<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INTEGRATED CIRCUIT SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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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 amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
2435 BOULEVARD OF THE GENERALS
P. O. BOX 968
VALLEY FORGE, PENNSYLVANIA 19482
(610) 630-5300
November 25, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of Integrated Circuit Systems, Inc. (the "Company") which will be held on
Wednesday, December 30, 1998, beginning at 10:00 a.m., at the offices of the
Company, 2435 Boulevard of the Generals, Norristown, Pennsylvania.
The accompanying notice of the meeting and proxy statement describes the
matters to be acted upon at the annual meeting of shareholders. Your
participation in these matters related to your Company is important, regardless
of the number of shares you hold. TO ASSURE YOUR REPRESENTATION AT THE MEETING,
WHETHER OR NOT YOU ARE ABLE TO ATTEND, PLEASE COMPLETE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY TO US IN THE POSTAGE-PAID ENVELOPE PROVIDED.
We look forward to your participation.
Sincerely,
/s/Henry I. Boreen
Henry I. Boreen
Chairman of the Board, CEO
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
2435 BOULEVARD OF THE GENERALS
P. O. BOX 968
VALLEY FORGE, PENNSYLVANIA 19482
----------------
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
DECEMBER 30, 1998
----------------
To the Shareholders:
The annual meeting of shareholders of Integrated Circuit Systems, Inc. (the
"Company") will be held on Wednesday, December 30, 1998, at 10:00 a.m., at the
offices of the Company, 2435 Boulevard of the Generals, Norristown,
Pennsylvania for the following purposes:
1. To elect four directors of the Company;
2. To approve an amendment to the Company's 1997 Equity Compensation Plan
as described in the accompanying proxy statement.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of the Company's Common Stock at the close of
business on November 23, 1998 will be entitled to notice of the meeting and to
vote at the meeting and at any adjournments thereof.
All shareholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON, PLEASE PROMPTLY SIGN, DATE AND
MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE. If you decide to attend the
meeting and wish to vote in person, you may revoke your proxy by written
notice to the Secretary of the Company at that time.
By Order of the Board of Directors
/s/Hock E. Tan
Hock E. Tan
Secretary
November 25, 1998
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
2435 BOULEVARD OF THE GENERALS
P. O. BOX 968
VALLEY FORGE, PENNSYLVANIA 19482
----------------
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Integrated Circuit Systems, Inc., a
Pennsylvania corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on December 30, 1998, at 10:00 a.m., at the offices of
the Company, 2435 Boulevard of the Generals, Norristown, PA, and at any
adjournments thereof. The approximate date on which this proxy statement and
the accompanying form of proxy will be first sent or given to shareholders is
November 25, 1998.
The cost of solicitation of proxies by the Board of Directors will be borne
by the Company. In addition to solicitation by mail, proxies may be solicited
in person or by telephone, telegraph or facsimile by directors, officers or
employees of the Company without additional compensation. The Company will,
where appropriate, reimburse shareholders of record who are brokers, dealers,
banks and other institutions for their reasonable expenses in forwarding the
proxy materials to the beneficial owners of the Company's Common Stock which
such institutions hold of record.
The Company's annual report to shareholders for the fiscal year ended June
27, 1998, including financial statements (the "Annual Report"), is being
mailed to shareholders with this proxy statement but does not constitute a
part of the proxy statement.
VOTING AT THE MEETING
Holders of shares of common stock of the Company ("Common Stock"), of record
at the close of business on November 23, 1998 are entitled to vote at the
meeting and at any adjournments thereof. As of that date, there were
12,254,175 shares of Common Stock outstanding. The Company presently has no
other class of stock outstanding and entitled to be voted at the meeting. The
presence in person or by proxy of shareholders entitled to cast a majority of
all votes entitled to be cast at the meeting constitutes a quorum. Each
shareholder entitled to vote shall have the right to one vote for each share
outstanding in such shareholder's name.
Shares cannot be voted at the meeting unless the holder of record is present
in person or by proxy. The enclosed proxy card is a means by which a
shareholder may authorize the voting of his or her shares at the meeting. The
shares of Common Stock represented by each properly executed proxy card will
be voted at the meeting in accordance with each shareholder's directions.
Shareholders are urged to specify their choices by marking the appropriate
boxes on the enclosed proxy card; if no choice has been specified, the shares
will be voted as recommended by the Board of Directors. If any other matters
are properly presented to the meeting for action, the proxy holders will vote
the proxies (which confer discretionary authority to vote on such matters) in
accordance with their judgment.
With regard to the election of directors, votes may be cast in favor of or
withheld from any or all nominees. Votes that are withheld and abstentions
will be excluded entirely from the vote and will have no effect, other than
for purposes of determining the presence of a quorum.
