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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 Rule 14a-11(c) or Rule 14a-12
INTEGRATED SILICON SOLUTION, INC.
(Name of Registrant as Specified in Its Charter)
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(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction 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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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 29, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Integrated Silicon Solution, Inc., a Delaware corporation (the "Company"), will
be held on Friday, January 29, 1999 at 2:00 p.m., local time, at the Silicon
Valley Capital Club, Fairmont Plaza, 50 West San Fernando, 17th Floor, San Jose,
California, for the following purposes:
1. To elect six (6) directors to serve for the ensuing year and
until their successors are duly elected and qualified.
2. To approve the Company's 1998 Stock Plan with 500,000 shares
reserved for issuance thereunder, plus certain shares of
Common Stock previously reserved under the Company's prior
stock option plan.
3. To amend the Company's 1995 Director Stock Option Plan to
increase the number of shares available for issuance
thereunder by 75,000 shares to an aggregate of 125,000 shares.
4. To ratify the appointment of Ernst & Young, LLP as independent
auditors for the Company for the 1999 fiscal year.
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The foregoing matters are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on December 1,
1998 are entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope for that purpose. Any stockholder attending the meeting
may vote in person even if he or she has returned a proxy.
FOR THE BOARD OF DIRECTORS
/s/Gary L. Fischer
Gary L. Fischer
Secretary
Santa Clara, California
December 28, 1998
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
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INTEGRATED SILICON SOLUTION, INC.
2231 LAWSON LANE
SANTA CLARA, CALIFORNIA 95054-3311
(408) 588-0800
PROXY STATEMENT FOR 1999
ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Integrated Silicon Solution, Inc. (the "Company") for use at the Annual Meeting
of Stockholders to be held on Friday, January 29, 1999 at 2:00 p.m., local time,
or at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Silicon Valley Capital Club, Fairmont Plaza, 50 West San
Fernando, 17th Floor, San Jose, California.
These proxy solicitation materials were mailed on or about December 28,
1998 to all stockholders of record on December 1, 1998 (the "Record Date").
INFORMATION CONCERNING SOLICITATION AND VOTING
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company at the above address of the Company, written notice of revocation or
a duly executed proxy bearing a later date, or by attending the meeting and
voting in person.
VOTING AND SOLICITATION
Proxies properly executed, duly returned to the Company and not
revoked, will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted as the management of the
Company may propose. If any matter not described in this Proxy Statement is
properly presented for action at the meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote according to their best
judgment.
Each stockholder is entitled to one vote for each share of Common Stock
on all matters presented at the meeting. The required quorum for the transaction
of business at the Annual Meeting is a majority of the votes eligible to be cast
by holders of shares of Common Stock issued and outstanding on the Record Date.
Shares that are voted "FOR," "AGAINST," "WITHHELD" OR "ABSTAIN" are treated as
being present at the meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Annual Meeting (the "Votes Cast") with
respect to such matter. Abstentions will have the same effect as a vote against
a proposal. Broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but such
non-votes will not be counted for purposes of determining the number of Votes
Cast with respect to the particular proposal on which a broker has expressly not
voted. Thus, a broker non-vote will not effect the outcome of the voting on a
proposal.
The cost of soliciting proxies will be borne by the Company. The
Company may also reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and employees, without additional
compensation, personally or by telephone or telegram.
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RECORD DATE
Stockholders of record at the close of business on December 1, 1998 are
entitled to notice of the meeting and to vote at the meeting.
PRINCIPAL SHARE OWNERSHIP
At the Record Date, 19,417,827 shares of the Company's Common Stock,
$.0001 par value per share, were issued and outstanding and no shares of the
Company's Preferred Stock, $.0001 par value per share, were issued and
outstanding. As of December 1, 1998, there was no entity known by the Company to
be the beneficial owner of more than 5% of the Company's Common Stock.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals by stockholders of the Company which such stockholders intend
to present at the Company's 2000 Annual Meeting of Stockholders must be received
by the Company no later than August 31, 1999 so that they may be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
A board of six (6) directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's six (6) nominees named below, all of
whom are presently directors of the Company. If any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for the nominee designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominees will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next Annual Meeting of
Stockholders or until the director's successor has been elected and qualified.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The six (6) candidates receiving the highest number of "FOR" votes
shall be elected to the Company's Board of Directors. An abstention will have
the same effect as a vote withheld for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW:
Name of Nominee Age Principal Occupation
--------------- --- --------------------
Jimmy S. M. Lee.................................. 43 Chief Executive Officer, President and Chairman of
the Board of the Company
Kong-Yeu Han..................................... 43 Executive Vice President, General Manager, Taiwan
and Director of the Company
Pauline Lo Alker................................. 56 President and Chief Executive Officer,
Amplify.net, Inc.
Lip-Bu Tan....................................... 39 General Partner of Walden Group
Hide L. Tanigami................................ 48 President and Chief Executive Officer, Marubun USA
Corporation
Chun Win Wong.................................... 63 Vice Chairman, Wearnes Technology Pte., Ltd.
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Except as set forth below, each nominee has been engaged in his or her
principal occupation described above during the past five (5) years. There are
no family relationships among any directors or executive officers of the
Company.
Jimmy S.M. Lee has served as Chief Executive Officer, President and a
director of the Company since he co-founded the Company in October 1988. He has
also served as a director of ISSI-Taiwan since September 1990. From 1985 to
1988, Mr. Lee was engineering manager at International CMOS Technology, Inc., a
semiconductor company, and from 1983 to 1985, he was a design manager at
Signetics Corporation, a semiconductor company. Prior thereto, Mr. Lee was a
project manager at Toshiba Semiconductor Corporation and a design engineer at
National Semiconductor Corporation. Mr. Lee holds an M.S. degree in electrical
engineering from Texas Tech University and a B.S. degree in electrical
engineering from National Taiwan University.
Kong-Yeu Han has served as the Company's Executive Vice President since
April 1995, as General Manager, ISSI-Taiwan since September 1990 and as a
director of the Company since he co-founded the Company in October 1988. He has
also served as a director of ISSI-Taiwan since September 1990. From October 1988
to September 1990, he also served as Vice President, Engineering of the Company.
From 1985 to 1988, Mr. Han was design engineering manager at Vitelic
Corporation, a semiconductor company, and from 1984 to 1985 he was a staff
engineer at Signetics Corporation. From 1980 to 1984, Mr. Han was a senior
engineer at Advanced Micro Devices and its subsidiary Monolithic Memories, Inc.
("MMI"), both of which are semiconductor companies. Mr. Han holds an M.S. degree
in electrical engineering from the University of California, Santa Barbara and a
B.S. degree in electrical engineering from National Taiwan University.
