v.

Plaintiffs, Ryan Ridgeway and David Thompson, by their attorneys, allege on

1. This is a shareholder class action on behalf of the public shareholders of Silicon

2. The Proposed Transaction is unfair and fails to maximize shareholder value and

3. Accordingly, this action seeks, inter alia, equitable relief seeking to enjoin the

4. This Court has jurisdiction over the cause of action asserted herein pursuant to

5. This Court has jurisdiction over defendant Silicon Storage because it conducts

6. Venue is proper in this Court because the conduct at issue took place and had an

7. Plaintiff Ryan Ridgeway is, and at all times relevant hereto was, a shareholder of

8. Plaintiff David Thompson is, and at all times relevant hereto was, a shareholder

9. Defendant Silicon Storage supplies NOR flash memory semiconductor devices

10. Defendant Bing Yeh (“Yen”), one of the co-founders of Silicon Storage, has

11. Defendant Yaw Wen Hu (“Hu”) has been a member of the Board of Directors of

12. Defendant Ronald Chwang has been a member of the Company’s Board of

13. Defendant Terry Nickerson has been a member of the Company’s Board of

14. Defendant Edward Y.W. Yang has been a member of the Company’s Board of

15. Defendant Prophet, a private equity firm, is located at 181 Grand Avenue,

16. The defendants identified in ¶¶ 10 - 14 are collectively referred to herein as the

17. Each of the Individual Defendants at all times had the power to control and direct

18. Each of the Individual Defendants owes fiduciary duties of good faith, fair

19. As directors and/or officers of a publicly traded corporation, the Individual

(a) discourages or inhibits alternative offers to purchase Silicon Storage;

(b) adversely affects the value provided to the Company’s shareholders;

(c) contractually prohibits them from complying with their fiduciary duties;

(d) adversely affects their ability to secure the best value reasonably

available under the circumstances for the corporation’s shareholders; and/or

(e) provides Silicon Storage insiders with preferential treatment at the

expense of, or separate from, its public shareholders.

7. In accordance with his/her duties of loyalty and good faith, the Individual

(a) participating in any transaction in which their loyalties are divided;

(b) participating in any transaction in which they will receive a personal

financial benefit not equally shared by the public shareholders of the corporation; and/or

(c) unjustly enriching themselves at the expense or to the detriment of the

public shareholders.

20. Silicon Storage, which was founded in 1989, designs, manufactures and markets

21. The Company’s products have been very successful. On November 2, 2009, just

22. The Company’s positive prospects suggest that the Proposed Transaction

23. On November 13, 2009, Silicon Storage announced publicly that it agreed to be

24. Under the terms of the Proposed Transaction, shares of Silicon Storage will no

25. The consideration to public shareholders is only a 13 percent premium over the

26. A Strategic Committee of the Company’s Board of Directors, consisting of all

27. Moreover, Lloyd I. Miller, III, Silicon Storage’s second largest shareholder, filed

28. No doubt recognizing that the deal is unfair to existing shareholders, the

29. Moreover, if a potential acquiror were to propose a transaction more favorable to

30. Accordingly, the Proposed Transaction undervalues the Company’s shares when

31. Plaintiffs allege herein that the Individual Defendants, separately and together, in

32. Because the Individual Defendants have breached their duties of due care,

33. Plaintiffs bring this action pursuant to §382 of the California Code of Civil

34. This action is properly maintainable as a class action.

35. The Class is so numerous that joinder of all members is impracticable. As of

36. There are questions of law and fact which are common to the Class and

(a) whether the Individual Defendants have breached their fiduciary duty of

undivided loyalty, independence, due care and/or candor with respect to plaintiffs and the other

members of the Class in connection with the Proposed Transaction;

(b) whether the Individual Defendants are engaging in self-dealing in

connection with the Proposed Transaction;

(c) whether the Individual Defendants have breached their fiduciary duty to

secure and obtain the best price reasonable under the circumstances for the benefit of Plaintiffs

and the other members of the Class in connection with the Proposed Transaction;

(d) whether defendants have breached any of their other fiduciary duties to

Plaintiffs and the other members of the Class in connection with the Proposed Transaction,

including the duties of good faith, diligence, candor and fair dealing;

(e) whether the defendants have impeded or erected barriers to discourage

other offers for the Company or its assets; whether the consideration payable to Plaintiffs and

the Class is unfair and inadequate; and

(f) whether Plaintiffs and the other members of the Class would be

irreparably harmed if the transactions complained of herein are consummated.

37. Plaintiffs’ claims are typical of the claims of the other members of the Class and

38. Plaintiffs are adequate representatives of the Class, have retained competent

39. The prosecution of separate actions by individual members of the Class would

40. Plaintiffs anticipate that there will be no difficulty in the management of this

41. Defendants have acted on grounds generally applicable to the Class with respect

42. Plaintiffs repeat and reallege each allegation set forth herein.

43. The defendants have violated fiduciary duties of care, loyalty, candor and

44. By the acts, transactions and courses of conduct alleged herein, defendants,

45. As demonstrated by the allegations above, the Individual Defendants failed to

46. As a result of the actions of defendants, Plaintiffs and the Class have been and

47. Unless enjoined by this Court, the defendants will continue to breach their

48. Plaintiffs and the members of the Class have no adequate remedy at law. Only

COUNT II

(For Aiding and Abetting the Individual Defendants’ Breach

of Fiduciary Duty against Silicon Storage and Prophet)

49. Plaintiffs repeat and reallege each allegation set forth herein.

50. Defendants Silicon Storage and Prophet are sued herein as aiders and

51. The Individual Defendants breached their fiduciary duties of due care,

52. Such breaches of fiduciary duties could not and would not have occurred

53. Defendants Silicon Storage and Prophet directly breached or aided and/or abetted

54. Defendants Silicon Storage and Prophet had knowledge that it was aiding and

55. Defendants Silicon Storage and Prophet rendered substantial assistance to the

56. As a result of Silicon Storage’s and Prophet’s conduct of aiding and abetting the

57. As a result of the unlawful actions of Defendants Silicon Storage and Prophet,

58. Plaintiffs and the other members of the Class have no adequate remedy at

WHEREFORE, Plaintiffs demand judgment and preliminary and permanent relief,

A. Declaring that this action is properly maintainable as a class action;

B. Declaring and decreeing that the Merger Agreement was entered into in breach

C. Rescinding, to the extent already implemented, the Proposed Transaction or any

D. Preliminarily and permanently enjoining defendants, their agents, counsel,

E. Directing the Individual Defendants to exercise their fiduciary duties to obtain a

F. Awarding Plaintiffs the costs and disbursements of this action, including

G. Granting such other and further relief as this Court may deem just and proper.