date of the Outside Directors Plan.
In addition, on the day immediately following the initial election or
appointment of each new Outside Director, such Outside Director will
automatically receive a grant of an option to purchase 5,000 shares of the
Company's Common Stock, subject to proration of the number of shares if
appointed to fill a vacancy between annual meetings of the stockholders. Each
Outside Director previously granted an option under the Outside Directors Plan
will automatically receive an additional option to purchase 5,000 shares of the
9
<PAGE> 14
Company's Common Stock on the day immediately following each annual meeting of
the stockholders of the Company following which such person remains an Outside
Director.
The Company on April 11, 1996 granted each of Millard Phelps and
Leonard Liu, directors of the Company, options to purchase 5,000 shares of
common stock of the Company as compensation for services as directors. In August
1995, the Company entered into a joint venture agreement with United
Microelectronic Corporation ("UMC") pursuant to which the Company is committed
to invest a certain amount over a three year period for a 10% equity interest in
the joint venture entity, United Integrated Circuits Corporation ("UICC"), which
will construct a wafer fabrication facility in Taiwan. Following the
consummation of this transaction, Frank Lin was appointed as a director of UICC.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during fiscal 1996 was composed of three
independent, non-employee directors of the Company, Shyur-Jen Paul Chien,
Charles A. Dickinson, and Leonard Y. Liu, who was appointed to the Committee in
August 1995 and resigned from the Committee in April 1996. See "REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION."
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company's 1992 Stock Option Plan (the "Option Plan") provides that
in the event of a merger of the Company with or into another corporation, unless
the successor corporation assumes or substitutes equivalent options for options
granted under the Option Plan, the Board of Directors shall provide that all
outstanding options under the Option Plan will be fully exercisable prior to the
merger. Options which are neither assumed or substituted for by the successor
corporation nor exercised prior to the expiration of a 15-day notice period will
terminate upon the expiration of such period. All shares subject to options
granted under the Outside Directors Plan will become fully vested and
exercisable as of the date 15 days prior to a transfer of control of the Company
as defined in the Outside Directors Plan unless the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "Acquiring Corporation"), either assumes or substitutes Acquiring
Corporation options for options outstanding under the Outside Directors Plan.
Any such options which are neither assumed or substituted for by the Acquiring
Corporation nor exercised will terminate as of the date of the transfer of
control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1995, the Company entered into an agreement with Frank C.
Lin to extend the term of a loan previously made to Mr. Lin in November 1992 in
the principal amount of approximately $585,000 to January 5, 1997, and to
increase the principal amount of the loan to $634,117.73. The agreement was
authorized by the Compensation Committee of the Board of Directors. The loan is
secured by shares of the Company's Common Stock owned by Mr. Lin. The loan bears
interest at 3.85% per year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with, except
the following: Charles A. Dickinson did not timely file a statement of changes
10
<PAGE> 15
in beneficial ownership reporting one transaction and Frank C. Lin filed an
amendment to a statement of changes in beneficial ownership reporting one
additional transaction that was not timely filed.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Compensation Committee was composed of three independent,
non-employee directors of the Company during part of the fiscal year, and of two
such directors during the remainder of the fiscal year. None of such persons
were former employees of the Company. During fiscal 1996, the Compensation
Committee members were Shyur-Jen Paul Chien and Charles A. Dickinson. Leonard Y.
Liu also served on the Committee from August 1995 through April 1996. The
Compensation Committee's primary function is to review and recommend salary
levels of, to approve bonus plans for, and to approve stock option grants to
executive officers, and to set the compensation of the Chief Executive Officer.
COMPENSATION PHILOSOPHY
The Compensation Committee strives to align executive compensation with
the value achieved by the executive team for the Company's stockholders. Toward
that goal, the Company's compensation program emphasizes both short- and
long-term incentives designed to attract, motivate, and retain highly qualified
executives who will effectively manage the Company and maximize stockholder
value. The Company uses salary, executive officer bonuses and stock options to
motivate executive officers to achieve the Company's business objectives and to
align the incentives of officers with the long-term interests of stockholders.
The Compensation Committee reviews and evaluates each executive officer's base
and variable compensation annually relative to corporate performance and
comparative market information.
In setting total compensation, the Compensation Committee considers
individual and Company performance, as well as market information in the form of
published survey data provided to the Compensation Committee by the Company's
human resources staff. The market data consists primarily of base salary and
total cash compensation rates, as well as incentive bonus and stock programs, of
companies considered by the Compensation Committee to be comparable technology
companies as well as companies in the semiconductor design industry. The
Compensation Committee's policy is to generally target levels of cash and equity
compensation paid to its executive officers to be competitive with such
compensation paid by such comparable companies.
In preparing the performance graph for this Proxy Statement, the
Company has selected the H&Q Semiconductors Sector Index, and the Nasdaq Stock
Market-U.S. Index as its peer groups. The companies that the Company included in
its stratified salary surveys are not necessarily those included in the indices,
as such companies may not be competitive with the Company for executive talent.