Pauline Lo Alker was appointed to serve as a director of the Company in
April 1997. Since June 1998, Ms. Alker has served as President, Chief Executive
Officer and Chairman of the Board of Amplify.net, Inc., a company specializing
in software solutions for internet/intranet providers. From 1991 until 1998, Ms.
Alker was President and Chief Executive Officer of Network Peripherals, Inc., a
workgroup networking solutions company. In 1984 she founded Counterpoint
Computers, Inc., a developer and manufacturer of high-performance UNIX
multiprocessor computers, which was acquired by Acer, Inc. in 1987. She served
first as President of Acer's Network Computing Division Counterpoint, then
became President of Acer America's Sales and Marketing. Ms. Alker holds B.A.
degrees in mathematics and music from Arizona State University. She also serves
as a director of Network Peripherals, Inc., a workgroup networking company, and
Tektronix, Inc., a test equipment company.
Lip-Bu Tan has served as a director of the Company since March 1990. Mr.
Tan was also a director of ISSI-Taiwan from July 1992 until July 1993. Mr. Tan
is a General Partner of the Walden Group of venture capital funds and serves as
President of International Venture Capital Investment Corporation ("IVCIC"). Mr.
Tan holds an M.S. degree in business administration from the University of San
Francisco and a B.S. degree from Nanyang University. He has also served as a
director of Creative Technology Ltd., a multimedia products company and Premisys
Communications, Inc., a telecommunications company, since 1990.
Hide L. Tanigami was appointed to serve as a director of the Company on
December 3, 1997. Since January 1996, Mr. Tanigami has been President and Chief
Executive Officer of Marubun USA Corporation, an electronic components trading
company. Since April 1993, he has also been President and Chief Executive
Officer of Technology Matrix, Inc., an intellectual property company that
coordinates technology development and licensing in Japan. From October 1985
until March 1994, Mr. Tanigami was a co-founder and Vice President of Corporate
Development at Catalyst Semiconductor, Inc., a semiconductor company. He was a
director of Nexcom Technology, Inc. until its acquisition by ISSI in December
1997. Mr. Tanigami holds an M.A. degree in applied linguistics from San
Francisco State University and a B.A. degree from Kansai University of Foreign
Studies. Mr. Tanigami also serves as a director of Catalyst Semiconductor, Inc.
and Marubun Corporation, Japan, a trading and distribution company.
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Chun Win Wong has served as a director of the Company since December
1994. Mr. Wong was also a director of the Company from March 1991 to May 1994
and a director of ISSI-Taiwan from March 1991 until July 1993. Since April 1994,
Mr. Wong has been Vice Chairman of Wearnes Technology Pte, Ltd. ("Wearnes") and
since 1983, he has been Group General Manager of Wearnes Brothers, Limited,
Singapore, the parent company of Wearnes, both of which are multinational
electronics companies. He was also Managing Director of Wearnes from 1983 to
1994. From 1970 to 1980, Mr. Wong was Chief Executive Officer of Industrial
Electronics and Engineers Limited, an electronics company which he founded. Mr.
Wong holds a degree in electrical and control engineering from the Royal
Melbourne Institution of Technology in Australia and a degree from the
Manchester College of Science & Technology in England.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of December 1, 1998 (i) by each director of the Company, (ii) by
the Company's Chief Executive Officer and the two other executive officers of
the Company during fiscal 1998 (such officers are collectively referred to as
the "Named Executive Officers"), and (iii) by all current directors and
executive officers as a group:
Beneficial Ownership
---------------------------
Name Number Percent
---- ------ -------
Jimmy S.M. Lee(1)............................................... 496,944 2.5
Kong-Yeu Han(2)................................................. 424,804 2.2
Gary L. Fischer(3).............................................. 116,710 *
Pauline Lo Alker(4)............................................. 12,500 *
Lip-Bu Tan(5)................................................... 384,548 2.0
Hide L. Tanigami(6)............................................. 5,000 *
Chun Win Wong(7)................................................ 561,128 2.9
All directors and executive officers as a group
(8 persons) (8)............................................ 2,001,634 10.2
- ----------
* Less than 1%
(1) Includes 89,633 shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1998. Also includes 51,000
shares held by Mr. Lee as custodian for his minor children.
(2) Includes 82,039 shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1998. Also includes 40,000
shares held by Mr. Han as custodian for his minor children.
(3) Includes 59,000 shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1998. Also includes 1,500
shares held by Mr. Fischer's children.
(4) Represents shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1998.
(5) Includes 9,583 shares issuable upon exercise of options held by Mr. Tan
which are exercisable within 60 days of December 1, 1998. Also includes
172,100 shares held by Walden Capital Partners II and 183,333 shares
held by IVCIC. Mr. Tan is a General Partner of Walden Group and
President of IVCIC and may be deemed to be a beneficial owner of the
shares held by such entities.
(6) Represents shares issuable upon exercise of options which are
exercisable within 60 days of December 1, 1998.
(7) Includes 13,750 shares issuable upon exercise of options held by Mr.
Wong which are exercisable within 60 days of December 1, 1998. Also
includes an aggregate of 537,378 shares held by Wearnes Technology Pte.
Ltd. and United Wearnes Technology Pte. Ltd. Mr. Wong is the Managing
Director of Wearnes and may be deemed to be a beneficial owner of the
shares held by such entities.
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(8) Includes 271,505 shares issuable upon the exercise of options which are
exercisable within 60 days of December 1, 1998. See notes 1 through 8
above.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held seven (7) meetings during
fiscal 1998.
The Audit Committee, consisting of Messrs. Tan and Wong, held one (1)
meeting during fiscal 1998. The Audit Committee reviews the financial statements
and the internal financial reporting system and controls of the Company with the
Company's management and independent auditors, recommends resolutions for any
dispute between the Company's management and its auditors, and reviews other
matters relating to the relationship of the Company with its auditors.
The Compensation Committee consisted of Messrs. Banatao and Tan during
fiscal 1998. The Compensation Committee held no meetings in fiscal 1998.
However, the Board of Directors reviewed employee compensation at its July 24,
1998 meeting. The Compensation Committee makes recommendations to the Board of
Directors regarding the Company's executive compensation policies and
administers the Company's stock option plans and employee stock purchase plan.
The Board of Directors currently has no nominating committee or
committee performing a similar function.
Each director, except for Mr. Banatao, attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during fiscal 1998 and (ii) the total number of meetings held by all committees
of the Board of Directors during fiscal 1998 on which such director served. Mr.
Banatao, who resigned as a director of the Company on November 9, 1998, attended
43% of the total number of meetings of the Board of Directors and 50% of the
total number of meetings of committees on which he served during fiscal 1998.
