UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K/A
Amendment No. 2
(Mark One)
| þ | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended June 30, 2004
| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number0-20784
TRIDENT MICROSYSTEMS, INC.
| Delaware (State or other jurisdiction of incorporation or organization) | 77-0156584 (I.R.S. Employer Identification No.) |
| 1090 East Arques Avenue Sunnyvale, California (Address of principal executive offices) | 94085 (Zip code) |
Registrant’s telephone number, including area code: (408) 991-8800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $0.001 Par Value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yesþ Noo
The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing price of the Common Stock on December 31, 2003 ($17.42 per share), as reported on the NASDAQ National Market was approximately $235,219,281. Shares of Common Stock held by executive officers and directors and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of the registrant’s $0.001 par value Common Stock outstanding on August 31, 2004, was 22,941,958.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TRIDENT MICROSYSTEMS, INC.
FORM 10-K/A
AMENDMENT NO. 1
FOR THE FISCAL YEAR ENDED JUNE 30, 2004
INDEX
| Page | ||||||||
| Part III | ||||||||
| Executive Compensation | 3 | |||||||
| Part IV | ||||||||
| Exhibits and Financial Statement Schedules | 8 | |||||||
| EXHIBIT 31.1 | ||||||||
| EXHIBIT 31.2 | ||||||||
EXPLANATORY NOTE
Trident Microsystems, Inc. (“TMI” or the “Company”) hereby amends Item 11 of Part III of its Annual Report on Form 10-K for the fiscal year ended June 30, 2004, as filed with the Securities and Exchange Commission (the “SEC”) on September 13, 2004, to read in its entirety as provided below. The purpose of this amendment is to revise the potential realizable value figures in the table of TTI options granted during the last fiscal year to correct calculation errors.
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PART III
Item 11. Executive Compensation
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation during the fiscal years ended June 30, 2004, June 30, 2003 and June 30, 2002 of the Chief Executive Officer of the Company and the two most highly compensated executive officers of the Company as of June 30, 2004, whose salary and bonus for the fiscal year ended June 30, 2004 exceeded $100,000. Amounts under the caption “Bonus” are amounts earned during the fiscal year, including amounts paid after the end of the fiscal year, but exclude amounts paid in one fiscal year for performance in the prior fiscal year.
Summary Compensation Table
| Long-Term | ||||||||||||||||||||
| Annual Compensation | Compensation | |||||||||||||||||||
| Securities | ||||||||||||||||||||
| Other Annual | Underlying | |||||||||||||||||||
| Name and Principal Position | Year | Salary | Bonus | Compensation | Options (#) | |||||||||||||||
| Frank C. Lin | 2004 | $ | 505,523 | $ | 186,821 | $ | 319,425 | (1) | 0 | (5) | ||||||||||
| President and Chief | 2003 | $ | 505,523 | $ | 228,787 | $ | 0 | 80,000 | ||||||||||||
| Executive Officer | 2002 | $ | 505,523 | $ | 0 | $ | 25,962 | (2) | 100,000 | |||||||||||
| Jung-Herng Chang | 2004 | $ | 272,200 | $ | 58,789 | $ | 55,675 | (3) | 0 | (5) | ||||||||||
| President, Digital Media | 2003 | $ | 272,200 | $ | 47,399 | $ | 0 | 30,000 | ||||||||||||
| Business Unit | 2002 | $ | 272,200 | $ | 0 | $ | 2,025 | (4) | 50,000 | |||||||||||
| Peter Jen Sr. Vice President, Asia | 2004 | $ | 268,840 | $ | 48,224 | $ | 68,705 | (3) | 0 | (5) | ||||||||||
| Operations and Chief | 2003 | $ | 268,840 | $ | 45,853 | $ | 0 | 30,000 | ||||||||||||
| Accounting Officer | 2002 | $ | 268,964 | $ | 0 | $ | 6,246 | (4) | 50,000 | |||||||||||
| (1) | Includes $128,320.16 accrued vacation payout. Also includes $191,104.94 overseas housing (rental fee) and hardship allowance. | |
| (2) | Includes $7,290.92 accrued vacation payout for 9-11 donation. Also includes $18,670.95 loan interest reduction due to an amendment of loan agreement, in which interest rate was retroactively changed, effective January 1, 2001, to the monthly Applicable Federal Rates, as published by revenue rulings of the U.S. Internal Revenue Service. | |
| (3) | Accrued vacation payout. | |
| (4) | Reflects accrued vacation payout for 9-11 donation. | |
| (5) | No options to purchase shares of the Company’s stock were granted in fiscal year 2004. However, options to purchase shares of the common stock of the Company’s Taiwanese subsidiary, TTI, were granted in fiscal year 2004. See “TTI STOCK OPTIONS GRANTED DURING LAST FISCAL YEAR”. |
TMI Stock Options Granted During Last Fiscal Year
The following table provides the specified information concerning grants of options to purchase the Company’s Common Stock made during the fiscal year ended June 30, 2004 to the persons named in the Summary Compensation Table and John Edmunds, who joined the Company in the capacity of Chief Financial Officer on June 14, 2004.