Brokers who hold shares in street name for customers have the authority
under the rules of the various stock exchanges to vote on certain items when
they have not received instructions from beneficial owners. The Company
believes that brokers that do not receive instructions are entitled to vote
those shares with respect to the election of directors but not with respect to
the proposal to approve the amendment to the Company's 1997 Equity
Compensation Plan. Shares not voted by brokers under such circumstances are
referred to as "broker
<PAGE>
non-votes". Broker non-votes will not be counted as votes cast on a proposal
and will have no effect on matters to be voted upon.
Execution of the accompanying proxy will not affect a shareholder's right to
attend the meeting and vote in person. Any shareholder giving a proxy has the
right to revoke it by giving written notice of revocation to the Secretary of
the Company, or by delivering a subsequently executed proxy card, at any time
before the proxy is voted.
The cost of solicitation of proxies by the Board of Directors of the Company
(the "Board") will be borne by the Company. Proxies may be solicited by mail,
personal interview, telephone or telegraph and, in addition, directors,
officers and regular employees of the Company may solicit proxies by such
methods without additional remuneration. In addition, the Company has retained
Innisfree M&A incorporated to aid in the solicitation of proxies for which a
fee of approximately $15,000.00, plus expenses, will be paid, except in the
event the proxy solicitation firm is required to provide services in excess of
those required for a routine meeting with no contested proposals, in which
event the proxy solicitation firm's fees will increase. Banks, brokerage
houses and other institutions, nominees or fiduciaries will be requested to
forward the proxy materials to beneficial owners in order to solicit
authorizations for the execution of proxies. The Company will, upon request,
reimburse such banks, brokerage houses and other institutions, nominees and
fiduciaries for their expenses in forwarding such proxy materials to the
beneficial owners of the Company's Common Stock.
Your proxy vote is important. Accordingly, you are asked to complete, sign
and return the accompanying proxy card whether or not you plan to attend the
meeting. If you plan to attend the meeting to vote in person and your shares
are registered with the Company's transfer agent in the name of a broker or
bank, you must secure a proxy card from the broker or bank assigning voting
rights to you for your shares.
ELECTION OF DIRECTORS
At the annual meeting, four directors are to be elected. The term of each
director elected at the annual meeting will expire at the 1999 annual meeting
of shareholders, and each director will hold office until the selection and
qualification of the director's respective successor or until the director's
earlier death, resignation or removal. All nominees are presently directors of
the Company whose terms will expire at the Annual Meeting.
Each of the current directors has been nominated for election to the Board
of Directors.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by the shareholders, the persons named in the proxies
will vote the shares of Common Stock represented thereby for the election of
such nominees. The Board of Directors believes all nominees will be able to
serve as directors; if this should not be the case, however, the proxies may
be voted for a substitute nominee to be designated by the Board of Directors,
or the board may determine to reduce the number of directors.
The nominees are to be elected by at least a plurality of the votes cast at
the Annual Meeting. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
EACH OF THE NOMINEES.
NOMINEES FOR ELECTION AS DIRECTORS
The following biographical information is furnished as to each person
nominated for election as a director.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------------------------
<S> <C> <C>
Henry I. Boreen(1)............................ 71 Chairman of the Board, CEO
Edward M. Esber, Jr.(2)....................... 46 Director
Rudolf Gassner(2)............................. 63 Director
John L. Pickitt(1)(2)......................... 65 Director
</TABLE>
--------
(1)Member of the Compensation and Stock Option Committee.
(2)Member of the Audit Committee.
2
<PAGE>
MR. BOREEN became a director of the Company in December 1984 and chairman of
the Board of Directors in April 1995. In March 1998, Mr. Boreen was appointed
to the additional position of interim Chief Executive Officer. Mr. Boreen also
served as Interim Chief Executive Officer from August 1996 to April 1997 of
the Company. Mr. Boreen has been a principal of HIB International, an
electronics consulting company, since 1984, and has also served as a director
of AM Communications, Inc., a manufacturer of telecommunications equipment.
Mr. Boreen has over 35 years of experience in the integrated circuits industry
and was the founder and chairman of Solid State Scientific, a semiconductor
manufacturer.
MR. ESBER became a director of the Company in June 1997. He has served as
president, chief executive officer and director of Solopoint, Inc., a personal
communications management products company, since October 1995. He served as
chairman, president and chief executive officer of Creative Insights, Inc.
from March 1994 to June 1995. From May 1993 to May 1994, Mr. Esber was
president and chief operating officer of Creative Labs, Inc., and from
February 1991 to May 1993, he was president of the Esber Group. Mr. Esber is
also a member of the board of directors of Borealis Technology Corporation,
Quantum Corporation and Trustee of Case Reserve Institute of Technology.
MR. GASSNER became a director of the Company in June 1992. He has been
employed by AMP Incorporated, a leading producer of electrical and electronic
connecting and interconnection systems, in various positions since 1966. Since
January 1992, he has served as the vice president of AMP's Capital Goods
Business Unit and since 1996, has served as President AMP's Global PC
Division. In January, 1997, he was appointed Corporate Vice President AMP
Incorporated. Mr. Gassner also serves as a director of ITI and NetBuy.
