<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997
REGISTRATION NO. 333-35327
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
PERICOM SEMICONDUCTOR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
CALIFORNIA 3674 77-0254621
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
OR ORGANIZATION)
2380 BERING DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 435-0800
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACE OF BUSINESS)
--------------
PATRICK B. BRENNAN
VICE PRESIDENT, FINANCE AND ADMINISTRATION
PERICOM SEMICONDUCTOR CORPORATION
2380 BERING DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 435-0800
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
MICHAEL C. PHILLIPS, ESQ. GREGORY M. GALLO, ESQ.
KEVIN A. FAULKNER, ESQ. JAMES M. KOSHLAND, ESQ.
HEIKE E. FISCHER, ESQ. PAUL A. BLUMENSTEIN, ESQ.
MORRISON & FOERSTER LLP GRAY CARY WARE & FREIDENRICH
755 PAGE MILL ROAD A PROFESSIONAL CORPORATION
PALO ALTO, CA 94304-1018 400 HAMILTON AVENUE
PALO ALTO, CA 94301-1825
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
-----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
-----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 14, 1997
PROSPECTUS
2,500,000 Shares
[LOGO OF PERICOM]
Common Stock
Of the 2,500,000 shares of Common Stock offered hereby, 2,000,000 shares are
being offered by Pericom Semiconductor Corporation (the "Company") and 500,000
shares are being offered by certain shareholders of the Company (the "Selling
Shareholders"). See "Principal and Selling Shareholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Shareholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $9.00 and $11.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "PSEM."
SEE "RISK FACTORS," BEGINNING ON PAGE 5, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
-------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
Total(3)......................... $ $ $ $
</TABLE>
- ----
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $600,000.
(3) The Company and the Selling Shareholders have granted the Underwriters an
option, on the same terms and conditions as set forth above exercisable
within 30 days of the date hereof, to purchase up to 375,000 additional
shares of Common Stock solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Shareholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters, subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of share certificates will be made in New York, New
York, on or about , 1997.
SoundView Financial Group, Inc. Unterberg Harris
, 1997
<PAGE>
Set forth on the left hand side of the inside front cover page there are two
photos under the heading "Pericom High-Performance ICs," the one on the left
showing a gymnast performing a manouver on the still rings, the one to the
right showing a Pericom IC device on a circuit board. Below such photos, there
are three columns. The column on the left sets forth the following text:
"Pericom designs, develops and markets high-performance integrated circuits
(ICs) for the transfer, routing and timing of digital and analog signals in
personal computers, networking equipment and multimedia hardware. COMPUTERS--
Solutions for signal transfer, signal switching, clock distribution, hot-plug
interfaces, and mixed-voltage interface." The column in the center shows
graphics of seven Pericom IC devices of various types with the following
captions underneath: "Interface Logic," "Networking Transceivers," "Clock
Generators," "Digital Switches" and "Analog Switches." Below such graphics,
the center column includes the following text: "NETWORKING--Solutions used in
FastEthernet protocol switching, hub-to-hub connections, backplane signal
transfer, clock distribution, physical layer transceivers and hot-plug
interfaces." The column on the right sets forth the following text:
"MULTIMEDIA--Solutions used in TV/PC monitors, video switching, picture-in-
picture video overlay, audio switching and video multiplexing." Set forth
below such text is a stylized letter "P" in a circle and the name "PERICOM."
Set forth on the left hand side of the inside cover gatefold under the
caption "High-Performance Notebook Computer and Multimedia Applications" and
the sentence "Pericom supplies interface logic, digital and analog switches
and clock management products to notebook PC manufacturers such as Acer,
Compaq, Dell, IBM, Toshiba, and multimedia companies such as Avid, Diamond
Multimedia and Trident Microsystems." Set forth below are graphics consisting
of four rectangular boxes with smaller boxes inside, labeled as a docking
station, a notebook computer, an audio card, and a video card, respectively.
The box representing a docking station is connected to the box representing a
notebook computer. Within the boxes, certain elements of the applicable item
are depicted, with the interconnection of such elements shown by lines. The
elements offered by Pericom are highlighted: "Switch" in the box depicting a
docking station; "Logic," "Clock", and "Switch" in the box depicting a
notebook computer; "Clock," and three "Analog Switch[es]" in the box depicting
an audio card; and "Bus Switch," "Clock" and "Video Switch" in the box
depicting a video card. Set forth under such graphics is the following
sentence: "APPLICATION: High-performance notebook computer with Pentium-class
microprocessor with docking station connection."
Set forth on the right side of the inside cover gatefold under the caption
"Networking Application" and the sentence "Pericom supplies interface logic,
LAN switches, clock management products and transceivers to networking
equipment manufacturers such as 3COM, Ascend Communications, Bay Networks,
Cabletron Systems, Cisco Systems and Hewlett-Packard." Set forth below are
graphics consisting of rectangular boxes labeled "Network Switch" and
thereunder graphics and title "Network Interface Card." Within the boxes,
certain elements of the applicable items are depicted, with the
interconnection of such elements shown by lines. The elements offered by
Pericom are highlighted: two "Switch[es]," "Logic," "Clock," "PHY," and "LAN
Switch" in the box representing a network switch; and "Memory," "Multi-
Protocol Controller," two "LAN Transceiver[s]," and "Filter Magnetic" in the
box representing a network interface card. Elements that Pericom is currently
shipping engineering samples are footnoted as such with an asterisk. The boxes
depicting the two systems are connected by a line. Set forth to the left of
the box representing a network switch is a three-dimensional graphic labeled
"Network Switch," and to the left of the box depicting a network interface
card is a graphic labeled "Notebook Computer with Docking Station." Set forth
at the bottom of the page is the following sentence: "APPLICATION: Networking
system with multiprotocol 100-megabit transceivers for network switch and LAN
adapter."
[INSIDE FRONT COVER PHOTOGRAPHS]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT-COVERING
TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by independent accountants and to make
available quarterly reports containing unaudited summary financial information
for each of the first three quarters of each fiscal year.
Pericom is a registered trademark of the Company and SiliconConnect,
SiliconSwitch, SiliconClock, SiliconInterface, LanSwitch, DigitalSwitch,
AnalogSwitch, FlexClock and VideoSwitch are trademarks and trade names of the
Company. This Prospectus also contains other product names and trade names and
trademarks of the Company and of other organizations.
2
<PAGE>
Set forth on the left side of the inside cover gatefold under the caption
"High Performance Notebook Computer and Multimedia Applications" and the
sentence "Pericom supplies interface logic, digital and analog switches, and
clock management products to notebook companies such as Acer, Compaq, Dell,
Hitachi, IBM, and multimedia companies such as Avid, Diamond Multimedia, STB
Systems, and Trident Microsystems" are one circle, four rectangular boxes with
smaller boxes inside, and one square box, labeled as a file server, a docking
station, a notebook computer, a sound card, and a laser printer. The circle
representing a file server is connected to the box representing a docking
station which in turn is connected to the boxes representing a notebook computer
and a laser printer. Within the boxes, certain elements of the applicable item
are depicted, with the interconnection of such elements shown by lines. The
elements offered by Pericom are highlighted: "Switch" in the box depicting a
docking station; "Logic," "Clock", and two "Switches" in the box depicting a
notebook computer; "Switch," "Clock," and two "Analog Switch[es]" in the box
depicting a sound card; "Switch", "Clock" and "Video Switch" in the box
depicting a video card, and "Clock" in the box depicting a laser printer. Set
forth under such graphics is the following sentence: "APPLICATION: High-
performance notebook computers with Pentium-Class microprocessors communicating
with docking station connections".
<PAGE>
Set forth on the right side of the inside cover gatefold under the caption
"Networking Application" and the sentence "Pericom supplies interface logic, LAN
switches, clock management products, and transceivers to networking companies
such as 3COM, Ascend Communications, Cabletron Systems, Cisco Systems, Hewlett-
Packard and Samsung" are rectangular boxes labeled "Switching Hub System" and
thereunder graphics entitled "Adapter System." Within the boxes, certain
elements of the applicable item are depicted, with the interconnection of such
elements shown by lines. The elements offered by Pericom are highlighted:
"Switch,", "Logic," "Clock," "PHY," and "LAN Switch" in the box representing a
switching hub system; and "Logic," "Clock," and "LAN Switch" in the box
representing an adapter system. Elements of which Pericom is currently shipping
engineering samples are marked as such. The boxes depicting the systems are
connected by a line. Set forth to the left of the box representing a switching
hub system is a three-dimensional box labeled "Switching Hub," and to the left
of the box depicting an adapter system is a graphic labeled "Mobile Computer
with Docking Station." Set forth at the bottom of the page is the following
sentence: "APPLICATION: Networking systems with multiprotocol 100-megabit
transceivers for switching hub and adapter system."
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the detailed information and the Financial Statements,
including the Notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus (i) assumes no exercise
of the Underwriters' over-allotment option, (ii) has been adjusted to reflect a
1-for-2 reverse stock split to be effected in October 1997, and (iii) has been
adjusted to reflect the conversion of all outstanding shares of Preferred Stock
into Common Stock upon the closing of the offering.
THE COMPANY
Pericom Semiconductor Corporation (the "Company" or "Pericom") designs,
develops and markets high-performance interface integrated circuits ("ICs")
used in many of today's advanced electronic systems. Interface ICs, such as
interface logic, switches and clock management products, transfer, route and
time electrical signals among a system's microprocessor, memory and various
peripherals and between interconnected systems. High-performance interface ICs,
which enable high signal quality, are essential for the full utilization of the
available speed and bandwidth of advanced microprocessors, memory ICs, LANs and
WANs. Pericom focuses on high-growth and high-performance segments of the
notebook computing, networking and multimedia markets, in which advanced system
designs require interface ICs with high-speed performance, reduced power
consumption, low-voltage operation, small size and higher levels of
integration.
Pericom has combined its extensive design technology and applications
knowledge with its responsiveness to the specific needs of electronic systems
developers to become a leading supplier of interface ICs. The Company has
evolved from one product line in fiscal 1992 to four currently --
SiliconInterface, SiliconSwitch, SiliconClock and SiliconConnect -- with a
goal of providing an increasing breadth of interface IC solutions to its
customers. Pericom currently offers approximately 300 standard products, of
which 81 were introduced during the twelve months ended September 30, 1997, and
is planning to introduce 34 new products during the fourth quarter of calendar
1997.