COMPENSATION OF DIRECTORS
Non-employee directors receive $1,000 for attendance at each Board
meeting and are reimbursed for all reasonable expenses incurred by them in
attending Board and Committee meetings. In addition, each non-employee director
is eligible to participate in the Company's 1995 Director Stock Option Plan (the
"Director Plan"). Under the Director Plan, each non-employee director is
automatically granted a nonstatutory option to purchase 2,500 shares of Common
Stock upon the date upon which such person first becomes a non-employee
director. In addition, each director who has been a non-employee director for at
least six (6) months will automatically receive a nonstatutory option to
purchase 2,500 shares of Common Stock upon such director's annual reelection to
the Board by the stockholders. Options granted under the Director Plan have a
term of ten (10) years unless terminated sooner upon termination of the
optionee's status as a director or otherwise pursuant to the Director Plan. The
exercise price of each option granted under the Director Plan is equal to the
fair market value of the Common Stock on the date of grant. Options granted
under the Director Plan are subject to cumulative monthly vesting over a twelve
(12) month period commencing at the date of grant. On January 30, 1998, Messrs.
Tan, Wong, Tanigami, and Banatao and Ms. Alker were each granted an option under
the Director Plan to purchase 2,500 shares of Common Stock at an exercise price
of $10.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consisted of
Messrs. Banatao and Tan during fiscal 1998, neither of whom had been or was an
officer or an employee of the Company. No member of the
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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.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The members of the Compensation Committee of the Board of Directors
during fiscal 1998 were Messrs. Banatao and Tan. Mr. Banatao resigned as a
director of the Company on November 9, 1998. Both members of the Compensation
Committee were non-employee directors. The Compensation Committee reviews
compensation levels of senior management and recommends salaries and other
compensation paid to senior management to the Company's Board of Directors for
approval.
Compensation Philosophy. The Company's executive pay programs are
designed to attract and retain executives who will contribute to the Company's
long-term success, to reward executives for achieving both short and long-term
strategic Company goals, to link executive and stockholder interests through
equity-based plans, and to provide a compensation package that recognizes
individual contributions and Company performance. A meaningful portion of each
executive's total compensation is intended to be variable and to relate to and
be contingent upon Company performance. The Company's compensation philosophy is
that cash compensation must be competitive with other semiconductor companies of
comparable size in order to help motivate and retain existing staff and provide
a strong incentive to achieve specific Company goals. The Company believes that
the use of stock options as a long-term incentive links the interests of the
employees to those of the stockholders and motivates key employees to remain
with the Company to a degree that is critical to the Company's long-term
success.
Components of Executive Compensation. The two key components of the
Company's senior management compensation program in fiscal 1998 were base salary
and long-term incentives, represented by the Company's stock option program. The
Compensation Committee utilizes an industry recognized independent annual survey
of companies to determine whether the Company's senior management compensation
is within the competitive range. Base salary is set for each senior manager
commensurate with that person's level of responsibility and within the
parameters of companies of comparable size within the semiconductor industry.
Messrs. Lee and Han accepted a 20% salary reduction from July 1, 1998 to
December 31, 1998, and Mr. Fischer accepted a 10% salary reduction from July 1,
1998 to December 31, 1998. Effective January 1, 1999, Mr. Lee's base salary
reverts to the level established October 1, 1997 of $267,800.
It is the policy of the Company, and the members of the Committee
believe that it is consistent with practices of comparable companies in the
industry, that bonus compensation should comprise a meaningful portion of the
annual total compensation of senior management. Due to the declining market
conditions in fiscal 1998, no bonuses were approved for the executive officers
for fiscal 1998.
Stock options are generally granted when a senior manager joins the
Company and additional options may be granted from time-to-time thereafter. The
options granted to each senior manager generally vest over a four (4) year
period. In addition to the stock option program, senior managers are eligible to
participate in the Company's 1993 Employee Stock Purchase Plan.
Other elements of executive compensation include participation in
Company-wide medical and dental benefits and the ability to defer compensation
pursuant to a 401 (k) plan, and a non-qualified deferred compensation program.
The Company does not match annual contributions under the 401 (k) plan at this
time.
The Compensation Committee has considered the potential impact of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Section"). The Section disallows a tax deduction
for any publicly-held corporation for individual compensation exceeding $1
million in any taxable year for any of the Named Executive Officers, unless such
compensation is performance-based. Since the cash compensation of each of the
Named Executive Officers is below the $1 million threshold and the Compensation
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Committee believes that any options granted under the Company's Stock Plan will
meet the requirements of being performance-based, the Compensation Committee
believes that the Section 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.
However, the Compensation Committee believes that its primary responsibility is
to provide a compensation program that will attract, retain and reward the
executive talent necessary to the Company's success. Consequently, the
Compensation Committee recognizes that the loss of a tax deduction could be
necessary in some circumstances.
Mr. Lee receives no other material compensation or benefits not provided
to all executive officers.
Compensation Committee of the Board of Directors
Diosdado P. Banatao
Lip-Bu Tan
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PROPOSAL TWO:
APPROVAL OF 1998 STOCK PLAN
On October 29, 1998, the Company's Board of Directors adopted and
approved the Company's 1998 Stock Plan (the "Stock Plan"), subject to
stockholder approval. The Stock Plan will replace the Company's 1989 Stock
Option Plan (the "Option Plan"), which will expire on May 24, 1999, with respect
to future grants. A total of 4,487,500 shares of Common Stock were reserved for
issuance under the Option Plan, and as of December 1, 1998, an aggregate of
1,052,240 shares remained ungranted under the Option Plan. Upon stockholder
approval, the Stock Plan will become effective and no future options will be
granted under the Option Plan. No options have been granted under the Stock
Plan.
Subject to the other provisions of the Stock Plan, the maximum number
of shares of Common Stock which may be optioned and sold under the Stock Plan
shall be 500,000 shares plus any shares which have been reserved but unissued
under the Option Plan and any shares returned to the Option Plan as a result of
the termination of options under the Option Plan. At the Annual Meeting, the
stockholders are being requested to approve the Stock Plan and the reservation
of the shares thereunder. The Board believes that the adoption of the Stock Plan
will enable the Company to continue its policy of widespread employee stock
ownership as a means to motivate high levels of performance and to recognize key
employee accomplishments.
For a description of the principal features of the Stock Plan, see
"Appendix A -- Description of the 1998 Stock Plan."
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The approval of the Stock Plan requires the affirmative vote of a
majority of the Votes Cast on the proposal at the Annual Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE APPROVAL OF THE STOCK PLAN.
PROPOSAL THREE:
APPROVAL OF AMENDMENT TO 1995 DIRECTOR STOCK OPTION PLAN
The Company's Board of Directors and stockholders have previously
adopted and approved the Company's 1995 Director Stock Option Plan (the
"Director Plan"). A total of 50,000 shares of Common Stock are presently
reserved for issuance under the Director Plan. On October 29, 1998, the Board of
Directors approved an amendment to the Director Plan, subject to stockholder
approval, to increase the shares reserved for issuance thereunder by 75,000
shares, bringing the total number of shares issuable under the Director Plan to
125,000. As of December 1, 1998, 17,500 shares were available for future
issuance under the Director Plan.