GENERAL PICKITT (RET.) became a director of the Company in March 1994. He
previously served in the United States Air Force for 32 years in various
capacities in the fields of research and development, planning, international
operations and senior management until his retirement as a Lt. General in
1987. From January 1988 until December 1994, he served as chief executive
officer of the Computer and Business Equipment Manufacturers Association.
General Pickitt is currently a management consultant.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors currently has no standing executive committee. The
Board of Directors of the Company met on 9 occasions during the past fiscal
year. Each director attended all of the meetings of the Board of Directors
held during the period for which he was a director during such fiscal year and
the committee or committees on which he served during such period.
Audit Committee. During fiscal 1998 Edward M. Esber, Jr., Rudolf Gassner and
John L. Pickitt served as members of the Audit Committee, which held three
meetings. Mr. Esber was elected to the Audit Committee on October 23, 1997.
The functions of the Audit Committee include the recommendation to the Board
of Directors of the selection of independent auditors, and review of the scope
of audit procedures and the audit findings by the independent auditors. The
Audit Committee would also be responsible for ensuring that major policies and
control procedures implemented by the Company are appropriate and adequate.
Compensation and Stock Option Committee. During fiscal 1998 Henry Boreen,
Stavro E. Prodromou and John L. Pickitt served as members of the Compensation
and Stock Option Committee. During this period the Compensation and Stock
Option Committee held 7 meetings. The responsibilities of the Compensation and
Stock Option Committee include the review and approval of the policies and
procedures of the Company with respect to the employee compensation, the
determination of the salaries and bonus awards of certain executive officers,
the grant of stock options to certain employees and the administration of the
Company's 1991 Stock Option Plan, 1992 Stock Option Plan, and 1997 Equity
Compensation Plan, including the determination, subject to the plan
provisions, of the grantees eligible to receive an option, the nature of the
option to be granted, and the exercise price, vesting schedule and other terms
and conditions of the options to be granted. Dr. Prodromou resigned from the
Committee and from the Board of Directors on March 20, 1998.
3
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee currently consists of Henry I.
Boreen, and John L. Pickitt.
In March 1998, Mr. Boreen was appointed Chief Executive Officer of the
Company with a base salary compensation of $10,000 per month and a stock
option grant of 50,000 shares. In April 1997, Dr. Prodromou was appointed by
the Board of Directors as President and Chief Executive Officer. For his
services in this capacity, Dr. Prodromou received an annual base salary of
$240,000 as well as a grant of stock options to purchase an aggregate of
250,000 shares of the Company's Common Stock at an exercise price of $13.25
per share. See "Employment and Severance Agreements."
4
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of August 11, 1998 by:
(i) each person who is known by the Company to own beneficially more than 5%
of the Company's Common Stock, (ii) each director of the Company, (iii) each
executive officer named in the summary compensation table below and (iv) the
directors and executive officers as a group. Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to
the shares listed.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING
- ------------------------ --------------------- -----------
<S> <C> <C>
Henry I. Boreen............................... 404,540 3.3%
Edward M. Esber, Jr........................... 9,000
Rudolf Gassner................................ 28,500 *
John L. Pickitt............................... 20,000 *
Hock E. Tan................................... 54,526(2) *
Martin Goldberg............................... 937 *
K. Venkateswaren.............................. 7,963 *
Greg Richmond................................. 9,753 *
Stavro E. Prodromou........................... 74,000(3) *
Directors and executive officers.............. 609,219 4.9%
as a group (8)
</TABLE>
- --------
* Less than 1%.
(1) Includes shares purchasable upon exercise of options exercisable within 60
days of the above date to purchase the following respective shares of the
Company's Common Stock issued pursuant to Company stock option plans: Mr.
Boreen - 54,000, Mr.Gassner - 18,000, Mr. Pickitt - 17,000, Mr. Tan -
37,500, Mr. Goldberg - 937, Dr. Venkateswaren - 6,375, Mr. Richmond -
7,450, and Dr. Prodromou - 62,500; as well as shares issued pursuant to
and being held by the Company's 401k plan: Mr. Tan - 1,216, Dr.
Venkateswaren - 1,588, and Mr. Richmond - 1,381 as determined from reports
by the plan administrator.
(2) 15,810 of these shares of the Company's Common Stock are held in a trust,
of which Mr. Tan is the sole trustee, for the benefit of members of Edward
H. Arnold's family. Mr. Arnold was formerly Chairman Emeritus of the Board
of Directors. Mr. Tan disclaims beneficial ownership of such shares.
(3) Information with respect to beneficial ownership of this shareholder
(other than pursuant to the ownership of stock options) is based upon
information furnished by the shareholder.
5
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive an annual stipend of $15,000
plus $2,000 for each regular meeting of the Board of Directors attended in
person, as well as an annual stipend of $500 for serving as a committee
chairperson for a standing committee of the Board of Directors and $1,000 for
each other meeting of the Board of Directors or its committees (other than
those held in conjunction with a full board meeting) attended. In addition,
directors are reimbursed for expenses incurred in connection with their
attendance at meetings of the Board of Directors and committees thereof.