Pericom has developed and is continuously refining a modular design
methodology which enables it to rapidly introduce proprietary and leading-
performance products. Central to this methodology is Pericom's library of
advanced digital and analog macrocells and core functions, many of which are
not available in commercial ASIC libraries. A number of these macrocells and
core functions, including mixed-voltage input/output cells, a digital PLL, an
analog PLL and a charge pump, are designed with patented technology. This
advanced library allows Pericom to effectively address the market requirements
for interface ICs with short propagation delay, low noise and jitter, minimal
skew and reduced EMI emissions. The modular design methodology also allows the
Company to utilize a combination of digital macrocells, analog macrocells and
sea-of-gates arrays to rapidly design interface ICs optimized for power,
density, performance and manufacturing. Another key attribute of the design
methodology is the utilization of common mask sets from which multiple designs
can be developed, resulting in rapid product introductions, lower development
costs and fast response to volume requirements at competitive pricing.
The Company has adopted a fabless manufacturing strategy to gain access to a
broad range of advanced process technologies without incurring substantial
capital investments. The Company has a long-standing relationship with
Chartered, recently began using TSMC as an important supplier and is currently
qualifying LG. The Company also utilizes AMS and NJRC for BiCMOS and high-
voltage CMOS processes. See "Risk Factors--Dependence on Independent Wafer
Foundries."
Pericom pursues a three-tier customer strategy, consisting of (i) penetrating
target accounts by working with customer system design engineers to have
Pericom ICs incorporated into their product designs, (ii) solidifying customer
relationships through on-time delivery of high-quality, state-of-the-art,
competitively-priced ICs and
3
<PAGE>
(iii) expanding sales to existing customers by providing increasingly extensive
solutions to customer needs. The Company markets and distributes its products
through a worldwide network of independent sales representatives and
distributors. The Company's customers and OEM end users include 3Com
Corporation, Apple Computer, Inc., Ascend Communications, Inc., Avid
Technology, Inc., Cabletron Systems, Inc., Canon Inc., Cisco Systems, Inc.,
Compaq Computer Corporation, Digital Equipment Corporation, Hewlett-Packard
Company, Hitachi Ltd., International Business Machines Corporation, Intel
Corporation, Inventec, Inc., Smart Modular Technologies Inc., Solectron
Technology Corporation and Toshiba Corporation.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
By the Company.................................. 2,000,000 shares
By the Selling Shareholders..................... 500,000 shares
Total........................................ 2,500,000 shares
Common Stock to be outstanding after the
offering(1)...................................... 9,023,790 shares
Use of proceeds................................... General corporate purposes,
including working capital, purchase
of capital equipment and potential
acquisitions.
Proposed Nasdaq National Market symbol............ PSEM
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------------------- --------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues............. $6,284 $18,886 $22,732 $41,174 $33,166 $6,601 $11,398
Gross profit............. 2,983 7,878 9,859 18,377 12,180 2,605 4,559
Income from operations... 367 2,432 2,879 7,492 2,004 171 1,434
Net income............... 333 2,544 2,041 4,710 1,578 185 1,023
Net income per common and
equivalent share........ $ 0.05 $ 0.33 $ 0.26 $ 0.57 $ 0.20 $ 0.02 $ 0.12
Shares used in computing
per share data(2) ...... 6,638 7,696 7,975 8,269 8,092 8,224 8,210
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------
ACTUAL AS ADJUSTED (3)
------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents.................................... $ 9,544 $27,544
Working capital......................................... 13,535 31,535
Total assets............................................ 24,086 42,086
Shareholders' equity.................................... 17,876 35,876
</TABLE>
- --------
(1) Excludes 1,486,057 shares reserved for issuance pursuant to the exercise of
stock options outstanding as of September 30, 1997 having a weighted
average exercise price of $2.56 per share. See "Management -- Stock Plans"
and Note 6 of Notes to Financial Statements.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing net income
per common and equivalent share.
(3) Adjusted to reflect the receipt of the estimated net proceeds from the sale
of 2,000,000 shares offered by the Company hereby at an assumed initial
public offering price of $10.00 per share.
4
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, investors
should carefully consider the following risk factors in evaluating an
investment in the Common Stock offered hereby. This Prospectus contains
certain forward-looking statements. These statements are subject to risks and
uncertainties, including those set forth below, and actual results could
differ materially from those expressed or implied in these statements. All
forward-looking statements included in this Prospectus are made as of the date
hereof, and the Company assumes no obligation to update any such forward-
looking statements or reason why actual results might differ.
LIMITED OPERATING HISTORY; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company was founded in 1990 and has a limited history of operations,
having shipped its first products in volume in fiscal 1993. There can be no
assurance that any past levels of revenue growth or profitability can be
sustained on a quarterly or annual basis. The Company's expense levels are
based in part on anticipated future revenue levels, which can be difficult to
predict. The Company's business is characterized by short-term orders and
shipment schedules. The Company does not have long-term purchase agreements
with any of its customers, and customers can typically cancel or reschedule
their orders without significant penalty. The Company typically plans its
production and inventory levels based on forecasts, generated with input from
customers and sales representatives, of customer demand which is highly
unpredictable and can fluctuate substantially. If customer demand falls
significantly below anticipated levels, the Company's business, financial
condition and results of operations would be materially and adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company has experienced significant fluctuations in its quarterly
operating results in the past three fiscal years and could continue to
experience such fluctuations in the future. For instance, in the quarter ended
June 30, 1997, sales to Harris Corporation ("Harris") under a private label
resale program were $3.1 million, compared to an average of $0.8 million in
each of the three previous quarters. Sales to Harris are not expected to
continue at the level achieved in the quarter ended June 30, 1997 and may
fluctuate significantly from quarter to quarter. The Company's operating
results are affected by a wide variety of factors that could materially and
adversely affect net revenues and results of operations, including a decline
in the gross margins of its products, the growth or reduction in the size of
the market for interface ICs, delay or decline in orders received from
distributors, the availability of manufacturing capacity with the Company's
wafer suppliers, changes in product mix, customer acceptance of the Company's
new products, the ability of customers to make payments to the Company, the
timing of new product introductions and announcements by the Company and its
competitors, increased research and development expenses associated with new
product introductions or process changes, expenses incurred in obtaining and
enforcing, and in defending claims with respect to, intellectual property
rights, changes in manufacturing costs and fluctuations in manufacturing
yields, and other factors such as general conditions in the semiconductor
industry. All of the above factors are difficult for the Company to forecast,
and these or other factors can materially and adversely affect the Company's
business, financial condition and results of operations for one quarter or a
series of quarters. The Company's expense levels are based in part on its
expectations regarding future sales and are fixed in the short term to a large
extent. Therefore, the Company may be unable to adjust spending in a timely
manner to compensate for any unexpected shortfall in sales. Any significant
decline in demand relative to the Company's expectations or any material delay
of customer orders could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to sustain profitability on a
quarterly or annual basis. In addition, it is possible that the Company's
operating results in future quarters may fall below the expectations of public
market analysts and investors, which would likely result in a material drop in
the market price of the Company's Common Stock. See "-- No Prior Market, Stock
Price Volatility; Dilution" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Historically, selling prices in the semiconductor industry generally, as
well as for the Company's products, have decreased significantly over the life
of each product. Beginning late in calendar 1995 and continuing into calendar
1997, the Company experienced a significant decrease in the selling prices of
many of its products,
5
<PAGE>
which had a material adverse effect on the Company's net revenues and overall
gross margins. The Company expects that selling prices for its existing
products will continue to decline over time and that average selling prices
for new products will decline significantly over the lives of these products.
Declines in selling prices for the Company's products, if not offset by
reductions in the costs of producing these products or by sales of new
products with higher gross margins, would reduce the Company's overall gross
margins and could materially and adversely affect the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will be able to reduce production costs or to develop and market
new products with higher gross margins. See "-- Technological Change;
Dependence on New Products," "-- Competition," "-- Semiconductor Industry
Risks" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DEPENDENCE ON INDEPENDENT WAFER FOUNDRIES
In fiscal 1996 and 1997, approximately 90% of the wafers for the Company's
semiconductor products were manufactured by Chartered Semiconductor
Manufacturing Pte, Ltd. ("Chartered"), and the remainder of the Company's
wafers were manufactured by Austria Mikro Systeme GmbH ("AMS"), New Japan
Radio Corporation ("NJRC") and Taiwan Semiconductor Manufacturing Corporation
("TSMC"). The Company is currently qualifying LG Semicon Co., Ltd. ("LG") as a
foundry supplier. The Company believes that it will receive an increasing
portion of its wafer requirements from TSMC and LG in the future. The
Company's reliance on independent wafer suppliers to fabricate its wafers at
their production facilities subjects the Company to such possible risks as
potential lack of adequate capacity and available manufactured products, lack
of control over delivery schedules and the risk of events limiting production
and reducing yields, such as fires or other damage to production facilities or
technical difficulties. Although, to date, the Company has not experienced any
material delays in obtaining an adequate supply of wafers, there can be no
assurance that the Company will not experience delays in the future. Any
inability or unwillingness of the Company's wafer suppliers generally, and
Chartered in particular, to provide adequate quantities of finished wafers to
meet the Company's needs in a timely manner or in needed quantities would
delay production and product shipments and have a material adverse effect on
the Company's business, financial condition and results of operations.
At present, the Company purchases wafers from its wafer suppliers through
the issuance of purchase orders based on rolling six-month forecasts provided
by the Company, and such purchase orders are subject to acceptance by each
wafer foundry. The Company does not have long-term purchase agreements with
any of its wafer suppliers, each of which has the right to reduce or terminate
allocations of wafers to the Company. In the event that these suppliers were
unable or unwilling to continue to manufacture the Company's key products in
required volumes, the Company would have to identify and qualify additional
foundries. In any event, the Company's future growth will also be dependent
upon its ability to identify and qualify new wafer foundries. The
qualification process can take up to six months or longer, and there can be no
assurance that any additional wafer foundries will become available to the
Company or will be in a position to satisfy any of the Company's requirements
on a timely basis. The Company also depends upon its wafer suppliers to
participate in process improvement efforts, such as the transition to finer
geometries, and any inability or unwillingness of such suppliers to do so
could delay or otherwise materially adversely affect the Company's development
and introduction of new products. Furthermore, sudden shortages of raw
materials or production capacity constraints can lead wafer suppliers to
allocate available capacity to customers other than the Company or for
internal uses, which could interrupt the Company's ability to meet its product
delivery obligations. Any significant interruption in the supply of wafers to
the Company would adversely affect the Company's operating results and
relations with affected customers. The Company's reliance on independent wafer
suppliers may also impact the length of the development cycle for the
Company's products, which may provide time-to-market advantages to competitors
that have in-house fabrication capacity.