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TMI Option Grants In Last Fiscal Year
| Potential Realizable Value at | ||||||||||||||||||||||||
| Assumed Annual Rates of Stock | ||||||||||||||||||||||||
| Price Appreciation | ||||||||||||||||||||||||
| Individual Grants | for Option Term(3) | |||||||||||||||||||||||
| Number of | % of Total | |||||||||||||||||||||||
| Securities | Options | |||||||||||||||||||||||
| Underlying | Granted to | Exercise | ||||||||||||||||||||||
| Options | Employees | or Base | ||||||||||||||||||||||
| Granted | in Fiscal | Price | Expiration | |||||||||||||||||||||
| Name | (#)(1) | Year | ($/Sh)(2) | Date | 5% ($) | 10% ($) | ||||||||||||||||||
| Frank C. Lin | 0 | 0 | % | $ | 0.00 | N/A | $ | 0.00 | $ | 0.00 | ||||||||||||||
| Jung-Herng Chang | 0 | 0 | % | $ | 0.00 | N/A | $ | 0.00 | $ | 0.00 | ||||||||||||||
| John Edmunds | 150,000 | 42.9 | % | $ | 13.77 | 6/14/14 | $ | 1,298,982 | $ | 3,291,875 | ||||||||||||||
| Peter Jen | 0 | 0 | % | $ | 0.00 | N/A | $ | 0.00 | $ | 0.00 | ||||||||||||||
| (1) | The option listed was granted on June 14, 2004 under the 2002 Stock Option Plan (the “Option Plan”) and 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. 29,000 shares underlying the option granted to John Edmunds in the above table were under an incentive stock option and 121,000 shares were under a nonstatutory stock options. Under the Option Plan, the Compensation Committee retains discretion to modify the terms, including the exercise price of outstanding options. See “CHANGE IN CONTROL ARRANGEMENTS.” | |
| (2) | All options were granted with exercise prices at or above the market value of a share of our common stock on the date of grant. | |
| (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. |
TTI Stock Options Granted During Last Fiscal Year
The following table provides the specified information concerning grants of options to purchase stock in the Company’s Taiwanese subsidiary, TTI, made during the fiscal year ended June 30, 2004 to the persons named in the Summary Compensation Table and John Edmunds, who joined the Company in the capacity of Chief Financial Officer on June 14, 2004.