Each non-employee director also receives, at the time of such director's
initial election or appointment, options to acquire 12,000 shares of Common
Stock, which vest over a period of three years and expire on the fifth
anniversary of the grant date. Thereafter, each non-employee director receives
an annual grant of options to acquire 8,000 shares of Common Stock, which vest
over a period of one year and expire on the fifth anniversary of the date of
grant. The option exercise price is the fair market value (i.e., the closing
price) of a share of Common Stock on the date of the grant.
CONSULTING AGREEMENTS
Each non-employee director entered into an agreement with the Company to
provide as and when requested by management consulting services with respect
to corporate policies strategies and plans for future growth. The term of the
consulting agreement began on May 11, 1998 and ends on December 31, 1998,
compensation for which was $2,000.00 per day, not to exceed ten (10) days per
month.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended June 27, 1998,
June 28, 1997 and June 29, 1996, the compensation paid by the Company to those
persons who were at any time during the last completed fiscal year, each
person who served as the Company's chief executive officer, and its next most
highly compensated executive officers whose total annual salary and bonus was
in excess of $100,000 for the last completed fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
ANNUAL
COMPENSATION AWARDS PAYOUTS
----------------- ---------- -------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
FISCAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) (#) ($) ($)(3)
- --------------------------- ------ ------- ------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry I. Boreen.......... 1998 66,923 -- -- -- 58,000 -- --
Interim CEO 1997 96,923 40,020 -- -- 75,000 -- --
(since March 1998)
Hock E.Tan............... 1998 209,997 168,000 -- -- -- -- 5,254
Senior Vice President, 1997 166,273 112,660 -- -- 50,000 -- 5,182
COO, CFO and Secretary 1996 158,851 89,461 -- -- 33,000(6) -- 7,120
Martin Goldberg.......... 1998 168,846 82,875 -- -- 3,750 -- 428
Vice President, Sales(4) 1997 149,540 67,200 -- -- 34,500 -- 346
1996 146,515 48,734 -- -- 100,000(6) -- 346
Stavro E. Prodromou...... 1998 302,768 144,000 -- -- -- -- 504
President and Chief 1997 47,307(7) -- -- -- 254,000 -- 432
Executive Officer(5)
K. Venkateswaren......... 1998 169,423 69,483 -- -- 3,000 -- 5,178
Vice President, 1997 158,471 49,047 -- -- 49,500 -- 5,106
Engineering Services 1996 149,605 50,338 -- -- 20,000 -- 6,968
Greg Richmond............ 1998 161,479 66,517 -- -- 2,800 -- 5,158
Vice President, FTG 1997 151,183 46,012 -- -- 14,000 -- 5,090
1996 135,620 44,727 -- -- 50,000 -- 7,349
</TABLE>
- --------
(1) Includes cash bonuses for services rendered in the applicable fiscal
year.
(2) The Company has on occasion provided certain personal benefits to its
executive officers, the amount of such benefits to any of the above-named
individuals did not, however, exceed the lesser of $50,000 or 10% of
salary and bonus of such individual for the applicable fiscal year.
(3) Includes amounts contributed by the Company (i) under the Company's
401(k) Plan as follows: Mr. Tan - $1,216 for 1998, $4750 for 1997 and
$6774 for 1996; Mr. Richmond - $1,381 for 1998, $4,750 for 1997 and
$7,025 for 1996; Dr. Venkateswaren - $1,588 for 1998, $4,750 for 1997 and
$6,645 for 1996; (ii) for premiums for a life insurance policy as
follows: Dr. Prodromou - $504 for 1998, and $432 for 1997; Mr. Tan - $504
for 1998, $432 for 1997,and $346 for 1996; Mr. Goldberg $428 for 1998,
$346 for 1997, and $347 for 1996; Mr. Richmond - $408 for 1998; $340 for
1997, and $324 for 1996; Dr. Venkateswaren -$428 for 1998; $356 for 1997,
and $323 for 1996.
(4) Mr. Goldberg transferred from Turtle Beach Systems, Inc. to the Company
in November 1996 as Vice President of Sales and his employment with the
Company terminated on October 15, 1998.
(5) Dr. Prodromou joined the Company in April 1997 as President and Chief
Executive Officer and his employment with the Company terminated on March
20, 1998.
(6) Options granted by Turtle Beach Systems, Inc. to acquire shares of common
stock of Turtle Beach Systems, Inc., a subsidiary of the Company. Such
options were granted at a purchase price equal to $2.67 per share which
was determined by the board of directors of Turtle Beach to be the fair
market value of such stock on the date the options were granted. The
options have been terminated and are unexercisable.
(7) Of these options, 125,000 were canceled upon termination of Dr.
Prodromou's employment with the Company.