In the recent past, some wafer foundries, including some of those utilized
by the Company, required certain customers to make substantial financial
commitments to them as a condition to future allocations of finished wafer
output. These financial commitments have taken the form of equity investments
in the foundry, full or
6
<PAGE>
partial pre-payments on orders, or the furnishing of capital equipment to the
foundry. The Company has not been required to make such financial commitments
to date. Although wafer foundries generally are no longer requiring such
financial commitments, there can be no assurance that wafer foundries will not
renew such requirements at some time in the future. The Company has limited
financial resources and would be substantially less able than many of its
competitors and other semiconductor companies to provide equity investments or
other financial accommodations to its foundries to obtain capacity allocation
guarantees. To the extent that such financial commitments are required to
maintain existing wafer output or to obtain new capacity, the Company's
ability to obtain wafers will be adversely affected if the Company is unable
to meet such requirements.
Each of Chartered, AMS, NJRC, TSMC and LG is located outside the United
States, which exposes the Company to risks associated with international
business operations, including foreign governmental regulations, currency
fluctuations, reduced protection for intellectual property, changes in
political conditions, disruptions or delays in shipments and changes in
economic conditions in the countries where these foundries are located, each
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business -- Manufacturing."
TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS
The markets for the Company's products are characterized by rapidly changing
technology, frequent new product introductions and declining selling prices
over product life cycles. The Company's future success is highly dependent
upon the timely completion and introduction of new products at competitive
price/performance levels. The success of new products depends on a variety of
factors, including product selection, product performance and functionality,
customer acceptance, competitive pricing, successful and timely completion of
product development, sufficient wafer fabrication capacity and achievement of
acceptable manufacturing yields by the Company's wafer suppliers. There can be
no assurance that the Company will be able to successfully identify new
product opportunities and develop and bring to market such new products or
that the Company will be able to respond effectively to new technological
changes or new product announcements by others. In addition, the Company may
experience delays, difficulty in procuring adequate fabrication capacity for
the development and manufacture of such products or other difficulties in
achieving volume production of these products. The failure of the Company to
complete and introduce new products in a timely manner at competitive
price/performance levels would materially and adversely affect the Company's
business, financial condition and results of operations.
The Company has relied in the past and continues to rely upon its
relationships with manufacturers of high-performance systems for insights into
product development strategies for emerging system requirements. The Company
believes it will rely on these relationships more in the future as the Company
focuses on the development and production of application specific standard
products. The Company generally incorporates its new products into a
customer's product or system at the design stage. However, these design
efforts, which can often require significant expenditures by the Company, may
precede the generation of volume sales, if any, by a year or more. Moreover,
the value of any design win will depend in large part on the ultimate success
of the customer's product and on the extent to which the system's design
accommodates components manufactured by the Company's competitors. No
assurance can be given that the Company will achieve design wins or that any
design win will result in significant future revenues. To the extent the
Company cannot develop or maintain such relationships, its ability to develop
well-accepted new products may be impaired, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business -- Products" and "Business -- Research
and Development."
CUSTOMER CONCENTRATION
A relatively small number of customers has accounted for a significant
portion of the Company's net revenues in each of the past several fiscal years
and the Company expects this trend to continue for the foreseeable future. In
fiscal 1997, sales to Harris and International Business Machines Corporation
("IBM")
7
<PAGE>
accounted for approximately 17% and 14%, respectively, of the Company's net
revenues, and sales to the Company's top five customers accounted for
approximately 47% of net revenues. In the fourth quarter of fiscal 1997, sales
to Harris under a private label resale program were $3.1 million and accounted
for 27.3% of the Company's net revenues during that quarter. In the first
quarter of fiscal 1998, the Company's top five customers accounted for 35% of
net revenues, although no single customer accounted for greater than 10% of
net revenues. The Company does not have long-term purchase agreements with any
of its customers. There can be no assurance that the Company's current
customers will continue to place orders with the Company, that orders by
existing customers will continue at the levels of previous periods or that the
Company will be able to obtain orders from new customers. In particular, sales
to Harris are not expected to continue at the level achieved in the fourth
quarter of fiscal 1997. Loss of one or more of the Company's large customers,
or a reduction in the volume of orders placed by any of such customers, could
materially and adversely affect the Company's business, financial condition
and results of operations. See "-- Limited Operating History; Potential
Fluctuations in Operating Results," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Customers" and
"Business -- Sales and Marketing."
COMPETITION
The semiconductor industry is intensely competitive. Significant competitive
factors in the market for high- performance ICs include product features and
performance, product quality, price, success in developing new products,
adequate wafer fabrication capacity and sources of raw materials, efficiency
of production, timing of new product introductions, ability to protect
intellectual property rights and proprietary information, and general market
and economic conditions. The Company's competitors include Cypress
Semiconductor Corporation, Integrated Circuit Systems, Inc., Integrated Device
Technology, Inc., Maxim Integrated Products, Inc., Quality Semiconductor, Inc.
and Texas Instruments, Inc., most of which have substantially greater
financial, technical, marketing, distribution and other resources, broader
product lines and longer-standing customer relationships than the Company. The
Company also competes with other major or emerging companies that sell
products to certain segments of the markets addressed by the Company.
Competitors with greater financial resources or broader product lines may also
have greater ability than the Company to engage in sustained price reductions
in the Company's primary markets in order to gain or maintain market share.
The Company believes that its future success will depend on its ability to
continue to improve and develop its products and processes. Unlike the
Company, many of the Company's competitors maintain internal manufacturing
capacity for the fabrication and assembly of semiconductor products, which may
provide such competitors with more reliable manufacturing capability, shorter
development and manufacturing cycles and time-to-market advantages. In
addition, competitors with their own wafer fabrication facilities that are
capable of producing products with the same design geometries as those of the
Company may be able to manufacture and sell competitive products at lower
prices. Introduction of products by competitors that are manufactured with
improved process technology could materially and adversely affect the
Company's business and results of operations. As is typical in the
semiconductor industry, competitors of the Company have developed and marketed
products having functionality similar or identical to the Company's products,
and the Company expects this trend to continue in the future. To the extent
the Company's products do not achieve performance, price, size or other
advantages over products offered by competitors, the Company is likely to
experience greater price competition with respect to such products. The
Company also faces competition from the makers of microprocessors and other
system devices, including application specific integrated circuits ("ASICs"),
that have been and may be developed for particular systems. These devices may
include interface logic functions, which may eliminate the need or sharply
reduce the demand for the Company's products in particular applications. There
can be no assurance that the Company will be able to compete successfully in
the future or that competitive pressures will not materially and adversely
affect the Company's financial condition and results of operations.
Competitive pressures could also reduce market acceptance of the Company's
products and result in price reductions and increases in expenses that could
materially and adversely affect the Company's business, financial condition
and results of operations. See "-- Dependence on Independent Wafer Foundries,"
"-- Dependence on Single or Limited Source Assembly Subcontractors,"
"Business -- Manufacturing" and "Business -- Competition."
8
<PAGE>
VARIATION IN PRODUCTION YIELDS
The manufacture and assembly of semiconductor products is highly complex and
sensitive to a wide variety of factors, including the level of contaminants in
the manufacturing environment, impurities in the materials used and the
performance of manufacturing personnel and production equipment. In a typical
semiconductor manufacturing process, silicon wafers produced by the foundry
are sorted and cut into individual die that are then assembled into individual
packages and tested for performance. The Company's wafer fabrication suppliers
have from time to time experienced lower-than-anticipated yields of good die,
as is typical in the semiconductor industry. In the event of such decreased
yields, the Company would incur additional costs to sort wafers, an increase
in average cost per usable die and an increase in the time to market for its
products. These conditions could reduce the Company's net revenues and gross
margin, and have an adverse effect on the Company's business and results of
operations, and relations with affected customers. No assurance can be given
that the Company or its suppliers will not experience yield problems in the
future which could result in a material adverse effect on the Company's
business and results of operations. See "Business -- Manufacturing."
SEMICONDUCTOR INDUSTRY RISKS
The semiconductor industry has historically been cyclical and periodically
subject to significant economic downturns, characterized by diminished product
demand, accelerated erosion of selling prices, overcapacity and rapidly
changing technology and evolving industry standards. Beginning late in
calendar 1995 and continuing into calendar 1997, the Company experienced a
significant decrease in the selling prices of many of its products,
attributable primarily to a significant downward trend in pricing experienced
in the semiconductor industry. Although the semiconductor industry is
currently experiencing increased demand, it is uncertain how long these
conditions will continue. The Company does not expect that this high level of
demand will continue indefinitely. Accordingly, the Company may in the future
experience substantial period-to-period fluctuations in business and results
of operations due to general semiconductor industry conditions, overall
economic conditions or other factors. The Company's business is also subject
to the risks associated with the effects of legislation and regulations
relating to the import or export of semiconductor products. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Manufacturing," "Business -- Sales and Marketing" and
"Business -- Competition."
RELIANCE ON DISTRIBUTORS; PRODUCT RETURNS
Sales through domestic and international distributors represented 40% and
36% of the Company's net revenues in fiscal 1996 and 1997, respectively. The
Company's distributors are not subject to minimum purchase requirements, may
reduce or delay orders periodically due to excess inventory and can
discontinue selling the Company's products at any time. The Company recognizes
revenue and related gross profit from sales of products through distributors
when shipped. Domestic distributors are generally permitted a return allowance
of 10% of their net purchases every six months. Although the Company believes
that, to date, it has provided adequate allowances for exchanges, returns,
price protection and other concessions and, to date, amounts incurred have not
been material, there can be no assurance that actual amounts incurred will not
exceed the Company's allowances, particularly in connection with the
introduction of new products, enhancements to existing products or price
reductions. The Company's distributors typically offer competing products. The
loss of one or more distributors, or the decision by one of the distributors
to reduce the number of the Company's products offered by such distributor or
to carry the product lines of the Company's competitors, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Sales and Marketing."