The Company has considered the potential impact of Section 162(m) of
the Internal Revenue Code ("Section 162(m)") adopted under the federal Revenue
Reconciliation Act of 1993. Section 162(m) disallows a tax deduction to any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year paid to the chief executive officers or any of the four other
most highly compensated executive officers, unless compensation is
performance-based. Since the targeted cash compensation of each of the named
executive officers is well below the $1 million threshold and the Company
believes that any options granted under the Option Plan currently meet the
requirement of being performance-based in accordance with the regulations under
Section 162(m), the Compensation Committee believes that Section 162(m) will not
reduce the tax deduction available to the Company. The Company's policy is to
qualify to the extent reasonable its executive officers' compensation for
deductibility under applicable tax laws.
11
<PAGE> 16
FORMS OF COMPENSATION
Salary. The Company strives to offer executive officers salaries that
are competitive with comparable companies in the technology sector generally and
in the semiconductor design industry. Frank C. Lin, President and Chief
Executive Officer of the Company, approves executive salaries at the time
executives join the Company. Thereafter, Mr. Lin periodically reviews the
executive officers and recommends adjustments to the base salaries of those
officers which are subject to review and approval by the Compensation Committee.
The Compensation Committee reviews Mr. Lin's performance and makes adjustments
to his salary. Adjustments made by Mr. Lin and the Compensation Committee are
based on individual executive officer performance, cost of living increases,
Company performance, and adjustments to retain qualified personnel. Mr. Lin's
base salary is reviewed annually by the Compensation Committee and reflects his
position, duties, and responsibilities.
Incentive Compensation. The Board of Directors reviews and approves an
executive bonus plan ("Plan") based upon Company and individual performance. The
Compensation Committee believes that significant bonus incentives based on
performance of the Company and personal performance provide substantial
motivations to achieve corporate goals. Under the Plan, Company performance is
measured for the fiscal year on a basis of actual operating profit as compared
with budgeted operating profit. The Company performance portion of any Company
executive's incentive bonus could be higher if the Company's performance
exceeded the goal. Individual performance against management-by-objective
("MBO") goals comprises a significant component of the bonus for most
executives; however, Company performance is given more weight in any bonus
calculation. For fiscal 1996 the bonus for Peter Jen, who served as Vice
President of Sales, was based exclusively upon sales performance and the bonus
for Mr. Lin was based exclusively on Company performance. The Plan is
administered by the Compensation Committee with Mr. Lin determining whether
executive officers met their individual MBO goals. The Compensation Committee
believes the incentives paid to the Company's executives on a basis of Company
performance and individual performance are comparable to those paid under
industry standard incentive compensation programs.
The Company exceeded its performance plan for fiscal 1996 and therefore
incentive awards were granted to executive officers. The Compensation Committee
has approved a bonus plan for fiscal 1997 similar to the plan for fiscal 1996.
As with the fiscal 1996 plan, bonuses are capped at a fixed percentage of salary
for each officer.
Stock Options. The Compensation Committee strives to maintain the
equity position of all executive officers at levels competitive with comparable
companies. The Compensation Committee believes that equity ownership provides
significant additional motivation to executive officers to maximize value for
the Company's stockholders, and therefore grants stock options under the
Company's 1992 Stock Option Plan at the commencement of an executive officer's
employment and, depending on that officer's performance and the appropriateness
of additional awards to retain key employees, periodically thereafter. Stock
options are granted at the prevailing market price, vest over a period of years
and will only have value if the Company's stock price increases over the
exercise price. Therefore, the Compensation Committee believes that stock
options serve to align the interests of executive officers closely with other
stockholders because of the direct benefit executive officers receive through
improved stock price performance.
12
<PAGE> 17
In October 1995, the Compensation Committee granted options to
executive officers, including Mr. Lin. Mr. Lin received a grant of 50,000 shares
with an exercise price of $20.4875. The grant was based on Mr. Lin's senior
position, his responsibilities, and his past and expected contributions to the
Company's future success and was intended to provide competitive equity
compensation for the Company's 1996 fiscal year.
1996 COMPENSATION COMMITTEE
Shyur-Jen Paul Chien
Charles A. Dickinson
13
<PAGE> 18
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the cumulative
total return of the H&Q Semiconductors Sector Index, the H&Q Technology Index(1)
and the Nasdaq Stock Market-U.S. Index for the period commencing on December 15,
1992(2) and ending on June 30, 1996(3).
COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 15, 1992
THROUGH JUNE 30, 1996(4):
TRIDENT MICROSYSTEMS, INC., H&Q SEMICONDUCTORS SECTOR INDEX, H&Q TECHNOLOGY
INDEX AND THE NASDAQ STOCK MARKET-U.S. INDEX
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dec-92 Jun-93 Jun-94 Jun-95 Jun-96
Nasdaq Index $100.00 $108.53 $109.62 $146.32 $187.90
Trident $100.00 $ 28.67 $ 36.75 $122.01 $ 74.24
HQ Semiconductor Index $100.00 $140.10 $164.65 $321.98 $181.20
HQ Technology Index $100.00 $105.61 $108.21 $239.32 $214.97
</TABLE>
(1) The comparison of stockholder return for future periods will provide a
comparison only with the H&Q Semiconductors Sector Index and the Nasdaq
Stock Market-U.S. Index.