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TTI Option Grants in Last Fiscal Year
| Potential Realizable Value at Assumed Annual | ||||||||||||||||||||||||||||
| Rates of Stock Price Appreciation for option | ||||||||||||||||||||||||||||
| Individual Grants | Term(3) | |||||||||||||||||||||||||||
| Number of | % of Total | |||||||||||||||||||||||||||
| Securities | Options | |||||||||||||||||||||||||||
| Underlying | Granted to | Exercise | ||||||||||||||||||||||||||
| Options | Employees | or Base | Base | Base | ||||||||||||||||||||||||
| Granted | in Fiscal | Price | Expiration | Appreciation | Appreciation | |||||||||||||||||||||||
| Name | (#)(1) | Year | ($/Sh)(2) | Date | 0% ($) | 5% ($) | 10% ($) | |||||||||||||||||||||
| Frank C. Lin | 2,720,000 | 19.2 | % | $ | 0.30 | August 2013 | $ | 642,570 | $ | 1,551,816 | $ | 2,946,776 | ||||||||||||||||
| Jung-Hern Chang | 1,900,000 | 13.4 | % | $ | 0.30 | August 2013 | $ | 448,854 | $ | 1,083,989 | $ | 2,058,410 | ||||||||||||||||
| John Edmunds | 130,000 | 0.9 | % | $ | 0.30 | July 2008 | $ | 242,925 | $ | 304,974 | $ | 376,914 | ||||||||||||||||
| Peter Jen | 130,000 | 0.9 | % | $ | 0.30 | August 2013 | $ | 30,711 | $ | 74,166 | $ | 140,839 | ||||||||||||||||
| (1) | The share numbers represent shares of the common stock of TTI. As of June 30, 2004, there were outstanding 65.0 million shares of TTI common stock, and options to purchase a further 14.2 million shares of TTI common stock, none of which were exercisable as of that date. See “TRIDENT TECHNOLOGIES, INC. (TTI)” in Item 1 of Part I, as amended, above. Each option grant listed was granted under the TTI 2003 stock option plan (the “TTI Plan”) and vests 35% on the first anniversary of the date of grant, 15% on the second anniversary of the date of grant, 25% on the third anniversary of the date of grant and 25% on the fourth anniversary of the date of grant. | |
| (2) | All TTI options were granted at an exercise price of NT$ 10, or approximately $0.30 based upon an exchange rate of NT$ 33.864 per $1 on October 15, 2004. As is the practice in Taiwan, the exercise price of these options is initially fixed at the inception of the plan for a given pool of options, and then options are granted at that price until the pool is depleted. The initial fixed exercise price of NT$ 10 for TTI’s initial 16.2 million share pool was customary for an emerging company in Taiwan, and is equivalent to the par value of the stock. As stock options are granted, this fixed exercise price may be well below the fair market value of the stock at the time of grant. Consistent with generally accepted accounting principles, the Company measures the intrinsic value of these stock options and records deferred compensation at the time of grant to be amortized to expense over the vesting period of the option. See Note 8,Stock Options in TTIin the Notes to Consolidated Financial Statements filed as part of the Annual Report on Form 10-K for the fiscal year ended June 30, 2004, filed with the SEC on September 13, 2004. However, given the fact that TTI is not a widely traded public company, in Taiwan or elsewhere, the fair market value of TTI common stock is difficult to ascertain precisely as of any given date. | |
| (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 further development of a liquid market for TTI common stock or other transactions involving TTI common stock, the future performance of the TTI 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. The 0% column represents the difference between the exercise price and fair value on the date of grant. |
TMI Option Exercises and Fiscal 2004 Year-End Values
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, 2004, and unexercised options held as of June 30, 2004, by the persons named in the Summary Compensation Table.
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| Aggregate TMI Option Exercises in Last Fiscal Year And Fiscal Year-End Values | ||||||||||||||||||||||||
| Number of Securities Underlying | ||||||||||||||||||||||||
| Unexercised Options at FY- | Value of Unexercised In-the-Money | |||||||||||||||||||||||
| End(1) | Options at FY-End(2) | |||||||||||||||||||||||
| Shares | ||||||||||||||||||||||||
| Acquired | ||||||||||||||||||||||||
| On | ||||||||||||||||||||||||
| Exercise | Value | |||||||||||||||||||||||
| Name | (#) | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
| Frank Lin | 0 | $ | 0 | 1,027,500 | 60,000 | $ | 6,416,361 | $ | 415,002 | |||||||||||||||
| Jung-Herng Chang | 125,000 | $ | 1,721,515 | 437,500 | 22,500 | $ | 2,676,178 | $ | 155,626 | |||||||||||||||
| John Edmunds | 0 | $ | 0 | 0 | 150,000 | $ | 0 | $ | 0 | |||||||||||||||
| Peter Jen | 97,500 | $ | 1,220,242 | 412,500 | 22,500 | $ | 2,552,554 | $ | 155,626 | |||||||||||||||
| (1) | The options of Frank Lin, Jung-Herng Chang and Peter Jen were granted under the 1992 Stock Option Plan and the options of John Edmunds were granted under the 2002 Stock Option Plan. | |
| (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, 2004 ($11.37 per share), as reported by the Nasdaq National Market, and is net of the exercise price of such options. |
TTI Option Exercises and Fiscal 2004 Year-End Values
There were no exercises of TTI options by the named officers of the Company during Fiscal 2004.