MANAGEMENT OF GROWTH
The Company has recently experienced and may continue to experience growth
in the number of its employees and the scope of its operations, resulting in
increased responsibilities for management personnel. To manage recent and
potential future growth effectively, the Company will need to continue to
implement and
9
<PAGE>
improve its operational, financial and management information systems and to
hire, train, motivate and manage a growing number of employees. The future
success of the Company also will depend on its ability to attract and retain
qualified technical, marketing and management personnel, particularly highly-
skilled design, process and test engineers, for whom competition is intense.
In particular, the current availability of qualified engineers is limited, and
competition among companies for skilled and experienced engineering personnel
is very strong. The Company is currently attempting to hire a number of
engineering personnel and has experienced delays in filling such positions.
During strong business cycles, the Company expects to experience continued
difficulty in filling its needs for qualified engineers and other personnel.
The Company intends to implement a new management information system over the
next six months. There can be no assurance that the Company will not encounter
difficulties as it seeks to integrate this new system into its operations.
There can be no assurance that the Company will be able to achieve or manage
effectively any such growth, and failure to do so could delay product
development cycles or otherwise have a material adverse effect on the
Company's business, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future success will depend to a large extent on the continued
contributions of its executive officers and other key management and technical
personnel, none of whom has an employment agreement with the Company and each
of whom would be difficult to replace. The Company does not maintain any key
person life insurance policy on any such persons. The loss of the services of
one or more of the Company's executive officers or key personnel or the
inability to continue to attract qualified personnel could delay product
development cycles or otherwise have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Employees" and "Management."
PATENTS AND PROPRIETARY RIGHTS
The Company's success depends in part on its ability to obtain patents and
licenses and preserve other intellectual property rights covering its products
and development and testing tools. In the United States, the Company holds
five patents covering certain aspects of its product designs and has eight
additional patent applications pending. Copyrights, mask work protection,
trade secrets and confidential technological know-how are also key elements of
the Company's business. There can be no assurance that any additional patents
will be issued to the Company or that the Company's patents or other
intellectual property will provide meaningful protection from competition. The
Company may be subject to or may initiate interference proceedings in the U.S.
Patent and Trademark Office, which can consume significant financial and
management resources. In addition to the foregoing, the laws of certain
territories in which the Company's products are or may be developed,
manufactured or sold may not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States. The
inability of the Company to protect its intellectual property adequately could
have a material adverse effect on its business, financial condition and
results of operations.
The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights, and there can be no assurance
that the Company will not be subject to infringement claims by other parties.
In May 1995, Quality Semiconductor, Inc. ("QSI"), a competitor of the Company,
brought a lawsuit against the Company in the United States District Court for
the Northern District of California, San Francisco Division, claiming
infringement of one of its patents by certain features in certain of the
Company's bus switch products and seeking injunctive relief and unspecified
monetary damages. Discovery has commenced but is stayed pending a claim
construction hearing. The Company believes that it has meritorious defenses,
that the products involved are not material to the Company's business and that
the resolution of this matter will not have a material adverse effect on the
Company's business, financial position or results of operations. However, any
litigation, whether or not determined in favor of the Company, can result in
significant expense to the Company and can divert the efforts of the Company's
technical and management personnel from productive tasks. In the event of an
adverse ruling in any litigation involving intellectual property, the Company
might be required to discontinue the use of certain processes, cease the
manufacture, use and sale of infringing products,
10
<PAGE>
expend significant resources to develop non-infringing technology or obtain
licenses to the infringed technology, and may suffer significant monetary
damages, which could include treble damages. In the event the Company attempts
to license any allegedly infringed technology, there can be no assurance that
such a license would be available on reasonable terms or at all. In the event
of a successful claim against the Company and the Company's failure to develop
or license a substitute technology on commercially reasonable terms, the
Company's business and results of operations would be materially and adversely
affected. There can be no assurance that the claims brought by QSI or any
potential infringement claims by other parties (or claims for indemnity from
customers resulting from any infringement claims) will not materially and
adversely affect the Company's business, financial condition and results of
operations.
The process technology used by the Company's independent foundries,
including process technology that the Company has developed with its
foundries, can generally be used by such foundries to produce their own
products or to manufacture products for other companies, including the
Company's competitors. In addition, the Company does not generally have the
right to implement the process technology used to manufacture its products
with foundries other than the foundry with which it has developed such process
technology. See "Business --Intellectual Property."
RISKS OF INTERNATIONAL SALES
Sales outside of the United States accounted for approximately 35%, 30%, 37%
and 42% of the Company's net revenues in fiscal 1995, 1996 and 1997 and the
first quarter of fiscal 1998, respectively. The Company expects that export
sales will continue to represent a significant portion of net revenues. The
Company intends to expand its operations outside of the United States, which
will require significant management attention and financial resources and
further subject the Company to international operating risks. These risks
include unexpected changes in regulatory requirements, delays resulting from
difficulty in obtaining export licenses for certain technology, tariffs and
other barriers and restrictions, and the burdens of complying with a variety
of foreign laws. The Company is also subject to general geopolitical risks in
connection with its international operations, such as political and economic
instability and changes in diplomatic and trade relationships. In addition,
because the Company's international sales are denominated in U.S. dollars,
increases in the value of the U.S. dollar could increase the price in local
currencies of the Company's products in foreign markets and make the Company's
products relatively more expensive than competitors' products that are
denominated in local currencies, and there can be no assurance that the
Company will not be materially and adversely affected by fluctuating exchange
rates. There can be no assurance that regulatory, geopolitical and other
factors will not materially and adversely affect the Company's business,
financial condition and results of operations in the future or require the
Company to modify its current business practices. See "Business -- Customers"
and "Business -- Sales and Marketing."
DEPENDENCE ON SINGLE OR LIMITED SOURCE ASSEMBLY SUBCONTRACTORS
The Company primarily relies on foreign subcontractors for the assembly and
packaging of its products and, to a lesser extent, for the testing of its
finished products. Some of these subcontractors are the Company's single
source supplier for certain new packages. Although the Company believes that
it is not materially dependent upon any such subcontractor, changes in the
Company's or a subcontractor's business could cause the Company to become
materially dependent on a subcontractor. The Company has from time to time
experienced difficulties in the timeliness and quality of product deliveries
from the Company's subcontractors. Although delays experienced to date have
not been material, there can be no assurance that the Company will not
experience similar or more severe difficulties in the future. The Company
generally purchases these single or limited source components or services
pursuant to purchase orders and has no guaranteed arrangements with such
subcontractors. There can be no assurance that these subcontractors will
continue to be able and willing to meet the Company's requirements for any
such components or services. Any significant disruption in supplies from, or
degradation in the quality of components or services supplied by, these
subcontractors, or any other circumstance that would require the Company to
qualify alternative sources of supply could delay shipments and
11
<PAGE>
result in the loss of customers, or limitations or reductions in the Company's
revenues, or otherwise materially and adversely affect the Company's business,
financial condition and results of operations.
Each of the Company's assembly subcontractors is located outside the United
States, which exposes the Company to risks associated with international
business operations, including foreign governmental regulations, currency
fluctuations, reduced protection for intellectual property, changes in
political conditions, disruptions or delays in shipments and changes in
economic conditions in the countries where these subcontractors are located,
any of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business --
Manufacturing."
CONTROL BY PRINCIPAL SHAREHOLDERS
Upon the consummation of this offering, the current officers, directors and
current holders of five percent or more of the Company's Common Stock will own
approximately 49.2% of the outstanding Common Stock. Accordingly, these
shareholders acting as a group will have control with respect to matters
requiring approval by the shareholders of the Company, including the ability
to elect a majority of the board of directors. In addition, the Company's
Restated Articles of Incorporation allow the Company to issue Preferred Stock
with rights senior to those of the Common Stock without any further vote or
action by the shareholders, which could make it more difficult for
shareholders to effect certain corporate actions. These provisions could also
have the effect of delaying or preventing a change in control of the Company.
See "Management," "Principal and Selling Shareholders" and "Description of
Capital Stock."
BROAD MANAGEMENT DISCRETION IN USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered by
the Company hereby at the estimated initial public offering price of $10.00
per share are estimated to be $18.0 million ($ million if the Underwriters'
over-allotment option is exercised in full) after deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company. While the Company currently anticipates that it will use a portion of
such proceeds for acquisition of capital equipment, a substantial portion of
such proceeds are currently allocated only for general corporate purposes.
Consequently, management will have broad discretion over the use of a majority
of the proceeds of the offering. See "Use of Proceeds."
NO PRIOR MARKET; STOCK PRICE VOLATILITY; DILUTION
Prior to this offering, there has been no public market for the Company's
Common Stock. Consequently, the initial public offering price will be
determined by negotiations among the Company, the Selling Shareholders and the
representatives of the Underwriters. There can be no assurance that an active
public market for the Common Stock will develop or be sustained after the
offering or that the market price of the Common Stock will not decline below
the initial public offering price. The trading price of the Company's Common
Stock could be subject to wide fluctuations in response to quarter-to-quarter
variations in operating results, announcements of technological innovations or
new products by the Company or its competitors, general conditions in the
semiconductor and electronic systems industries, changes in earnings estimates
by analysts, or other events or factors. In addition, the stock market has
experienced extreme price and volume fluctuations, which have particularly
affected the market prices of many high technology companies and which have
often been unrelated to the operating performance of such companies. Any of
the foregoing factors may materially and adversely affect the market price of
the Company's Common Stock. In addition, purchasers of the Common Stock will
experience immediate and substantial dilution in net tangible book value per
share of the Common Stock from the initial public offering price per share.
See "Dilution" and "Underwriting."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON MARKET PRICE OF THE
COMMON STOCK
Sales of a substantial number of shares of Common Stock after this offering
could adversely affect the market price of the Common Stock and could impair
the Company's ability to raise capital through the sale of
12
<PAGE>
equity securities. Upon completion of this offering, the Company will have
approximately 9,023,790 shares of Common Stock outstanding, based on the
number of shares of Common Stock outstanding as of September 30, 1997. Of
these shares, the 2,500,000 shares offered hereby will be freely tradeable
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), unless they are held by "affiliates" of the Company as that
term is used in Rule 144 under the Securities Act.