7
<PAGE>
The following table sets forth the option grants during the fiscal year
ended June 27, 1998 for the individuals named in the Summary Compensation
Table as of June 27, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------- -------------------------
% OF TOTAL OPTIONS EXERCISE
GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED FISCAL YEAR ($/SH) DATE ($) ($)
---- ------- ------------------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Henry I. Boreen......... 50,000 8.23% 16.0625 4/21/03 $ 221,889 $ 490,316
8,000 1.32% 35.25 10/23/02 77,911 172,164
Hock E. Tan............. -- -- -- -- -- --
Martin Goldberg......... 3,750 0.62% 25.625 8/04/02 $ 60,433 $ 153,149
Stavro E. Prodromou..... -- -- -- -- -- --
K. Venkateswaren........ 3,000 0.49% 25.625 8/04/02 $ 48,346 $ 122,519
Greg Richmond........... 2,800 0.46% 25.625 8/04/02 $ 45,123 $ 114,351
</TABLE>
The following table sets forth aggregate option exercises during the fiscal
year ended June 27, 1998 and option values for the individuals named in the
Summary Compensation Table as of June 27, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON EXERCISE REALIZED AT FISCAL YEAR END AT FY-END
NAME (#) ($) (#) ($)(/1/)
---- --------------- ---------- -------------------- --------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Henry Boreen............ 87,000 $1,989,480 54,000/4,000 0/0
Hock E. Tan............. 100,000 $1,665,250 25,000/75,000 $129,688/$335,938
Martin Goldberg......... 42,375 $ 303,227 0/35,875 0/$46,262
Stavro E. Prodromou..... 24,000 $ 297,000 62,500/62,500 $152.344/$152,344
K. Venkateswaren........ 162,300 $ 735,171 1,875/52,625 $5,664/$202,755
Greg Richmond........... 46,500 $ 863,160 6,000/38,300 $24,937/$169,967
</TABLE>
- --------
(1) Unless otherwise indicated the value is based on closing price of $15.69
per share on June 27, 1998, less the option exercise price.
EMPLOYMENT AND SEVERANCE AGREEMENTS
On March 20, 1998, Stavro E. Prodromou resigned as President, Chief
Executive Officer and Director and in connection therewith entered into an
agreement with the Company under which he released the Company from any claims
he might have and agreed not to compete with the Company until September 30,
1998. In return, the Company agreed to pay Dr. Prodromou the sum of $120,000,
unused vacation and the sum of $15,000 in lieu of relocation expenses. The
Company had previously granted options to purchase 250,000 shares of Common
Stock of Integrated Circuit Systems ("Stock Options") pursuant to the 1992
Stock Option Plan, of which 62,500 Stock
8
<PAGE>
Options vested on April 2, 1998 and 62,500 Stock Options will vest on April 2,
1999. These 125,000 Stock Options are exercisable until October 2, 1999. In
accord with agreement between the Company and Dr. Prodromou, the remaining
125,000 Stock Options were cancelled.
On May 6, 1998, the Company entered into an employment agreement with Henry
Boreen, pursuant to which Mr. Boreen is employed as the Company's Chief
Executive Officer. At the time of his appointment to the Chief Executive
Officer position, Mr. Boreen received a fully vested stock option grant of
50,000 shares of Common Stock of Integrated Circuit Systems. The initial term
of the employment agreement expired in September 1998 and has been extended to
December 31, 1998. Upon extension of the term of the agreement, Mr. Boreen
received a fully vested Stock Option grant for 30,000 shares of the Company's
Common Stock. The Company may terminate the employment agreement upon the
appointment of a new Chief Executive Officer upon giving Mr. Boreen written
notice of such termination. Mr. Boreen's base compensation is currently
$12,000 per month.
In August 1996 the Company entered into a two year agreement with Mr. Tan
which provides, in the event of termination under certain conditions (as
defined in the agreement), for the payment to Mr. Tan of one year's base
salary and permit the exercise of such stock options as have been granted to
him, over a one-year period from the date of such termination. Payments under
such agreement are, however, limited by the provision of Section 280G of the
Internal Revenue Code of 1986.
CHANGE IN CONTROL ARRANGEMENTS
Options granted under the Company's 1991 and 1992 Stock Option Plan and 1997
Equity Compensation Plan contain provisions pursuant to which all outstanding
options granted under such plans shall become fully vested and immediately
exercisable upon a "Change in Control" as defined in such plans.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During fiscal 1998 the Compensation Committee of the Board of Directors
established the general compensation policies for all employees and the
specific compensation levels regarding salary and bonuses for certain
executive officers and had responsibility for making awards under the
Company's stock option plans. The Compensation and Stock Option Committee
presently consists of John L. Pickitt, who is a non-employee director of the
Company and Henry I. Boreen, who is the Company's Chairman and Chief Executive
Officer. This report is being submitted by Messrs. Boreen and Pickitt as
members of the Compensation and Stock Option Committee (the "Committee").
The Company's compensation program includes short and long-term incentives
designed to attract, motivate and retain highly qualified executives who will
effectively manage the Company and maximize shareholder value. The Committee
believes that executive officer compensation, including that of the Chief
Executive Officer, should be significantly influenced by Company performance.