Compensation of Directors
Board members other than the Company’s non-employee directors receive no compensation for attending Board meetings. The Company’s non-employee directors receive $20,000 per year as an annual retainer and reimbursement of certain expenses in connection with attendance at Board meetings and Committee meetings. In addition, each non-employee director receives $1,500 for each Board or Committee meeting attended in person, and $1,000 for each Board or Committee meeting attended by telephone. In July 2004, the Board and the Compensation Committee approved a new director compensation package which continues an annual retainer of $20,000 and $1,500 for each Board meeting attended in person, but lowers the fees to $1,250 for the Committee chairperson and $1,000 for the committee member for each Committee meeting attended in person. The fee for each Board or Committee meeting attended by telephone is also decreased from $1,000 to $500.
Under the Company’s 1994 Outside Directors Stock Option Plan (the “Directors Plan”), on the day of the initial election or appointment of each new non-employee director, such non-employee director automatically receives an option to purchase 20,000 shares of the Company’s Common Stock and receives an additional option to purchase 20,000 shares of the Company’s Common Stock on the date of the first annual meeting of stockholders following the third anniversary of his or her previous Directors Plan option grant, provided that he or she remains in office. Furthermore, each non-employee director currently in office who previously was granted an option under the Directors Plan automatically receives an additional option to purchase 20,000 shares of the Company’s Common Stock on the day of each third annual meeting of stockholders of the Company subsequent to the date of the prior option grant after which the individual remains in office. Each option granted under the Directors Plan becomes exercisable in three annual installments, subject to the non-employee director’s continued Board service. In July 2004, pursuant to the new director compensation package approved by the Compensation Committee and the Board, the director stock option grant to non-employee directors was increased from 20,000 shares to 25,000 shares vesting over a three year period effective as of the date of the Company’s 2004 Annual Meeting of Stockholders. Such grants will be made under the Company’s 2002 Stock Option Plan.
Change-in-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, all outstanding options under the Option Plan will become fully exercisable
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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 Directors Plan will become fully vested and exercisable as of the date 15 days prior to a change in control of the Company, as defined in the Directors Plan, unless the surviving or successor corporation either assumes or substitutes its options for options outstanding under the Directors Plan. Any such options which are neither assumed or substituted for by the successor corporation, nor exercised, will terminate as of the date of the change in control.
The Company entered into a change-in-control agreement, effective September 25, 2001, with Frank Lin, the Chairman, CEO and President of the Company. The agreement provides for severance and other benefits to be paid to Mr. Lin in the event of Mr. Lin’s termination following a “change in control” of the Company. The agreement defines a “change in control” as a merger or consolidation or the sale, or exchange by the stockholders of the Company of 40% or more of the capital stock of the Company, or the sale or exchange of 40% or more of the Company’s assets. The agreement provides that in the event of Mr. Lin’s involuntary termination, constructive termination, death or disability within 36 months following a change in control, Mr. Lin will be entitled to receive: (1) severance in the amount of 36 months of Mr. Lin’s annual base salary then in effect, (2) three times Mr. Lin’s potential annual bonus then in effect, (3) acceleration in vesting of up to 1,000,000 of Mr. Lin’s options, and (4) continued group insurance coverage of medical, dental, prescription drug, vision care and life insurance for 36 months following Mr. Lin’s termination.
The Board of Directors believes that the agreement is in the best interests of the Company in order to ensure the continued dedication and objectivity of Mr. Lin, notwithstanding the possibility of a “change in control.”
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company’s Board of Directors was composed of two independent, non-employee directors of the Company, John Luke and Yasushi Chikagami during the first nine months of fiscal 2004. On April 21, 2004, Glen Antle, an independent, non-employee director of the Company, was appointed to the Compensation Committee, joining Messrs Luke and Chikagami. No member of the Compensation Committee is a former employee of the Company, and no member of the Compensation Committee or executive officer of the Company has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
3. Exhibits
| Exhibit | Description | |
| 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer* | |
| 31.2 | Rule 13a-14(a) Certification of Chief Financial Officer* |
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TRIDENT MICROSYSTEMS, INC. | ||||
| Dated: February 24, 2005 | /s/ John S. Edmunds | |||
| John S. Edmunds | ||||
| Chief Financial Officer | ||||
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Index to Exhibits
| Exhibit | Description | |
| 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer* | |
| 31.2 | Rule 13a-14(a) Certification of Chief Financial Officer* |
| * | Filed herewith. |