The remaining 6,523,790 outstanding shares are "restricted securities"
within the meaning of Rule 144. None of these shares will be eligible for sale
in the public market at the effective date of the Registration Statement of
which this Prospectus is a part (the "Effective Date"). Upon the expiration of
agreements not to sell shares entered into with SoundView Financial Group,
Inc. and/or the Company, 180 days after the Effective Date, approximately
6,523,790 shares will become eligible for sale subject to the provisions of
Rule 144 or Rule 701 and 826,891 additional shares subject to vested options
will be eligible for sale subject to compliance with Rule 144 and Rule 701.
Any shares subject to lock-up agreements may be released by SoundView
Financial Group, Inc. prior to the expiration of the lock-up period at any
time without notice. See "Underwriting."
As soon as practicable after the Effective Date, the Company intends to file
one or more registration statements on Form S-8 under the Securities Act up to
register approximately 3,267,518 shares of Common Stock reserved for issuance
under the Company's 1990 Stock Option Plan, 1995 Stock Option Plan and 1997
Employee Stock Purchase Plan, thus permitting the resale of such shares by
non-affiliates in the public market without restriction under the Securities
Act unless subject to lock-up agreements. Such registration statement(s) will
become effective immediately upon filing. See "Management -- Stock Plans."
Prior to this offering, there has been no public market for the Common Stock
of the Company, and any sale of substantial amounts in the open market may
adversely affect the market price of the Common Stock offered hereby. See
"Shares Eligible for Future Sale."
13
<PAGE>
THE COMPANY
Pericom Semiconductor Corporation was incorporated in California on June 25,
1990. The principal executive offices of the Company are located at 2380
Bering Drive, San Jose, California 95131, and its telephone number at this
address is (408) 435-0800.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock being offered by the Company hereby at an assumed initial public
offering price of $10.00 per share are estimated to be $18.0 million ($
million if the Underwriters' over-allotment option is exercised in full),
after deducting the estimated underwriting discounts and commissions and
offering expenses. The principal purposes of this offering are to create a
public market for the Company's Common Stock, obtain additional capital and
facilitate future access by the Company to public equity markets. The net
proceeds to the Company are expected to be used for general corporate
purposes, including working capital. The Company expects to use approximately
$2.0 million of the net proceeds of the offering in fiscal 1998 to acquire
capital equipment for research and development and testing. The Company will
not receive any proceeds from the sale of shares of Common Stock by the
Selling Shareholders. See "Risk Factors -- Broad Management Discretion in Use
of Proceeds" and "Principal and Selling Shareholders."
The Company may also use a portion of the net proceeds to fund acquisitions
of complementary businesses, products or technologies. Although the Company
has in the past reviewed potential acquisition opportunities, there are no
current agreements or negotiations with respect to any such transactions.
Pending the foregoing uses, the net proceeds of this offering will be
invested in short-term, investment-grade or U.S. government securities.
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock. The
Company currently does not intend to pay dividends in the foreseeable future
so that it may reinvest its earnings in the development of its business.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1997, (ii) on a pro forma basis to give effect to the conversion
into Common Stock of all outstanding shares of Preferred Stock upon the
closing of the offering, and (iii) as further adjusted to give effect to the
sale by the Company of the 2,000,000 shares of Common Stock being offered by
the Company hereby at an assumed initial public offering price of $10.00 per
share and the receipt of the estimated net proceeds therefrom. This table
should be read in conjunction with the Financial Statements, including the
Notes thereto, and "Selected Financial Data" included elsewhere herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------
PRO AS
ACTUAL FORMA ADJUSTED
------- ------- --------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C> <C>
Shareholders' equity:
Preferred Stock, no par value; 14,225,000 shares au-
thorized, actual; 5,000,000 shares authorized, pro
forma and as adjusted:
Series A Preferred Stock, 5,200,000 shares
designated, issued and outstanding, actual; none
designated, issued and outstanding, pro forma and as
adjusted............................................ $ 2,588 $ -- $ --
Series B Preferred Stock, 2,150,000 shares
designated, issued and outstanding, actual; none
designated, issued and outstanding, pro forma and as
adjusted............................................ 2,137 -- --
Series C Preferred Stock, 1,875,000 shares
designated, issued and outstanding, actual; none
designated, issued and outstanding, pro forma and as
adjusted............................................ 2,992 -- --
Common Stock, no par value; 30,000,000 shares
authorized; 2,411,290 shares outstanding, actual;
7,023,790 shares outstanding, pro forma; 9,023,790
shares outstanding, as adjusted(1).................. 259 7,976 25,976
Retained earnings.................................... 9,900 9,900 9,900
------- ------- -------
Total shareholders' equity........................ 17,876 17,876 35,876
------- ------- -------
Total capitalization............................ $17,876 $17,876 $35,876
======= ======= =======
</TABLE>
- --------
(1) Excludes 1,486,057 shares subject to outstanding options and 1,483,961
shares available for future issuance under the Company's 1990 Stock Option
Plan and 1995 Stock Option Plan and 300,000 shares available for future
issuance under the Company's 1997 Employee Stock Purchase Plan. See
"Management -- Stock Plans" and Note 6 of Notes to Financial Statements.
15
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of September 30,
1997 was approximately $17,876,000, or $2.55 per share. Pro forma net tangible
book value per share represents the amount of the Company's shareholders'
equity divided by 7,023,790 shares of Common Stock outstanding at September
30, 1997, assuming the conversion of all outstanding shares of Preferred Stock
into Common Stock. Pro forma net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of Common Stock in this offering and the pro forma net tangible book
value per share of Common Stock immediately after completion of the offering.
After giving effect to the sale by the Company of 2,000,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering
price of $10.00 per share, and the receipt of the estimated net proceeds
therefrom, the pro forma net tangible book value of the Company as of
September 30, 1997 would have been approximately $35,876,000, or $3.98 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.43 per share to existing shareholders and an immediate dilution in
pro forma net tangible book value of $6.02 per share to the purchasers of
Common Stock in the offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $10.00
Pro forma net tangible book value per share as of September 30,
1997........................................................... $2.55
Increase in pro forma net tangible book value attributable to
new investors ................................................. 1.43
-----
Pro forma net tangible book value per share after offering........ 3.98
------
Dilution per share to new investors............................... $ 6.02
======
</TABLE>
The following table sets forth, on a pro forma basis as of September 30,
1997, the difference between the existing shareholders and the purchasers of
shares in the offering (at an assumed initial public offering price of $10.00
per share) with respect to the number of shares purchased from the Company,
the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1).... 7,023,790 77.8% $ 7,976,000 28.5% $ 1.14
New investors............... 2,000,000 22.2% 20,000,000 71.5% 10.00
--------- ----- ----------- -----
Total..................... 9,023,790 100.0% $27,976,000 100.0%
========= ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Shareholders in this offering will reduce the number
of shares held by existing shareholders as of September 30, 1997 to
6,523,790, or 72.3% ( % if the over-allotment option is exercised in
full), and will increase the number of shares held by new investors to
2,500,000, or 27.7% ( , or % if the over-allotment option is
exercised in full), of the total number of shares of Common Stock
outstanding after this offering. See "Principal and Selling Shareholders."
At September 30, 1997, there were outstanding stock options to purchase an
aggregate of 1,486,057 shares of Common Stock at a weighted average exercise
price of $2.56 per share. If all of these options had been exercised, the
Company's pro forma net tangible book value as of September 30, 1997 would
have been approximately $21,680,000, or $2.55 per share. After giving effect
to the sale by the Company of 2,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $10.00 per
share, and the receipt of the estimated net proceeds therefrom, the pro forma
net tangible book value of the Company as of September 30, 1997 would have
been approximately $39,680,000, or $3.78 per share. This would represent an
immediate increase in pro forma net tangible book value of $1.23 per share to
existing shareholders and an immediate dilution in pro forma net tangible book
value of $6.22 per share to the purchasers of Common Stock in the offering.
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of the Company is qualified by
reference to and should be read in conjunction with the Financial Statements,
including the Notes thereto, and Management's Discussion and Analysis of
Financial Condition and Results of Operations included elsewhere herein. The
Statement of Income Data for each of the years in the three-year period ended
June 30, 1997 and the Balance Sheet Data as of June 30, 1996 and 1997 are
derived from, and are qualified by reference to, the Financial Statements
included elsewhere in this Prospectus, which have been audited by Deloitte &
Touche LLP, independent accountants, whose report with respect thereto appears
elsewhere in this Prospectus. The Statement of Income Data for the years ended
June 30, 1993 and 1994 and the Balance Sheet Data as of June 30, 1993, 1994
and 1995 are derived from audited financial statements not included herein.