At the Annual Meeting, the stockholders are being requested to consider
and approve the proposed amendment to the Director Plan to increase the number
of shares of Common Stock reserved for issuance thereunder by 75,000 shares,
bringing the total number of shares issuable under the Director Plan to 125,000.
The Board believes that the amendment will enable the Company to attract and
retain the best available personnel to serve as outside directors of the
Company.
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For a description of the principal features of the Director Plan, see
"Appendix B -- Description of the 1995 Director Stock Option Plan."
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The approval of the amendment to the Director Plan requires the
affirmative vote of a majority of the Votes Cast on the proposal at the Annual
Meeting.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE AMENDMENT TO THE DIRECTOR PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER.
PROPOSAL FOUR:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young, LLP, independent
auditors, to audit the financial statements of the Company for the 1999 fiscal
year. This nomination is being presented to the stockholders for ratification at
the meeting. Ernst & Young, LLP has audited the Company's financial statements
since 1990. A representative of Ernst & Young, LLP is expected to be present at
the meeting, will have the opportunity to make a statement, and is expected to
be available to respond to appropriate questions.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of the Votes Cast on the proposal at
the Annual Meeting is required to ratify the Board's selection. If the
stockholders reject the nomination, the Board will reconsider its selection.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation received for services rendered
to the Company and the Company's subsidiaries in all capacities during the last
three fiscal years by (i) the Company's Chief Executive Officer and (ii) the
Company's two other Named Executive Officers:
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SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation(1) Compensation
--------------------------------------------------------- -------------
Fiscal Other Annual Awards
Name and Principal Position Year Salary Bonus(2) Compensation(3) Options(4)
--------------------------- ------ ------ ------- --------------- ---------
Jimmy S.M. Lee............. 1998 $257,395 - - -
Chief Executive Officer and 1997 255,741 - - 108,000
President 1996 248,205 - - 33,000
Kong-Yeu Han............... 1998 204,780 - 45,640 -
Executive Vice President and 1997 218,417 - 49,899 94,000
General Manager, Taiwan 1996 219,229 - 50,307 30,000
Gary L. Fischer............ 1998 185,554 - - -
Executive Vice President and 1997 181,954 10,000 - 50,000
Chief Financial Officer 1996 170,000 - - 12,000
(1) Excludes perquisites and other personal benefits which for each Named
Executive Officer did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus for such officer.
(2) Includes bonus awards earned for performance in the fiscal year noted
even though such amounts are payable in subsequent years. Excludes
bonus awards paid in the fiscal year noted but earned in prior years.
(3) In fiscal 1998, 1997 and 1996, includes $45,640, $49,899 and $50,307,
respectively, for housing allowance and rent allowance in connection
with Mr. Han's relocation to Taiwan.
(4) Options granted in fiscal 1997 include options previously granted in
fiscal 1996 that were repriced in fiscal 1997.
OPTION GRANTS IN FISCAL YEAR 1998
No options were granted to the Named Executive Officers during fiscal
1998.
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning options
exercised by the Named Executive Officers in fiscal 1998, and exercisable and
unexercisable stock options held by each of the Named Executive Officers as of
September 30, 1998.
Fiscal Year-End Option Values
------------------------------------------------------------------
Value of Unexercised
Number of Unexercised Options In-the-Money Options at Fiscal
at Fiscal Year End Year End(1)
----------------------------- ------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
--- ----------- -------- ---------- ------------- ----------- -------------
Jimmy S.M. Lee........ 34,500 204,620 65,167 67,833 - -
Kong-Yeu Han.......... 80,000 474,480 60,772 58,228 - -
Gary L. Fischer....... 54,800 193,510 47,354 33,896 - -
- -------------------------
(1) The value of an "in the money" option represents the difference
between the exercise price of such option and the fair market value of the
Company's Common Stock at September 30, 1998, multiplied by the total number of
shares subject to the option.
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COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
The following graph sets forth the Company's total cumulative
stockholder return compared to the Standard & Poor's 500 Index and the Standard
& Poor's Semiconductor Index for the period February 3, 1995 (the date of the
Company's initial public offering) through September 30, 1998. Total stockholder
return assumes $100 invested at the beginning of the period in the Common Stock
of the Company, the stocks represented in the Standard & Poor's 500 Index and
the stocks represented in the Standard & Poor's Semiconductor Index,
respectively. Total return also assumes reinvestment of dividends; the Company
has paid no dividends on its Common Stock.
Historical stock price performance should not be relied upon as
indicative of future stock price performance.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of filings under Section 16 (a) of
the Securities Exchange Act of 1934, as amended, received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 1998, all Section 16 filing requirements were met.
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CERTAIN TRANSACTIONS
In December 1997, the Company acquired Nexcom Technology, Inc.
("Nexcom"). In connection with this acquisition, the Company assumed a
promissory note owed by Nexcom in the amount of $100,000 payable to Technology
Matrix, Inc. The promissory note bears interest at the rate of 7% per annum.
Principal and accrued interest on the promissory note is due and payable in July
1999. Hide L. Tanigami, a director of the Company, is President and Chief
Executive Officer of Technology Matrix, Inc. In addition, in connection with
this acquisition, the Company assumed a liability owed by Nexcom to Mr. Tanigami
in the amount of $200,000. This amount was paid by the Company to Mr.
Tanigami in January 1998.
In January 1998, the Company loaned Gary L. Fischer, Executive Vice
President and Chief Financial Officer of the Company, $260,000 pursuant to a
promissory note in order to enable Mr. Fischer to exercise a Company stock
option and to pay related taxes. As of September 30, 1998, the outstanding
balance on the promissory note was $267,007, including accrued interest, which
was the largest aggregate amount of indebtedness outstanding under the
promissory note during fiscal 1998. The promissory note bears interest at the
rate of 5.39% per annum.
In June 1998, the Company sold approximately 46% of Integrated Silicon
Solution (Taiwan), Inc. ("ISSI-Taiwan") to a group of private investors for an
aggregate purchase price of approximately $37.6 million. Prior to this
transaction, ISSI-Taiwan was a wholly-owned subsidiary of the Company. Lip-Bu
Tan, a director of the Company, is also a director of the following purchasers:
Asian Venture Capital Investment Corporation, International Venture Capital
Investment Corporation, TWG Investment LDC, Sino-French Capital Investment
Company, and O,W&W Investments Limited. K.Y. Han, a director of the Company, is
a director, President, and General Manager of ISSI-Taiwan. Jimmy S.M. Lee, Chief
Executive Officer, President, and a director of the Company is a director of
ISSI-Taiwan. In fiscal 1998, the Company purchased a total of $66.5 million of
product from ISSI-Taiwan.
