Plaintiff,

v.

Defendants

Plaintiff, Anis Shaikh, by his attorneys, alleges on information and belief except as to

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 effect

7. Plaintiff is, and at all times relevant hereto was, a shareholder of Silicon Storage.

8. Defendant Silicon Storage supplies NOR flash memory semiconductor devices for

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

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

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

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

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

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

15. Defendant TRH, a Delaware corporation, is a Prophet-controlled entity.

16. The defendants identified in ¶¶ 9 - 13 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 dealing,

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

(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 Defendants are also

(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,

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. Plaintiff alleges herein that the Individual Defendants, separately and together, in

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

33. Plaintiff brings this action pursuant to §382 of the California Code of Civil Procedure on its

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 October 31,

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

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

undivided loyalty, independence, due care and/or candor with respect to plaintiff 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 Plaintiff 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 Plaintiff 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 Plaintiff and the Class is

unfair and inadequate; and

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

harmed if the transactions complained of herein are consummated.

37. Plaintiff’s claim is typical of the claims of the other members of the Class and plaintiff

38. Plaintiff is an adequate representative of the Class, has retained competent counsel

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

40. Plaintiff anticipates that there will be no difficulty in the management of this litigation. A

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

42. Plaintiff repeats and re alleges each allegation set forth herein.

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

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

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

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

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

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

49. Plaintiff repeats and re alleges each allegation set forth herein.

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

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

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

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

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

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

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

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

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

WHEREFORE, Plaintiff demands judgment and preliminary and permanent relief, including

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 of the

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

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

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

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

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