The Statement of Income Data for the three-month periods ended September 30,
1996 and 1997 and the Balance Sheet Data as of September 30, 1997 are derived
from unaudited interim financial statements contained elsewhere herein. The
unaudited interim financial statements include all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary
for a fair presentation of the data. Results of operations for interim periods
are not necessarily indicative of results to be expected for the full fiscal
year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------------------- --------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net revenues............ $6,284 $18,886 $22,732 $41,174 $33,166 $6,601 $11,398
Cost of revenues........ 3,301 11,008 12,873 22,797 20,986 3,996 6,839
------ ------- ------- ------- ------- ------ -------
Gross profit.......... 2,983 7,878 9,859 18,377 12,180 2,605 4,559
Operating expenses:
Research and
development.......... 1,167 2,303 2,942 4,414 4,187 986 1,169
Selling, general and
administrative....... 1,449 3,143 4,038 6,471 5,989 1,448 1,956
------ ------- ------- ------- ------- ------ -------
Total operating
expenses........... 2,616 5,446 6,980 10,885 10,176 2,434 3,125
------ ------- ------- ------- ------- ------ -------
Income from operations.. 367 2,432 2,879 7,492 2,004 171 1,434
Other income (expense),
net.................... (33) 106 144 (50) 351 105 93
------ ------- ------- ------- ------- ------ -------
Income before income
taxes.................. 334 2,538 3,023 7,442 2,355 276 1,527
Provision (credit) for
income taxes........... 1 (6) 982 2,732 777 91 504
------ ------- ------- ------- ------- ------ -------
Net income.............. $ 333 $ 2,544 $ 2,041 $ 4,710 $ 1,578 $ 185 $ 1,023
====== ======= ======= ======= ======= ====== =======
Net income per common
and equivalent share... $ 0.05 $ 0.33 $ 0.26 $ 0.57 $ 0.20 $ 0.02 $ 0.12
====== ======= ======= ======= ======= ====== =======
Shares used in computing
per share data(1)...... 6,638 7,696 7,975 8,269 8,092 8,224 8,210
====== ======= ======= ======= ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
-------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1997
---- ---- ---- ---- ---- -------------
(IN THOUSANDS)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
Working capital............ $2,115 $ 6,625 $ 7,999 $12,145 $12,984 $13,535
Total assets............... 4,458 10,054 14,483 19,820 23,581 24,086
Long-term obligations...... 123 -- -- -- -- --
Shareholders' equity....... 2,742 8,294 10,352 15,095 16,795 17,876
</TABLE>
- -------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing net income
per common and equivalent share.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company, founded in June 1990, designs, develops and markets high-
performance interface ICs for the transfer, routing and timing of signals
within electronic systems. The Company's first volume sales occurred in fiscal
1993 and consisted exclusively of 5-volt 8-bit interface logic circuits. The
Company expanded its product offering by introducing 3.3-volt 16-bit logic
circuits and 8-bit digital switches in fiscal 1994; clock generators, 3.3-volt
clock synthesizers and buffers, and high-speed interface products for the
networking industry in fiscal 1995; 32-bit logic, 16-bit digital switches and
Pentium, 56K modem and laser printer clock synthesizers in fiscal 1996; and an
analog switch family, mixed-voltage logic, a family of clock generators and a
FastEthernet transceiver in fiscal 1997.
The Company completed its first profitable fiscal year on June 30, 1993 and
has been profitable in each of its last nineteen quarters. Beginning late in
calendar 1995 and continuing into calendar 1997, the Company experienced a
significant decrease in the selling prices of many of its products, which had
a material adverse effect on the Company's net revenues and overall gross
margins. This decrease in selling prices was attributable primarily to a
significant downward trend in pricing experienced in the semiconductor
industry and by the Company and was not fully offset by cost reductions. The
decrease in net revenues and gross margins was also attributable to reduced
sales to two customers, Apple Computer, Inc. ("Apple") and American Computer &
Digital Components, Inc. ("ACDC"), which had previously accounted for
substantial sales of certain of the Company's higher margin products. In
addition, in the fourth quarter of fiscal 1997, the Company made significant
shipments to Harris under a private label resale program, which had lower
gross margins. Sales to Harris are not expected to continue at the level
achieved in that quarter. The Company's operating results are influenced by a
wide variety of factors that could materially and adversely affect net
revenues and results of operations. See "Risk Factors --Limited Operating
History; Potential Fluctuations in Operating Results."
As is typical in the semiconductor industry, the Company expects selling
prices for its products to decline over the life of each product. The
Company's ability to increase net revenues is highly dependent upon its
ability to increase unit sales volumes of existing products and to introduce
and sell new products in quantities sufficient to compensate for the
anticipated declines in selling prices of existing products. The Company seeks
to increase unit sales volume through increased wafer fabrication capacity
allocations from its existing foundries, qualification of new foundries,
increase the number of die per wafer through die size reductions and improve
yields of good die through the implementation of advanced process
technologies, but there can be no assurance that the Company will be
successful in these efforts. In fiscal 1996 and 1997, approximately 90% of the
wafers for the Company's semiconductor products were manufactured by
Chartered. The Company qualified AMS as a wafer supplier in fiscal 1991, NJRC
in fiscal 1995 and TSMC in fiscal 1997, and the Company is currently
qualifying LG as an additional foundry supplier. The Company believes that it
will receive an increasing portion of its wafer requirements from TSMC and LG
in the future. See "Risk Factors -- Dependence on Independent Wafer
Foundries."
Declining selling prices will adversely affect gross margins unless the
Company is able to offset such declines with the sale of new higher margin
products or achieve commensurate reductions in unit costs. The Company seeks
to improve its overall gross margin through the development and introduction
of selected new products that the Company believes will ultimately achieve
higher gross margins. A higher gross margin for a new product is typically not
achieved until some period after the initial introduction of the product --
\after start-up expenses for that product have been incurred and once volume
production of the product begins. In general, costs are higher at the
introduction of a new product due to the use of a more generalized design
schematic, lower economies of scale in the assembly phase and lower die yield.
The Company's ability to decrease unit cost depends on its ability to shrink
the die sizes of its products, improve yields, obtain favorable subcontractor
pricing, and make in-house test and assembly operations more productive and
efficient. There can be no assurance that these efforts, even if successful,
will be sufficient to offset declining selling prices.
18
<PAGE>
Revenue from product sales is recognized upon shipment. Estimated costs for
exchanges, returns, price protection and other concessions are accrued in the
period that sales are recognized. Although the Company believes that, to date,
it has provided adequate allowances for exchanges, returns, price protection
and other concessions, and, to date, amounts incurred have not been material,
there can be no assurance that actual amounts incurred will not exceed the
Company's allowances, particularly in connection with the introduction of new
products, enhancements to existing products or price reductions. See "Risk
Factors -- Reliance on Distributors; Product Returns."
RESULTS OF OPERATIONS
The following table sets forth certain statement of income data as a
percentage of net revenues for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
JUNE 30, SEPTEMBER 30,
------------------- --------------
1995 1996 1997 1996 1997
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................... 56.6 55.4 63.3 60.5 60.0
----- ----- ----- ------ ------
Gross margin.............................. 43.4 44.6 36.7 39.5 40.0
Operating expenses:
Research and development.................. 12.9 10.7 12.6 15.0 10.3
Selling, general and administrative....... 17.8 15.7 18.1 21.9 17.1
----- ----- ----- ------ ------
Total operating expenses................. 30.7 26.4 30.7 36.9 27.4
----- ----- ----- ------ ------
Income from operations..................... 12.7 18.2 6.0 2.6 12.6
Other income (expense), net................ 0.6 (0.1) 1.1 1.6 0.8
----- ----- ----- ------ ------
Income before income taxes................. 13.3 18.1 7.1 4.2 13.4
Provision for income taxes................. 4.3 6.6 2.3 1.4 4.4
----- ----- ----- ------ ------
Net income................................. 9.0% 11.5% 4.8% 2.8% 9.0%
===== ===== ===== ====== ======
</TABLE>
FIRST QUARTER OF FISCAL 1997 COMPARED TO FIRST QUARTER OF FISCAL 1998
NET REVENUES. Net revenues consist primarily of product sales, which are
recognized at time of shipment, less an estimate for returns and other
allowances as discussed above. Net revenues increased 73% from $6.6 million in
the first quarter of fiscal 1997 to $11.4 million in the first quarter of
fiscal 1998. This increase resulted from continued market acceptance of the
Company's existing products and sales of new products in the Company's
SiliconInterface and SiliconSwitch product lines, offset in part by a 22%
decline in selling prices.
GROSS PROFIT. Gross profit increased 75% from $2.6 million in the first
quarter of fiscal 1997 to $4.6 million in the first quarter of fiscal 1998.
Gross margin increased from 39.5% in the first quarter of fiscal 1997 to 40.0%
in the first quarter of fiscal 1998. These increases were primarily due to
cost reductions which were achieved primarily through lower per unit assembly
and test costs attributable to volume production economies and increased die
per wafer resulting from reduced design geometries. These cost reductions
exceeded the decline in selling prices of the Company's products.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel costs associated with developing new products,
enhancing existing products, testing products and developing product
documentation as well as other costs directly related to product development.
Such expenses increased 19% from $1.0 million in the first quarter of fiscal
1997 to $1.2 million in the first quarter of fiscal 1998 but decreased as a
percentage of net revenues from 15.0% in the first quarter of fiscal 1997 to
10.3% in the first quarter of fiscal 1998. The increase in expenses was
primarily due to increased payroll-related expenses, increased mask expenses
and increased consulting expenses offset by reductions in legal and software
maintenance expenses. Research and development expenses decreased as a
percentage of net revenues due primarily to the increase in net revenues in
the first quarter of fiscal 1998 compared to the first quarter of fiscal 1997.
19
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses consist primarily of personnel and related overhead costs for sales,
marketing, finance, human resources and general management. Such costs also
include advertising, sales materials, sales commissions and other marketing
and promotional expenses. Selling, general and administrative expenses
increased 35% from $1.4 million in the first quarter of fiscal 1997 to $2.0
million in the first quarter of fiscal 1998 but decreased as a percentage of
net revenues from 21.9% in the first quarter of fiscal 1997 to 17.1% in the
first quarter of fiscal 1998. The increase in expenses was primarily due to
increased commission expenses resulting from higher sales as well as expenses
associated with increased staffing levels, particularly in sales and
marketing, and increased advertising expenses. Selling, general and
administrative expenses decreased as a percentage of net revenues due
primarily to the increase in net revenues in the first quarter of fiscal 1998
compared to the first quarter of fiscal 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes increased from
$91,000 in the first quarter of fiscal 1997 to $504,000 in the first quarter
of fiscal 1998 due to increased profitability. The Company's effective tax
rate in each of these quarters was approximately 33%.
