SiliconBeat

Silicon Storage Technology reached an agreement with investor Bryant Riley, nominating him for a seat on its board in exchange for an agreement by him to call off his proxy fight with the company in which he named an opposition slate of nominees to the board. As a result the company pushed back its impending shareholder meeting from June 9 to June 27.

Riley also agreed to several “standstill” provisions which will prevent he and his
investment company, Riley Investment Management (RIM), from taking a variety of steps to undermine the board or acquire a stake in the company greater than 9.9 percent that’s good through June 2009.

Riley first revealed his interest in SST back in September when he filed notice that he RIM had acquired a nearly 5 percent stake in the company, paying on average $3.13 a share. At that time, he expressed his belief that the company’s shares were “significantly undervalued” (i.e. he thinks he bought low), and that the sum of its part, including a then $168 million in cash and $100 million worth of equity investments, not to mention $35 million in annual licensing revenue and a “robust pipeline of non-commodity products” made it worth more than its $321 market cap at the time.

Back then, SST was still under a regulatory cloud as it was in the process of investigating past stock-option granting practices and behind in filing its required financial reports to the SEC, something it finally caught up with in January.

(The company ended up taking net charges totaling $41.7 million to properly account for
incorrectly dated option grants from 1997 through 2005. As usual, current members of
management were cleared of any wrongdoing, just cluelessness, with no such determination made about former management. And in a finding worthy of the Pentagon, the only possible culpability could be located among the lower ranks: “There is evidence, however, that a former non-management employee was aware of the methods by which the exercise price of such options was determined and that this employee may have been aware that the use of such methods was improper.” But we digress.)

Unsatisfied with the company’s progress at increasing shareholder value, Riley filed notice in April of his intent to nominate an opposing slate of directors to the board, which obviously got the board’s attention.

Shares of SST closed Friday at $3.12, essentially the same price where Riley came in.