In November 1998, NexFlash Technologies, Inc., a subsidiary of the
Company ("NexFlash"), sold 2,009,660 shares of Series A Preferred Stock to the
Company and 669,885 shares of its Series A Preferred Stock to ISSI-Taiwan in
consideration for the grant of certain technology rights. NexFlash also sold
2,944,986 shares of its Series B Preferred Stock for an aggregate purchase price
of $7,362,465 to investors, which included 400,000 shares to ISSI-Taiwan for
$1,000,000. NexFlash was formed in September 1998 as a wholly owned subsidiary
of the Company. Mr.
Lee is acting Chief Executive Officer and a director of NexFlash.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors of the Company may recommend.
THE BOARD OF DIRECTORS
Santa Clara, California
December 28, 1998
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APPENDIX A
DESCRIPTION OF THE 1998 STOCK PLAN
General. The Company's 1998 Stock Plan (the "Stock Plan") was adopted
by the Board of Directors on October 29, 1998. The Stock Plan authorizes the
Board, or one or more committees which the Board may appoint from among its
members (the "Committee"), to grant stock options or stock purchase rights
("SPRs"). Options granted under the Stock Plan may be either Incentive Stock
Option ("ISOs") as defined in Section 422 of the Code, or Nonstatutory Stock
Options ("NSOs"), as determined by the Board or the Committee.
Subject to other provisions of the Stock Plan, the maximum aggregate
number of shares of Common Stock which may be optioned and sold under the Stock
Plan shall be 500,000 shares plus any shares which have been reserved but
unissued under the Option Plan and any shares returned to the Option Plan as a
result of the termination of options under the Option Plan. The shares reserved
under the Stock Plan may be authorized, but unissued, or reacquired Common
Stock.
Purpose. The general purpose of the Stock Plan is to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to Employees, Directors, and Consultants and to
promote the success of the Company's business.
Administration. The Stock Plan may be administered by the Board or the
Committee. Subject to the other provisions of the Stock Plan, the Board or the
Committee has the authority to: (i) interpret the Stock Plan and apply its
provisions; (ii) prescribe, amend or rescind rules and regulations relating to
the Stock Plan; (iii) select the persons to whom Options and SPRs are to be
granted; (iv) determine the number of shares to be made subject to each Option
and SPR; (v) determine whether and to what extent Options and SPRs are to be
granted; and (vi) prescribe the terms and conditions of each Option and SPR
(including the exercise price, whether an Option will be classified as an ISO or
a NSO and the provisions of the Stock Option or Stock Purchase Agreement to be
entered into between the Company and the grantee). All decisions,
interpretations and other actions of the Board or Committee shall be final and
binding on all holders of Options and SPRs and on all persons deriving their
rights therefrom.
Eligibility. The Stock Plan provides that Options and Stock Purchase
Rights may be granted to the Company's Employees, Directors, and Consultants (as
such terms are defined in the Stock Plan). ISOs may be granted only to
Employees. Any Optionee who owns more than 10% of the combined voting power of
all classes of outstanding stock of the Company or any Parent or Subsidiary is
not eligible for the grant of an ISO unless the Exercise Price of the Option is
at least 110% of the fair market value of the Common Stock on the date of grant.
The Stock Plan provides that no employee shall be granted, in any
fiscal year of the Company, options to purchase more than 250,000 shares of
Common Stock. In connection with an employee's initial employment, the employee
may be granted options to purchase up to an additional 250,000 shares of Common
Stock.
Terms and Conditions of Options. Each Option granted under the Stock
Plan is evidenced by a written stock option agreement between the Optionee and
the Company and is subject to the following terms and conditions:
(a) Exercise Price. The Board determines the exercise price of
Options to purchase shares of Common Stock at the time the Options are granted.
However, excluding Options issued to 10% Stockholders, the exercise price under
an ISO must not be less than 100% of the fair market value of the Common Stock
on the
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date the Option is granted. Generally, the fair market value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on the Nasdaq National Market on the last market trading day
prior to the date of determination.
(b) Form of Consideration. The means of payment for shares
issued upon exercise of an Option is specified in each stock option agreement
and generally may be made by cash, check, promissory note, other shares of
Common Stock of the Company owned by the Optionee, delivery of an exercise
notice together with irrevocable instructions to a broker to deliver the
exercise price to the Company from the sale or loan proceeds, reduction in the
amount of any Company liability to the Optionee, or by a combination thereof, or
such other consideration and method of payment for the issuance of shares to the
extent permitted by applicable laws.
(c) Exercise of the Option. Each stock option agreement will
specify the term of the Option and the date when the Option is to become
exercisable. However, in no event shall an Option granted under the Stock Plan
be exercised more than ten (10) years after the date of grant. Moreover, in the
case of an ISO granted to a 10% Stockholder, the term of the Option shall be for
no more than five (5) years from the date of grant.
(d) Termination of Continuous Status. In the event of
termination of an Optionee's Continuous Status as an Employee, Director, or
Consultant with the Company (as the case may be), such Optionee may, but only
within three (3) months following the Optionee's termination (or within such
other period of time as is determined by the Board, with such determination in
the case of an Incentive Stock Option being made at the time of grant of the
Option and such time period not exceeding ninety (90) days) after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(e) Disability. In the even of termination of an Optionee's
Continuous Status as an Employee, Director, or Consultant as a result of his
total and permanent disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within twelve (12) months (or within such other period of
time as is determined by the Board) from the date of such termination (but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(f) Death. In the event of the death of an Optionee while
Optionee is an Employee, Director, or Consultant, the Option may be exercised at
any time within twelve (12) months following the date of death (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. To the
extent that Optionee was not entitled to exercise the Option at the date of
death, or if Optionee's estate does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(g) Termination of Options. Each stock option agreement will
specify the term of the Option and the date when all or any installment of the
Option is to become exercisable. Notwithstanding the foregoing, however, the
term of an ISO shall not exceed ten (10) years from the date of grant. No
Options may be exercised by any person after the expiration of its term.
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(h) Nontransferability of Options. Unless determined otherwise
by the Administrator, an Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee.
(i) Value Limitation. If the aggregate Fair Market Value of
all shares of Common Stock subject to an Optionee's ISO which are exercisable
for the first time during any calendar year under all plans of the Company or
any Parent or Subsidiary exceeds $100,000, such excess Options shall be treated
as NSOs.
(j) Buyout Provisions. The Board or Committee may at any time
offer to buy out for a payment in cash or shares, an Option previously granted,
based on such terms and conditions as the Board or Committee shall establish and
communicate to the Optionee at the time that such offer is made.