(2) The Company's initial public offering commenced on December 16, 1992.
For purposes of this presentation, the Company has assumed that its
initial offering price of $17.00 would have been the closing sales
price on December 15, 1992, the day prior to commencement of trading.
(3) June 28, 1996 was the last day of trading in the Company's fiscal year
ended June 30, 1996.
(4) Assumes that $100.00 was invested on December 15, 1992 in the Company's
Common Stock at the Company's initial offering price of $17.00 and at
the closing sales price for each index on that date and that all
dividends were reinvested. No dividends have been declared on the
Company's Common Stock. Stockholder returns over the indicated period
should not be considered indicative of future stockholder returns.
14
<PAGE> 19
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class
I Directors (Charles A. Dickinson and Yasushi Chikagami), three Class II
Directors (Shyur-Jen Paul Chien, Leonard Y. Liu and Millard Phelps), and two
Class III Directors (Frank C. Lin and Glen M. Antle), who will serve until the
annual meetings of stockholders to be held in 1996, 1997 and 1998, respectively,
and until their respective successors are duly elected and qualified. At each
annual meeting of stockholders, Directors are elected for a full term of three
years to succeed those Directors whose terms expire on the annual meeting dates.
Vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (other than removal from office by
vote of the stockholders) may be filled by a majority vote of the Directors then
in office, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires.
The term of the Class I Directors will expire on the date of the
upcoming annual meeting. Two people are to be elected to serve as Class I
Directors of the Board of Directors at that meeting. Management's nominees for
election by the stockholders to these positions are Charles A. Dickinson and
Yasushi Chikagami, the current Class I members of the Board of Directors. If
elected, the nominees will serve as Directors until the Company's annual meeting
of stockholders in 1999, and until their successors are elected and qualified.
If any of the nominees decline to serve, the proxies may be voted for such
substitute nominees as the Company may designate.
If a quorum is present and voting, the two nominees for Class I
Directors receiving the highest number of votes will be elected as Class I
Directors. Abstentions and shares held by brokers that are present, but not
voted because the brokers were prohibited from exercising discretionary
authority, i.e., "broker non-votes," will be counted as present for purposes of
determining if a quorum is present.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
MESSRS. DICKINSON AND CHIKAGAMI.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse LLP
as independent public accountants to audit the financial statements of the
Company for the fiscal year ending June 30, 1997. A representative of Price
Waterhouse LLP is expected to be present at the annual meeting with the
opportunity to make a statement if the representative desires to do so, and is
expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the annual
meeting of stockholders at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and "broker non-votes" will each be counted as present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING JUNE 30, 1997.
15
<PAGE> 20
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting of the stockholders of the Company must be received by the Company at
its offices at 189 North Bernardo Avenue, Mountain View, California 94043, no
later than July 1, 1997, and satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included in
the Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business that the Board
of Directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ James T. Lindstrom
JAMES T. LINDSTROM
Secretary
October 28, 1996
16
<PAGE> 21
PROXY
TRIDENT MICROSYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Frank C. Lin and James T. Lindstrom, and each of
them, with full power of substitution, to represent the undersigned and to vote
all of the shares of stock in Trident Microsystems, Inc. (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of the Stockholders of
the Company to be held at the principal executive offices of the Company at 380
North Bernardo Avenue, Mountain View, California 94043 on December 12, 1996 at
9:00 a.m., local time, and at any adjournment thereof (1) as hereinafter
specified upon the proposals listed below and as more particularly described in
the Proxy Statement of the Company dated October 28, 1996 (the "Proxy
Statement"), receipt of which is hereby acknowledged, and (2) in their
discretion, upon such other matters as may properly come before the meeting. The
undersigned hereby acknowledges receipt of the Company's 1996 Annual Report to
Stockholders.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 THROUGH 2.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
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<PAGE> 22
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS:
Please mark
your votes as
indicated in /X/
this example.
1. ELECTION OF CLASS I DIRECTORS. FOR WITHHELD
Nominees: Charles A. Dickinson and all from all
Yasushi Chikagami nominees nominees
/ / / /
except vote withheld from the following nominee(s):
- ---------------------------------------------------
2. PROPOSAL TO RATIFY THE FOR AGAINST ABSTAIN
APPOINTMENT OF PRICE WATERHOUSE LLP / / / / / /
AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR
ENDING JUNE 30, 1997.
YES NO
I plan to attend the meeting: / / / /
WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE
RETURN ENVELOPE SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING.
_______________________________________________________Dated:____________, 1996
Please print your name here exactly as it appears on
your stock certificate. (If you are voting as the proxy
for a stockholder, please print the name of that
stockholder).
________________________________________By:_____________________(if applicable)
Please sign here. If shares of stock are
held jointly, both or all of such
persons should sign. Corporate or
partnership proxies should be signed in
full corporate or partnership name by an
authorized person.
Persons signing in a fiduciary capacity
should indicate their full titles in
such capacity.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