The Company's compensation package for its executive officers consists of
base salary and variable incentive compensation, consisting of two parts: a
short-term cash bonus and long-term stock options. The variable portion of the
compensation package is directly linked to Company performance. In setting
total compensation, individual and Company performance are considered, as well
as compensation survey data and other publicly available data of companies
considered to be peers of the Company in the semiconductor industry.
Each year the Committee establishes, a comprehensive annual salary plan and
policy for the Company's senior executives. The salary plan is based upon
industry and peer group data, as well as the past performance and expected
future contributions of the individual executives. The Committee also
determines the base salary of the Chief Executive Officer and the Chief
Operating Officer (the "COO") based upon similar competitive compensation data
and the Committee's assessment of their performance and its expectation as to
their future contributions in leading the Company.
9
<PAGE>
The Company uses a system of "management by objectives" ("MBOs") to
determine cash bonuses. Under the Company's bonus plan, all employees,
including executive officers, are eligible to receive cash bonuses based upon
a combination of (i) the Company achieving revenue and earnings objectives,
(ii) the employee's business unit achieving its specific business and
financial objectives, and (iii) the employee meeting specified performance
objectives. Each employee has a target bonus, expressed in terms of a
percentage of base salary, which is dependent upon his or her position with
the Company. For fiscal 1998, the bonus plan provided for target bonuses
ranging from 5 % to 80% of base salary. The target bonuses for the Chief
Executive Officer and the Chief Operating Officer are 80%. Based upon
achievement of the aforementioned criteria bonuses are determined and paid
semi-annually. In addition to the target bonuses, discretionary bonuses may be
determined and paid to certain senior managers and sales executives on a
quarterly basis. The Committee relies on the above data and its assessment of
individual performance and achievement of business unit and Company results to
objectives, and it exercises subjective judgment and discretion in light of
this information and the Company's compensation policies described above to
determine base salaries and bonuses.
Beginning in April 1997, Dr. Stavro E. Prodromou began serving as President
and Chief Executive Officer of the Company. Dr. Prodromou's compensation in
such capacity has been previously described under the heading Compensation
Committee Interlocks and Insider Participation. Since Dr. Prodromou's
resignation on March 20, 1998, Mr. Boreen has been serving as Chairman and
Chief Executive Officer. Mr. Boreen's compensation in such capacity has been
previously described under the heading Employment and Severance Agreements.
From August 1996 to April 1997, Mr. Boreen served as interim Chief Executive
Officer of the Company, pending the hiring of a replacement for David W. Sear,
Ph.D., a former Chief Executive Officer of the Company. Mr. Boreen's
compensation in this capacity has been previously described under the heading
Compensation Committee Interlocks and Insider Participation.
Stock options are granted to employees, including the Chief Executive
Officer, primarily based upon the employee's ability to impact the Company's
long-term growth and profitability. Options typically vest over four years and
are exercisable at fair market value on the date of grant. Since the value of
an option bears a direct relationship to the Company's stock price it is an
effective incentive for management to create value for shareholders. The
Committee therefore views stock options as a critical component of its long-
term, performance-based compensation philosophy. As with the determination of
base salaries and bonuses, the Committee relies on data of companies in the
semiconductor industry, its assessment of individual's, the business unit's
and Company's performance and the stock options grants previously made, and
exercises subjective judgment and discretion after careful consideration of
this information and the Company's general policies. Executive officers may
also participate, along with other Company employees, in the Company's 401(k)
Plan, which includes Company matching contributions which are invested in the
Company's Common Stock.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various compensation.
Some types of compensation and their deductibility depend upon the timing of
an executive's vesting or exercise of previously granted rights. Further
interpretations of and changes in the tax laws also effect the deductibility
of compensation. To the extent reasonably practicable and to the extent it is
within the Committee's control, the Committee intends to limit executive
compensation in ordinary circumstances to that deductible under Section 162(m)
of the Internal Revenue Code of 1986. In doing so, the Committee may utilize
alternatives (such as deferring compensation) for qualifying executive
compensation for deductibility.
The current membership of the Compensation and Stock Option Committee is as
follows:
Henry I. Boreen John L. Pickitt
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock for the period June 30, 1993 to June 27, 1998 with
similar returns for (i) the Nasdaq Stock Market (U.S.) Index (the "Nasdaq
Index") and (ii) the Hambrecht & Quist Technology Index (the "H&Q Index").
Dividend reinvestment has been assumed. The graph assumes the value of the
investment in the Company's Common Stock and each index in June 30, 1993 was
$100.00.