COMPARISON OF FISCAL 1995, 1996 AND 1997
NET REVENUES. Net revenues increased 81% from $22.7 million in fiscal 1995
to $41.2 million in fiscal 1996. The increase in net revenues in fiscal 1996
was primarily attributable to the Company's 16-bit logic family introduced in
fiscal 1995, which accounted for 42% of net revenues in fiscal 1996 up from
19% of net revenues in fiscal 1995. Net revenues decreased 19% from $41.2
million in fiscal 1996 to $33.2 million in fiscal 1997. This decrease was
primarily attributable to the significant downward trend in pricing
experienced by the semiconductor industry and the Company in late fiscal 1996
through fiscal 1997. A 30% increase in the number of units shipped in fiscal
1997 compared to fiscal 1996 was not sufficient to offset a 36% decline in
selling prices experienced by the Company in fiscal 1997. In addition, sales
to two of the Company's principal customers decreased significantly in fiscal
1997. Apple, which accounted for 20% of the Company's net revenues in fiscal
1996, curtailed a number of programs and, as a result, significantly reduced
its purchases of the Company's products. ACDC, a chip module supplier which
accounted for 8% of the Company's net revenues in fiscal 1996, experienced a
downturn in its business and reduced its purchases of integrated circuits from
a number of suppliers, including the Company. ACDC has not purchased any
products from the Company since the fourth quarter of fiscal 1996. In the
fourth quarter of fiscal 1997, sales to Harris totaled $3.1 million, compared
to an average of $0.8 million in each of the three previous fiscal quarters.
Sales to Harris in future periods are not expected to continue at the level
achieved in the fourth quarter of fiscal 1997.
GROSS PROFIT. Gross profit increased 86% from $9.9 million in fiscal 1995 to
$18.4 million in fiscal 1996. Gross profit as a percentage of net revenues, or
gross margin, increased from 43.4% in fiscal 1995 to 44.6% in fiscal 1996.
These increases were primarily due to changes in product mix, as well as cost
reductions, which were achieved primarily through lower per unit assembly and
test costs attributable to volume production economies and increased die per
wafer resulting from reduced design geometries. Gross profit decreased 34%
from $18.4 million in fiscal 1996 to $12.2 million in fiscal 1997. Gross
margin decreased from 44.6% in fiscal 1996 to 36.7% in fiscal 1997. These
decreases were primarily the result of the significant downward trend in
pricing experienced by the semiconductor industry and the Company in late
fiscal 1996 through fiscal 1997 that was not fully offset by cost reductions,
as well as the significant decrease in high-margin sales to Apple and ACDC and
significant shipments in fiscal 1997 of the Company's products to Harris under
a private label resale program which had lower margins.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 50%
from $2.9 million in fiscal 1995 to $4.4 million in fiscal 1996, but decreased
as a percentage of net revenues from 12.9% in fiscal 1995 to 10.7% in fiscal
1996. The increase in expense was primarily due to an expansion of the
Company's engineering staff, additional depreciation expense for new design
hardware and software, increased mask expenses and additional legal expenses
associated with patent and other intellectual property rights. Research and
development expenses decreased 5% from $4.4 million in fiscal 1996 to $4.2
million in fiscal 1997 but increased as a percentage of net revenues from
10.7% in fiscal 1996 to 12.6% in fiscal 1997. The decrease in
20
<PAGE>
research and development expense was due primarily to reduced legal expenses
associated with patent and other intellectual property rights and reduced mask
expenses. Research and development expenses increased as a percentage of net
revenues from fiscal 1996 to fiscal 1997 due to the decrease in net revenues
in that period, as well as the Company's commitment to continued product
development efforts.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 60% from $4.0 million in fiscal 1995 to $6.5 million in
fiscal 1996, but decreased as a percentage of net revenues from 17.8% in
fiscal 1995 to 15.7% in fiscal 1996. The increase in expenses was primarily
due to increased staffing levels, particularly in sales and marketing, as well
as increased commission expense due to higher sales levels. Selling, general
and administrative expenses decreased 7% from $6.5 million in fiscal 1996 to
$6.0 million in fiscal 1997, but increased as a percentage of net revenues
from 15.7% in fiscal 1996 to 18.1% in fiscal 1997 due to the lower net
revenues recorded in fiscal 1997. The decrease in expenses was primarily due
to reduced commissions resulting from lower net revenues in fiscal 1997
compared to fiscal 1996.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
income and expense and the Company's allocated portion of net losses of
Pericom Technology, Inc., a British Virgin Islands corporation based in
Shanghai, People's Republic of China ("PTI"). PTI was formed by Pericom and
certain Pericom shareholders in 1994 to develop and market semiconductors in
China and certain other Asian countries. See Note 4 of Notes to Financial
Statements. Other income (expense), net decreased from income of $144,000 in
fiscal 1995 to an expense of $50,000 in fiscal 1996 due to the one-time write-
off in fiscal 1996 of $382,000 in costs associated with the Company's proposed
initial public offering, which was not consummated, partially offset by a
$199,000 increase in interest income from the investment of the Company's
cash. Other income (expense), net increased from an expense of $50,000 in
fiscal 1996 to income of $351,000 in fiscal 1997 due to interest earned on
cash balances in fiscal 1997 and the fact that fiscal 1996 included costs
associated with the initial public offering that was not consummated.
PROVISION FOR INCOME TAXES. The provision for income taxes was $982,000,
$2,732,000 and $777,000 in fiscal 1995, 1996 and 1997, respectively. In each
of these fiscal years, the provision for income taxes differed from the
federal statutory rate primarily due to state income taxes and the utilization
of research and development tax credits.
21
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables present certain unaudited quarterly results in dollars
and as a percentage of net revenues for fiscal 1996, fiscal 1997 and the first
quarter of fiscal 1998. The Company believes that all necessary adjustments,
consisting only of normal recurring accruals, have been included in the
amounts stated below to present fairly the selected quarterly information when
read in conjunction with the Financial Statements, including the Notes
thereto, included elsewhere herein. The results of operations for any quarter
are not necessarily indicative of results that may be expected for any
subsequent periods.
<TABLE>
<CAPTION>
FISCAL
1998
FISCAL 1996 QUARTER ENDED FISCAL 1997 QUARTER ENDED QUARTER
-------------------------------------- ------------------------------------ ENDED
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 1995 1996 1996 1996 1996 1997 1997 1997
STATEMENT OF INCOME DATA: --------- -------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............. $9,776 $11,553 $11,359 $8,486 $6,601 $7,300 $8,008 $11,257 $11,398
Cost of revenues......... 5,377 6,147 6,197 5,076 3,996 4,676 5,017 7,297 6,839
------ ------- ------- ------ ------ ------ ------ ------- -------
Gross profit............ 4,399 5,406 5,162 3,410 2,605 2,624 2,991 3,960 4,559
Operating expenses:
Research and
development............ 974 1,175 1,159 1,106 986 989 1,078 1,134 1,169
Selling, general and
administrative......... 1,563 1,684 1,737 1,487 1,448 1,407 1,497 1,637 1,956
------ ------- ------- ------ ------ ------ ------ ------- -------
Total operating
expenses.............. 2,537 2,859 2,896 2,593 2,434 2,396 2,575 2,771 3,125
------ ------- ------- ------ ------ ------ ------ ------- -------
Income from operations... 1,862 2,547 2,266 817 171 228 416 1,189 1,434
Other income (expense),
net..................... 58 110 (296) 78 105 75 90 81 93
------ ------- ------- ------ ------ ------ ------ ------- -------
Income before income
taxes................... 1,920 2,657 1,970 895 276 303 506 1,270 1,527
Provision for income
taxes................... 720 996 739 277 91 100 167 419 504
------ ------- ------- ------ ------ ------ ------ ------- -------
Net income............... $1,200 $ 1,661 $ 1,231 $ 618 $ 185 $ 203 $ 339 $ 851 $ 1,023
====== ======= ======= ====== ====== ====== ====== ======= =======
Net income per common and
equivalent share........ $ 0.15 $ 0.20 $ 0.15 $ 0.07 $ 0.02 $ 0.03 $ 0.04 $ 0.11 $ 0.12
====== ======= ======= ====== ====== ====== ====== ======= =======
Shares used in computing
per share data.......... 8,097 8,364 8,328 8,287 8,224 8,112 8,044 7,987 8,210
====== ======= ======= ====== ====== ====== ====== ======= =======
<CAPTION>
FISCAL
1998
FISCAL 1996 QUARTER ENDED FISCAL 1997 QUARTER ENDED QUARTER
-------------------------------------- ------------------------------------ ENDED
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
AS A PERCENTAGE 1995 1995 1996 1996 1996 1996 1997 1997 1997
OF NET REVENUES: --------- -------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......... 55.0 53.2 54.6 59.8 60.5 64.1 62.6 64.8 60.0
------ ------- ------- ------ ------ ------ ------ ------- -------
Gross margin............ 45.0 46.8 45.4 40.2 39.5 35.9 37.4 35.2 40.0
Operating expenses:
Research and
development............ 10.0 10.2 10.2 13.0 15.0 13.5 13.5 10.1 10.3
Selling, general and
administrative......... 16.0 14.6 15.3 17.5 21.9 19.3 18.7 14.5 17.1
------ ------- ------- ------ ------ ------ ------ ------- -------
Total operating
expenses.............. 26.0 24.8 25.5 30.5 36.9 32.8 32.2 24.6 27.4
------ ------- ------- ------ ------ ------ ------ ------- -------
Income from operations... 19.0 22.0 19.9 9.7 2.6 3.1 5.2 10.6 12.6
Other income (expense),
net..................... 0.6 1.0 (2.6) 0.9 1.6 1.0 1.1 0.7 0.8
------ ------- ------- ------ ------ ------ ------ ------- -------
Income before income
taxes................... 19.6 23.0 17.3 10.6 4.2 4.1 6.3 11.3 13.4
Provision for income
taxes................... 7.4 8.6 6.5 3.3 1.4 1.3 2.1 3.7 4.4
------ ------- ------- ------ ------ ------ ------ ------- -------
Net income............... 12.2% 14.4% 10.8% 7.3% 2.8% 2.8% 4.2% 7.6% 9.0%
====== ======= ======= ====== ====== ====== ====== ======= =======
</TABLE>
22
<PAGE>
The Company has a limited history of operations, having shipped its first
products in volume in fiscal 1993. There can be no assurance that any past
levels of revenue growth or profitability can be sustained on a quarterly or
annual basis. The Company's expense levels are based in part on anticipated
future revenue levels, which can be difficult to predict. The Company's
business is characterized by short-term orders and shipment schedules. The
Company does not have long-term purchase agreements with any of its customers,
and customers can typically cancel or reschedule their orders without
significant penalty. The Company typically plans its production and inventory
levels based on a combination of external and internal forecasts of customer
demand. If net revenues fall significantly below anticipated levels, the
Company's business and results of operations would be materially and adversely
affected.