Stock Purchase Rights. The Stock Plan permits the Company to grant
rights to purchase Common Stock either alone or in combination with other awards
granted under the Stock Plan or in combination with cash awards made outside of
the Stock Plan. After the Board or Committee determines that it will offer Stock
Purchase Rights under the Stock Plan, it shall advise the offeree in writing or
electronically, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of shares that the
offeree shall be entitled to purchase, the price to be paid and the time within
which the offeree must accept such offer. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Board or Committee.
Unless the Board or Committee determines otherwise, the Restricted
Stock purchase agreement shall grant the Company a repurchase option exercisable
upon the voluntary or involuntary termination of the purchaser's service with
the Company for any reason (including death or disability). The purchase price
for shares repurchased pursuant to the Restricted Stock purchase agreement shall
be the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The repurchase option shall
lapse at such rate as the Board or Committee may determine.
Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or SPR, and the number of shares
of Common Stock which have been authorized for issuance under the Stock Plan but
as to which no Options or SPRs have yet been granted or which have been returned
to the Stock Plan upon cancellation or expiration of an Option or SPR, as well
as the price per share of Common Stock covered by each such outstanding Option
or SPR, shall be proportionately adjusted for an any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option or SPR.
In the event of the proposed dissolution or liquidation of the Company,
the Board shall notify the Optionee, as soon as practicable prior to the
effective date of such proposed action. To the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed action.
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In the event of a merger of the Company with or into another corporation, the
Option or SPR may be assumed or an equivalent option shall be substituted by
such successor corporation or a parent or subsidiary of such successor
corporation. In the event that such successor corporation does not agree to
assume the Option or SPR or to substitute an equivalent option, the Board shall,
in lieu of such assumption or substitution, provide for the Optionee to have the
right to exercise the Option or SPR as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. If the Board
makes an Option or SPR fully exercisable in lieu of assumption or substitution
in the event of a merger, the Board shall notify the Optionee that the Option or
SPR shall be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the Option or SPR will terminate upon the expiration of such
period.
Amendments, Suspensions and Termination of the Option Plan. The Board
may amend, alter, suspend or discontinue the Stock Plan at any time, but no
amendment, alteration, suspension or discontinuation shall be made which would
impair the rights of any Optionee unless mutually agreed otherwise between the
Optionee and the Board in a writing signed by the Optionee and the Company. The
Company shall obtain stockholder approval for any Stock Plan amendment to the
extent necessary to comply with applicable laws. In any event, the Stock Plan
will terminate automatically in 2008.
Federal Tax Information for Stock Plan. Options granted under the Stock
Plan may be either ISOs or NSOs.
An Optionee who is granted an ISO will not recognize taxable income
either at the time the Option is granted or upon its exercise, although the
exercise may subject the Optionee to the alternative minimum tax. Upon the sale
or exchange of the shares more than two (2) years after grant of the Option and
one (1) year after exercise of the Option, any gain or loss will be treated as
long-term capital gain or loss. If these holding periods are not satisfied, the
Optionee will recognize ordinary income at the time of sale or exchange equal to
the difference between the exercise price and the lower of (i) the fair market
value of the shares on the date of exercise and (ii) the sale price of the
shares. A different rule for measuring ordinary income upon such premature
disposition may apply if the Optionee is also an Officer, Director, or 10%
Stockholder of the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the Optionee. Any gain or loss
recognized on such a premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as long-term or short-term
capital gain or loss, depending on the holding period.
All Options which do not qualify as ISOs are referred to as NSOs. An
Optionee will not recognize any taxable income at the time he or she is granted
an NSO. However, upon its exercise, the Optionee will recognize ordinary income
generally measured as the excess of the then Fair Market Value of the shares
purchased over the purchase price. Any ordinary income recognized in connection
with an Option exercise by an Optionee who is also an employee of the Company
will be subject to tax withholding by the Company. Upon resale of such shares by
the Optionee, any difference between the sales price and the Optionee's purchase
price, to the extent not recognized as ordinary income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period. The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the Optionee with respect to shares
acquired upon exercise of an NSO.
Stock purchase rights will generally be taxed in the same manner as
nonstatutory stock options. However, restricted stock is generally purchased
upon the exercise of a stock purchase right. At the time of purchase, restricted
stock is subject to a "substantial risk of forfeiture" within the meaning of
Section 83 of the Code. As a result, the purchaser will not recognize ordinary
income at the time of purchase. Instead, the purchaser will recognize ordinary
income on the dates when a stock ceases to be subject to a substantial risk of
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forfeiture. The stock will generally cease to be subject to a substantial risk
of forfeiture when it is no longer subject to the Company's right to repurchase
the stock upon the purchaser's termination of employment with the Company. At
such times, the purchaser will recognize ordinary income measured as the
difference between the purchase price and the fair market value of the stock on
the date the stock is no longer subject to a substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and the beginning of any capital gain
holding period by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, is measured as the
difference between the purchase price and the fair market value of the stock on
the date of purchase, and the capital gain holding period commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% shareholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE STOCK PLAN, DOES NOT PURPORT TO BE COMPLETE, AND
DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE INCOME TAX
LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE OPTIONEE MAY
RESIDE.
Stock Plan Benefits. The Company is unable to predict the amount of
benefits that will be received by or allocated to any particular participant
under the Stock Plan. The following table sets forth the dollar amount and the
number of shares granted under the Option Plan during the last fiscal year to
(i) each of the Company's Named Executive Officers, (ii) all executive officers
as a group, (iii) all non-employee directors as a group and (iv) all employees
other than executive officers as a group.
STOCK PLAN BENEFITS TABLE
DOLLAR VALUE NUMBER OF SHARES
NAME AND POSITION OF GRANTS(1) GRANTED
----------------- ----------- ----------------
Jimmy S.M. Lee............................................................ - -
Chief Executive Officer and President
Kong-Yeu Han.............................................................. -
Executive Vice President and General Manager, Taiwan -
Gary L. Fischer........................................................... -
Executive Vice President and Chief Financial Officer -
All Executive Officers as a Group (3 persons)............................. -
-
All Non-employee Directors as a Group (4 persons)......................... -
-
All Employees other than Executive Officers as a Group.................... $1,325,156 128,500
(1) The dollar value of option grants under the Option Plan was computed by
multiplying the number of shares subject to the option times the
exercise price of the option. All options granted under the Option Plan
were granted at an exercise price equal to the fair market value of the
Common Stock on the date of grant.