[Performance Graph Appears Here]
<TABLE>
<CAPTION>
ICS,INC H&Q TEC NASDAQ
<S> <C> <C> <C>
Jun-93 100.00 100.00 100.00
Sep-93 162.79 102.02 108.36
Dec-93 120.93 107.55 110.35
Mar-94 125.58 111.41 105.61
Jun-94 100.00 101.82 100.28
Sep-94 104.65 115.99 108.59
Dec-94 69.77 128.69 106.82
Mar-95 93.02 143.99 116.09
Jun-95 137.21 179.48 132.60
Sep-95 134.88 202.72 148.24
Dec-95 115.12 191.86 149.46
Mar-96 90.70 195.44 156.46
Jun-96 100.00 209.22 168.34
Sep-96 105.81 221.96 174.29
Dec-96 126.74 237.89 183.40
Mar-97 132.56 226.63 173.55
Jun-97 211.05 272.67 204.85
Sep-97 344.19 330.34 239.46
Dec-97 265.12 278.28 223.08
Mar-98 194.77 336.94 260.77
Jun-98 154.65 344.90 269.16
</TABLE>
11
<PAGE>
APPROVAL OF AMENDMENT TO THE 1997 EQUITY COMPENSATION PLAN
PROPOSED AMENDMENT
At the annual meeting there will be presented a proposal to approve and
ratify an amendment to the Company's 1997 Equity Compensation Plan (the "1997
Plan"). The amendment (the "Plan Amendment") provides for non-employee
directors, who are currently entitled to receive non-discretionary stock
options under the 1997 Plan, to become eligible to receive discretionary stock
options as well. The Plan Amendment was approved by the Board of Directors on
September 11, 1998, subject to shareholder approval.
VOTE REQUIRED FOR APPROVAL
To be adopted, the Amended Plan must be approved by a majority of the votes
cast by shareholders of the Company present in person or represented by proxy
and entitled to vote at the meeting. If such approval is not received, the
Plan Amendment will not become effective and the 1997 Plan will continue as in
effect prior to adoption of the Plan Amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE PLAN
AMENDMENT.
DESCRIPTION OF THE PLAN
General. The 1997 Plan was adopted by the Board of Directors on September
3, 1997, and approved by the shareholders at the 1997 annual meeting. The
purpose of the 1997 Plan is to advance the interests of the Company and its
shareholders by encouraging and providing for the acquisition of an equity
interest in the Company by employees, officers, directors, consultants and
advisors, by providing additional incentive to such persons, and by enabling
the Company to attract and retain the services of such persons who make
substantial contributions to the Company through their ability and loyalty.
Recognizing that the granting of stock options is an effective method of
attracting and retaining valuable non-employee directors to the Company and
also serves to provide incentive and strengthen the identity of interests
between them and the Company, the Board included provisions in the 1997 Plan
that provide for the grant of non-discretionary stock options to each non-
employee director upon his election to the Board of Directors and annually
during his term of service to the Company. In order to provide additional
incentive to the non-employee directors, the Board of Directors has approved
the Plan Amendment, subject to shareholder approval, which allows for the
issuance of discretionary stock options to non-employee directors.
The Current Plan. As in effect prior to the Board's approval of the Plan
Amendment, the 1997 Plan provides that upon becoming a non-employee director,
each such person receives a non-discretionary grant of an option to purchase
12,000 shares of Common Stock. Thereafter, in each year that any such person
is re-elected to the Board of Directors at an annual meeting of shareholders,
such person shall receive a non-discretionary grant of an option to purchase
an additional 8,000 shares of Common Stock. The exercise price of these non-
discretionary options is the fair market value on the date the option is
granted. These non-discretionary options become exercisable over a period of
three years from the date the option is granted and are exercisable until the
earlier of three months after the optionee ceases to be a non-employee
director or five years from the date the option is granted. Non-discretionary
options granted to non-employee directors are not intended to qualify as
incentive stock options under the Internal Revenue Code of 1986 (the "Code")
and are instead intended to be "non-qualified" or "non-statutory" stock
options.
The Plan Amendment. If the Plan Amendment is approved by shareholders at
the annual meeting, in addition to being entitled to receive the non-
discretionary options described above, non-employee directors will be eligible
to receive discretionary stock options to purchase Common Stock. Such options
may be granted in the discretion of the Board of Directors or a committee of
the Board of Directors consisting of Non-Employee Directors (collectively, the
"Committee"). The exercise price of these discretionary options would be the
fair market value on the date the option is granted, as determined by the
Board or the Committee. These discretionary
12
<PAGE>
options would become exercisable over a period determined by the Board or the
Committee and would be exercisable until the earlier of a period fixed by the
Board or the Committee or ten years from the date the option is granted. Any
discretionary options granted to non-employee directors would not be intended
to qualify as incentive stock options under the Code and would instead be
intended to be "non-qualified" or "non-statutory" stock options. The Board of
Directors currently contains three non-employee directors who will be eligible
to receive discretionary grants under the Amended Plan.