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APPENDIX B
DESCRIPTION OF THE 1995 DIRECTOR STOCK OPTION PLAN
General. The Company's 1995 Director Option Plan (the "Director Plan")
provides for the granting of nonstatutory stock options to nonemployee directors
of the Company. A total of 50,000 shares of Common Stock are presently reserved
for issuance pursuant to the Director Plan. As of December 1, 1998, an aggregate
of 17,500 shares were available for future grant under the Director Plan. In On
October 29, 1998, the Board amended the Director Plan, subject to stockholder
approval, to increase shares reserved for issuance from 75,000 to 125,000. The
stockholders are being asked to approve this share increase at the Annual
Meeting. The Director Plan authorizes the Board to grant nonstatutory stock
options to nonemployee directors of the Company.
Personnel. The purpose of the Director Plan is to attract and retain the
best available personnel to serve as outside directors of the Company.
Administration. The Director Plan is administered by the Board.
However, all options granted under the Director Plan are automatic and
non-discretionary. Upon re-election to the Board at the Annual Meeting of
stockholders each year during the term of the Director Plan, each outside
director will automatically receive an option to purchase 2,500 shares (the
"Annual Grant"). Additionally, each new outside director will automatically be
granted an option to purchase 2,500 shares upon the date on which such person
becomes a director (the "Initial Grant").
The Board has the authority to: (i) determine the fair market value of
the Common Stock in accordance with the terms of the Director Plan; (ii)
interpret the Director Plan; (iii) prescribe, amend and rescind rules and
regulations relating to the Director Plan; (iv) authorize any person to execute,
on behalf of the Company, any instrument required to effectuate the grant of an
option previously granted under the Director Plan; and (v) make all other
determinations deemed necessary or advisable for the administration of the
Director Plan. All decisions, determinations, and interpretations of the Board
shall be final.
Eligibility. The Director Plan provides that options may be granted only
to the Company's outside directors.
Terms and Conditions. Each option granted under the Director Plan is
evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The price to be paid for shares of Common
Stock upon the exercise of an option granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date the option is
granted. If the Common Stock is listed on any established stock exchange or a
national market system, the fair market value shall be the closing sale price
for such stock (or the closing bid if no sales were reported) on the date the
option is granted. If the Common Stock is traded on the over-the-counter market,
the fair market value shall be the mean of the high bid and low asked prices on
the date the option is granted.
(b) Form of Consideration. The consideration to be paid for
the shares of Common Stock issued upon exercise of an option shall be determined
by the Board. Such form of consideration may vary for each option, and may
consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares
which (x) in the case of Shares acquired upon exercise of an Option either have
been owned by the Optionee for more than six months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (y) have a Fair
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Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (5) authorization from
the Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (6) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for
the Shares not more than twelve months after the date of delivery of the
subscription agreement, (7) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
(8) any combination of the foregoing methods of payment.
(c) Exercise of the Option. Annual Grants under the Director
Plan will become exercisable in installments cumulatively as to 1/12th of the
shares of Common Stock subject to the Annual Grants at the end of each month
following the date of grant. Initial Grants under the Director Plan will become
exercisable in installments cumulatively as to 1/12th of the shares of Common
Stock subject to the Initial Grants at the end of each month following the date
of grant. In no event may an option granted under the Director Plan be exercised
more than ten years after the date of grant. An option granted under the
Director Plan is not exercisable for a fraction of a share. An option is
exercised by giving written notice of exercise to the Company specifying the
number of shares of Common Stock to be purchased and by tendering full payment
of the purchase price.
(d) Termination of Status as a Director. If the optionee's
status as a director terminates for any reason (other than death or permanent
disability), then all options held by such optionee under the Director Plan
expire upon the earlier of (i) three months after such termination or (ii) the
expiration date of the option. The optionee may exercise all or part of his or
her option at any time before such expiration to the extent that such option was
exercisable as of the date of termination of the optionee's status as a
director.
(e) Permanent Disability. If the optionee's status as a
director terminates as a result of total and permanent disability (as defined in
the Code), then all options held by such optionee under the Director Plan shall
expire upon the earlier of (i) twelve months after the date of such termination
or (ii) the expiration date of the option. The optionee may exercise all or part
of his or her option at any time before such expiration to the extent that such
option was exercisable at the time of termination of the optionee's status as a
director.
(f) Death. If an optionee dies while serving as a director of
the Company, the director's options under the Director Plan shall expire upon
the earlier of (i) twelve months after his or her death or (ii) the expiration
date of the option. The executor or legal representative of the optionee may
exercise all or part of the optionee's option at any time before such expiration
to the extent that such option was exercisable at the time of the optionee's
death.
(g) Nontransferability of Options. An option is
nontransferable by the optionee, other than by will or the laws of descent and
distribution, and is exercisable during the optionee's lifetime only by the
optionee. In the event of the optionee's death, options held by the optionee may
be exercised by a person who acquires the right to exercise the option by
bequest or inheritance.
Adjustments Upon Changes in Capitalization, Dissolution or Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of shares covered by each
outstanding Option and the number of shares which have been authorized for
issuance under the Director Plan but as to which no Options have yet been
granted or which have been returned to the Director Plan upon cancellation or
expiration of an Option, as well as the price per Share
B-2
23
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Mergers or Asset Sale. In the event of a merger of the
Company with or into another corporation or the sale of substantially all of the
assets of the Company, in a transaction or series of transactions whereby the
stockholders of the Company hold less than a majority of the outstanding capital
stock of the surviving or successor entity, each outstanding Option shall become
fully vested and exercisable, including as to shares that would not otherwise be
exercisable. If an Option becomes fully vested and exercisable in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the Option shall terminate upon the expiration of such thirty
(30) day period.
Amendment and Termination of the Director Plan. The Board may amend,
alter, suspend or discontinue the Director Plan; provided, however, that such
action shall not impair the rights of any optionee under the Director Plan
without the optionee's consent.
Federal Income Tax Consequences. All options granted under the Director
Plan are nonstatutory options. An optionee who is granted a nonstatutory stock
option will not recognize any taxable income at the time he or she is granted a
nonstatutory option. However, upon its exercise, the optionee will recognize
taxable income generally measured by the excess of the then fair market value of
the shares purchased over the purchase price. Any taxable income recognized in
connection with an option exercise by an optionee who is also an employee of the
Company will be subject to tax withholding by the Company. The Company will be
entitled to a deduction in the same amount as ordinary income recognized by the
employee. Upon sale of such shares by the optionee, any difference between the
sales price and the optionee's purchase price, to the extent not recognized as
taxable income as provided above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
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24
Director Plan Benefits. Only outside directors of the Company are
eligible to receive grants under the Director Plan. During fiscal 1998, each
outside director automatically received an option to purchase 2,500 shares of
Common Stock on the date of the Annual Meeting of Stockholders at the fair
market value of the Common Stock on such date.
B-4
25
INTEGRATED SILICON SOLUTION, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JIMMY S.M. LEE and GARY L. FISCHER, jointly and
severally, proxies, with full power of substitution, to vote all shares of
Common Stock of Integrated Silicon Solution, Inc., a Delaware corporation, which
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held at the Silicon Valley Capital Club, Fairmont Plaza, 50 West San Fernando,
17th Floor, San Jose, California, on January 29, 1999, at 2:00 p.m., local time,
or any adjournment thereof. The proxies are being directed to vote as specified
below or, if no specification is made, FOR the election of directors, FOR the
proposal to approve the Company's 1998 Stock Plan, FOR the proposal to amend the
Company's 1995 Director Stock Option Plan, FOR the appointment of Ernst & Young,
LLP as independent auditors and in accordance with their discretion on such
other matters that may properly come before the meeting.
The directors recommend a FOR vote on each item.
(Continued and to be signed on reverse side.)
26
FOR WITHHELD
all nominees AUTHORITY
listed (except to vote for
as withheld) nominees listed
1. ELECTION OF DIRECTORS [ ] [ ]
(Instruction: To withhold authority to vote
for any individual nominees, strike that
nominee's name below.)
Nominees: Jimmy S.M. Lee Kong-Yeu Han
Pauline Lo Alker Hide Tanigami
Lip-Bu Tan Chun Win Wong
FOR AGAINST ABSTAIN
2. Proposal to approve the Company's 1998 Stock [ ] [ ] [ ]
Plan with 500,000 shares reserved for issuance
thereunder:
FOR AGAINST ABSTAIN
3. Proposal to amend the Company's 1995 Director [ ] [ ] [ ]
Stock Option Plan to increase the number of
shares available for issuance thereunder by
75,000 shares to an aggregate of 125,000 shares:
FOR AGAINST ABSTAIN
4. Proposal to ratify the appointment of Ernst [ ] [ ] [ ]
& Young, LLP as independent auditors for the
1999 fiscal year:
YES NO
I plan to attend the Meeting: [ ] [ ]
Signature(s) _________________________________________________ Date ____________
(Signature(s) must be exactly as name(s) appear on this Proxy. If signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such, and, if signing for a corporation, please give your title. When shares
are in the names of more than one person, each should sign this Proxy.)
27
ANNEX A
INTEGRATED SILICON SOLUTION, INC.
1998 STOCK PLAN
1. Purposes of the Plan. The purposes of this 1998 Stock Plan are:
o to attract and retain the best available personnel for positions
of substantial responsibility,
o to provide additional incentive to Employees, Directors and
Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Integrated Silicon Solution, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
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(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1998 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
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(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is (a) Five Hundred Thousand (500,000) Shares, plus (b) any
Shares which have been reserved but unissued under the Company's 1989 Stock Plan
(the "1989 Plan") as of the date of stockholder approval of this Plan, and (c)
any Shares returned to the 1989 Plan after the date of stockholder approval of
this Plan as a result of the termination of options under the 1989 Plan. The
Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
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(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
5
32
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 250,000 Shares.
6
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(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 250,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
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(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
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10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain
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exercisable for twelve (12) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
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(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not
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otherwise be exercisable. In addition, the Administrator may provide that any
Company repurchase option applicable to any Shares purchased upon exercise of an
Option or Stock Purchase Right shall lapse as to all such Shares, provided the
proposed dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option or
Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
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(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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ANNEX B
INTEGRATED SILICON SOLUTION, INC.
1995 DIRECTOR STOCK OPTION PLAN
(AS AMENDED OCTOBER 29, 1998)
1. Purposes of the Plan. The purposes of this 1995 Director Stock Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Integrated Silicon Solution, Inc., a Delaware
corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of
grant, as reported in The Wall Street Journal or such other source as the Board
deems reliable;
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(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the day of determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means an Outside Director who receives an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1995 Director Stock Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 125,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in this Section
4(a) shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
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(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option (the "First Option") to purchase 10,000 Shares (adjusted as provided in
Section 10(a) hereof) on the date on which such person first becomes an Outside
Director, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy; provided, however, that no First
Option shall be granted hereunder to a person who was a Director and who has
become an Outside Director as a result of such person no longer being employed
by the Company.
(iii) Each Outside Director shall be automatically granted an
Option (a "Subsequent Option") to purchase 10,000 shares (adjusted as provided
in Section 10(a) hereof) on the date on which such person is re-elected by the
stockholders of the Company as an Outside Director; provided, however, that no
Option shall be granted hereunder to an Outside Director who is re-elected
within six months of being appointed or elected to the Board.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, no Options shall be exercisable before the Company has obtained
stockholder approval of the Plan in accordance with Section 16.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof.
(C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option.
(D) the First Option shall become exercisable as to
one-twelfth of the Shares subject to the First Option one month from its date of
grant, and as to an additional one-twelfth of the Shares subject to the First
Option each month thereafter, provided that the Optionee remains an Outside
Director as of the end of each one month period, so that one year from its date
of grant the First Option shall be fully vested.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of a Subsequent Option shall be ten (10)
years.
(B) a Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof.
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(C) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of a Subsequent Option.
(D) a Subsequent Option shall become exercisable as to
one-twelfth of the Shares subject to such Option one month from its date of
grant, and as to an additional one-twelfth of the Shares subject to such Option
each month thereafter, provided that the Optionee remains an Outside Director as
of the end of each one month period, so that one year from its date of grant a
Subsequent Option shall be fully vested.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the number of Shares in the
Pool, then the remaining Shares available for Option grant shall be granted
under Options to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the stockholders to increase
the number of Shares which may be issued under the Plan or through cancellation
or expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof. An Outside Director who has been granted an Option may, if he
or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan. The Plan shall become effective upon the date that the
Company's registration statement on Form S-1 for the purpose of effecting the
initial public offering of the Common Stock becomes effective under the
Securities Act of 1933, as amended (the "Securities Act"). It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 11 of
the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) by
delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (7)
delivery of a properly executed
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exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price; (8) any combination of the foregoing methods of payment, (9) or
such other consideration and method of payment for the issuance of Shares to the
extent permitted under Applicable Laws. In making its determination as to the
type of consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company (Section 315(b)
of the California corporation law).
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must comply with
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions, and
other transactions by Outside Directors that otherwise could be matched with
Plan transactions, for the maximum exemption from Section 16 of the Exchange
Act.
(c) Termination of Continuous Status as a Director. In the event an
Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within three (3) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than
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the expiration of its ten (10) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.
(d) Disability of Optionee. In the event Optionee's Continuous Status
as a Director terminates as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her
Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, in a transaction or series of transactions whereby the
stockholders of the Company hold less than a majority of the outstanding capital
stock of the surviving or successor entity, each outstanding Option shall become
fully vested and exercisable, including as to Shares that would not otherwise be
exercisable. If an Option becomes fully vested and exercisable in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the Option shall terminate upon the expiration of such thirty
(30) day period.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section 4, the
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, state
securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful
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issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
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