Generally, recipients of non-qualified stock options will not recognize
taxable income at the time of grant but will recognize ordinary income upon
exercise in an amount equal to the difference between the fair market value of
the shares of Common Stock acquired and the aggregate exercise price. The
Company will receive a deduction at that time in a like amount and should not
be limited by the provisions of Section 162(m) of the Code which restricts a
corporation's compensation deduction in certain circumstances. Upon the
disposition of shares of Common Stock acquired upon the exercise of a non-
qualified option, the optionee will recognize long-term or short-term capital
gain or loss in an amount equal to the difference between the amount realized
and such optionee's basis in the shares sold. Such basis will generally by the
fair market value of the shares sold on the date the shares were acquired
through the exercise of the option.
The Board of Directors has the right to amend or terminate the Amended Plan
at any time provided that the Board of Directors obtains shareholder approval
to any amendment if such approval is required in order to meet the
requirements for incentive stock options under Section 422 of the Code (and
the Board of Directors has determined that compliance with Section 422 of the
Code is desirable).
On November 20, 1998, the last reported sales price of the Common Stock on
the Nasdaq National Market was $14 15/32 per share.
The following table shows the number of shares of Common Stock underlying
options awarded under the 1997 Plan during the fiscal year ended June 27, 1998
to each of the officers listed in the Summary Compensation Table, to all
current executive officers as a group, to all current directors who are not
executive officers as a group, and to all non-executive officer employees as a
group.
NEW PLAN BENEFITS
1997 EQUITY COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION SHARES
----------------- ---------
<S> <C>
Henry I. Boreen
Chairman of the Board, Chief Executive Officer ................ 58,000
Hock E. Tan
Senior Vice President, Chief Operating Officer and Chief
Financial Officer ............................................. --
Martin Goldberg
Vice President of Sales........................................ --
K. Venkateswaren
Vice President, Engineering Services .......................... --
Stavro Prodromou
Former President and Chief Executive Officer .................. --
Greg Richmond
Vice President, Frequency Timing Generator Group............... --
Executive Group................................................. 58,000
Non-Executive Director Group.................................... 24,000
Non-Executive Officer Employee Group............................ 318,000
</TABLE>
13
<PAGE>
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick has been appointed as the Company's
independent auditors for the fiscal year ending July 3, 1999. Representatives
of KPMG Peat Marwick are expected to be present at the meeting and available
to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1999 Annual Meeting
of Shareholders must be received by the Company at least 50 days and not more
than 75 days prior to the date of such meeting and otherwise comply with the
provisions set forth in the Company's By-laws relating to advance notice of
shareholder proposals in order to be eligible for consideration by
shareholders at such meeting. Any such proposal must further be received by
the Company by July 28, 1999 in order to be considered for inclusion in the
Company's proxy materials for the 1999 Annual Meeting of Shareholders. In
addition, the execution of a proxy solicited by the Company in connection with
the 1999 Annual Meeting of Shareholders shall confer on the designated
proxyholder discretionary voting authority to vote on any shareholder proposal
which is not included in the Company's proxy materials and for which the
Company has not received notice at least 50 days and not more than 75 days
prior to the date of such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Company does not intend to
present and has not been informed that any other business will be presented
for consideration at the meeting. However, if other matters should properly
come before the meeting or any adjournment thereof, it is the intention of the
persons named in the accompanying proxy, or their substitutes, to vote the
proxy in accordance with their judgment in such matters.
/s/Hock E. Tan
By Order of the Board of Directors
HOCK E. TAN
Secretary
14
<PAGE>
INTEGRATED CIRCUIT SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<TABLE>
The undersigned hereby appoints Henry I. Boreen and Hock E. Tan, and either
of them, proxies (each with full power of substitution) to vote, as indicated
below and in their discretion upon such other matters as may properly come
before the meeting, all shares which the undersigned would be entitled to vote
at the Annual Meeting of the Shareholders of the Company to be held on December
30, 1998 and at any adjournment or postponement thereof.
1. ELECTION OF DIRECTORS: (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE BELOW.)
<S> <C>
[_] FOR ALL NOMINEES LISTED BELOW [_] WITHHOLD AUTHORITY TO VOTE FOR ALL
NOMINEES LISTED BELOW
NOMINEES: Henry I. Boreen, Edward M. Esber, Jr., Rudolf Gassner and John L. Pickitt.
-------------------------------------------------------------------------------------
</TABLE>
2. Amendment of the Company's 1997 Equity Compensation Plan as described in the
Proxy Statement:
[_] FOR [_] AGAINST [_] ABSTAIN
PLEASE SIGN AND DATE YOUR PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS OTHERWISE
SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR
DIRECTOR LISTED ON THE REVERSE SIDE HEREOF AND "FOR" THE AMENDMENT OF THE
COMPANY'S 1997 EQUITY COMPENSATION PLAN. THIS PROXY ALSO DELEGATES
DISCRETIONARY AUTHORITY WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT.
PLEASE SIGN AND DATE THIS PROXY BELOW
Date: ____________________________
__________________________________
__________________________________
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON LEFT. WHEN SIGNING AS
ATTORNEY, EXECUTOR,
ADMINISTRATOR, GUARDIAN OR
CORPORATE OFFICIAL, PLEASE GIVE
FULL TITLE.