The Company's future operating results may fluctuate as a result of a number
of additional factors, including a decline in the gross margins of its
products, the growth or reduction in the size of the market for interface
circuits, delay or decline in orders received from distributors, the
availability of manufacturing capacity with the Company's wafer suppliers,
changes in product mix, customer acceptance of the Company's new products, the
ability of customers to make payments to the Company, the timing of new
product introductions and announcements by the Company and its competitors,
increased research and development expenses associated with new product
introductions or process changes, expenses incurred in obtaining and
enforcing, and in defending claims with respect to, intellectual property
rights, changes in manufacturing costs and fluctuations in manufacturing
yields, and other factors such as general conditions in the semiconductor
industry. See "Risk Factors -- Limited Operating History; Potential
Fluctuations in Operating Results and "Risk Factors -- Semiconductor Industry
Risks."
NET REVENUES. The Company's net revenues have fluctuated over the last nine
quarters from a low of $6.6 million in the first quarter of fiscal 1997 to a
high of $11.6 million in the second quarter of fiscal 1996. Beginning with the
third quarter of fiscal 1996, the Company's net revenues declined for three
consecutive quarters. This decrease was primarily attributable to the
significant downward trend in pricing experienced by the semiconductor
industry and the Company in late fiscal 1996 through fiscal 1997. Reduced
sales to Apple and ACDC beginning in the fourth quarter of fiscal 1996,
combined with this general downturn in the semiconductor industry, caused the
Company's net revenues to decrease significantly beginning in the fourth
quarter of fiscal 1996. Unit shipments declined 7% from the second quarter of
fiscal 1996 to the first quarter of fiscal 1997 but increased on a quarterly
basis through the remainder of fiscal 1997. Unit shipments increased 119% from
the first quarter of fiscal 1997 to the first quarter of fiscal 1998, and net
revenues grew on a quarterly basis in that period as well. Increased net
revenues have resulted from continued market acceptance of the Company's
existing products, and additions to the Company's SiliconInterface and
SiliconSwitch product lines. In the fourth quarter of fiscal 1997, sales to
Harris totaled $3.1 million. Sales to Harris are not expected to continue at
this level in future periods and were $0.5 million in the first quarter of
fiscal 1998.
GROSS PROFIT. Gross profit and gross margin fluctuated significantly from
quarter to quarter over the last nine quarters. Gross margin ranged from a low
of 35.2% in the fourth quarter of fiscal 1997 to a high of 46.8% in the second
quarter of fiscal 1996. Gross margin was adversely affected by the significant
downward trend in pricing experienced by the semiconductor industry and the
Company in late fiscal 1996 and through fiscal 1997, as well as the
significant decrease in high-margin sales to Apple and ACDC. Cost reductions
achieved by lower per unit assembly and test costs attributable to volume
production economies and increased die per wafer resulting from reduced design
geometries were not sufficient to offset the decline in selling prices
experienced by the Company during most of this time period. After rising in
the third quarter of fiscal 1997 due primarily to cost reductions, gross
margin declined in the fourth quarter of fiscal 1997 as the Company made
significant shipments of its products to Harris under a private label resale
program which has lower gross margins. Gross margin increased to 40.0% in the
first quarter of fiscal 1998 primarily due to a change in customer mix, as
shipments to Harris declined from $3.1 million in the fourth quarter of fiscal
1997 to $0.5 million in the first quarter of fiscal 1998.
OPERATING EXPENSES. Research and development expenses have consistently
ranged from approximately $1.0 million to $1.2 million on a quarterly basis
over the last nine quarters. Research and development expenses
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are expected to grow in the future in absolute amounts as the Company intends
to increase its commitment of resources to develop new products. Selling,
general and administrative expenses fluctuated on a quarterly basis over the
last nine quarters, primarily due to varying levels of sales commissions based
on net revenues during these periods.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has used proceeds from the private sale of
equity securities, bank borrowings and internal cash flow to support its
operations, acquire capital equipment and finance inventory and accounts
receivable growth. The Company has raised a total of $8.0 million from the
private sale of equity securities. Operating activities provided approximately
$1.6 million in cash in fiscal 1995, $4.9 million in fiscal 1996, $2.9 million
in fiscal 1997 and $0.8 million in the first quarter of fiscal 1998.
The Company made capital expenditures of approximately $1.3 million, $1.4
million and $2.0 million in fiscal 1995, 1996, and 1997, respectively, and
$0.7 million in the first quarter of fiscal 1998, primarily for the purchase
of test equipment and design and engineering systems. The Company expects to
spend approximately $2.0 million of the net proceeds of the offering to
acquire capital equipment for research and development and testing in fiscal
1998. See "Use of Proceeds."
As of September 30, 1997, the Company's principal source of liquidity
included cash and cash equivalents of approximately $9.5 million. The Company
believes that cash generated from operations and the net proceeds of the
offering will be sufficient to fund necessary purchases of capital equipment
and to provide working capital at least through the next 12 months. However,
there can be no assurance that future events will not require the Company to
seek additional capital sooner or, if so required, that adequate capital will
be available at all or on terms acceptable to the Company.
24
<PAGE>
BUSINESS
Pericom Semiconductor Corporation (the "Company" or "Pericom") designs,
develops and markets high-performance interface integrated circuits ("ICs")
used in many of today's advanced electronic systems. Interface ICs, such as
interface logic, switches and clock management products, transfer, route and
time electrical signals among a system's microprocessor, memory and various
peripherals and between interconnected systems. High-performance interface
ICs, which enable high signal quality, are essential for the full utilization
of the available speed and bandwidth of advanced microprocessors, memory ICs,
LANs and WANs. Pericom focuses on high-growth and high-performance segments of
the notebook computing, networking and multimedia markets, in which advanced
system designs require interface ICs with high-speed performance, reduced
power consumption, low-voltage operation, small size and higher levels of
integration.
Pericom has combined its extensive design technology and applications
knowledge with its responsiveness to the specific needs of electronic systems
developers to become a leading supplier of interface ICs. The Company has
evolved from one product line in fiscal 1992 to four currently --
SiliconInterface, SiliconSwitch, SiliconClock and SiliconConnect -- with a
goal of providing an increasing breadth of interface IC solutions to its
customers. Pericom currently offers approximately 300 standard products, of
which 81 were introduced during the twelve months ended September 30, 1997,
and is planning to introduce 34 new products during the fourth quarter of
calendar 1997. The Company's customers and OEM end users include 3Com
Corporation, Apple Computer, Inc., Ascend Communications, Inc., Avid
Technology, Inc., Cabletron Systems, Inc., Canon, Inc., Cisco Systems, Inc.,
Compaq Computer Corporation, Digital Equipment Corporation, Hewlett-Packard
Company, Hitachi Ltd., International Business Machines Corporation, Intel
Corporation, Inventec, Inc., Smart Modular Technologies Inc., Solectron
Technology Corporation and Toshiba Corporation.
INDUSTRY BACKGROUND
OVERVIEW
The presence of electronic systems and subsystems permeates our everyday
life, as evidenced by the growth of the personal computer, mobile
communications, networking and consumer electronics markets. The growth of
these markets has been driven by systems characterized by ever-improving
performance, flexibility, reliability and multifunctionality, as well as
decreasing size, weight and power consumption. Advances in ICs through
improvements in semiconductor technology have contributed significantly to the
increased performance of, and demand for, electronic systems and to the
increasing presence of ICs as a proportion of overall system cost. This
technological progress has occurred at an accelerating pace, while the cost of
electronic systems has remained steady or declined.
ROLE OF THE INTEGRATED CIRCUIT IN ELECTRONIC SYSTEMS
Performance of electronic systems has benefited significantly from advances
in IC technology, which has fostered innovations in applications such as
notebook computers, networking and multimedia and associated software.
Innovations in these applications have in turn created new opportunities and
challenges that foster further innovations by IC designers. In this way, IC
and application developers have participated in a cyclical process that has
led to shorter product lives, increasing the pressure on system manufacturers
to introduce products with enhanced capabilities and performance while keeping
prices within reach of their target markets. This process in turn is driving
the demand for timely, cost-effective IC solutions.
An electronic system generates and manipulates electrical signals using
three types of ICs: (1) system logic ICs, such as microprocessors and
controllers, which perform arithmetic and logic functions and control specific
system operations; (2) memory ICs, such as DRAMs and EPROMs, which store data
and instructions for future retrieval; and (3) "interface" ICs, such as
interface logic, switches and clock management products, which control the
transfer, routing and timing of data. Data is retrieved from the memory and is
received from various system peripherals, such as a keyboard, mouse, modem,
scanner, microphone or camera, and from network
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interface cards. Data is manipulated by the microprocessor in accordance with
its arithmetic and logic functions to produce the desired output, which the
microprocessor communicates to the memory and various output devices, such as
printers, video display terminals, modems, speakers and network interface
cards. In this environment, data travels in the form of electrical signals,
which convey information in the form of rising and falling voltage levels.
In order to efficiently move data from the input devices and memory to the
microprocessor and from the microprocessor to memory and output devices, the
electrical signals must be precisely timed, synchronized, transmitted and
routed by a variety of interface ICs. For example, interface logic and bus
switches are used to transfer and route data between system logic ICs and
memory within the system and between systems. Analog switches are used to
transfer and route signals such as video and audio signals. Clock management
ICs are used to generate, buffer and distribute precise timing signals that
are required to synchronize the operation of different system logic and memory
ICs. Network transceivers are used to transmit and receive data packets
between different network nodes. Without a very high degree of precision in
the transfer, routing and timing of electrical signals, the system will either
operate at a degraded performance level or crash.
Whereas system logic and memory ICs consist entirely of digital circuits,
interface ICs can consist of digital circuits, analog circuits, or mixed
digital and analog ("mixed-signal") circuits. Digital circuits process
discrete electrical signals in a binary format, i.e., as either a "1" or a
"0," typically represented by different voltage levels. Analog circuits
process continuous electrical signals that vary over a specified operating
range, performing such functions as amplification and transmission. Mixed-
signal circuits process both digital and analog signals on a single IC to
achieve higher levels of integration and enhanced performance. Increasingly,
interface circuits are combining both analog and digital circuitry to achieve
better IC performance. The development of these mixed-signal ICs incorporates
a level of circuit design complexity which presents significant development
challenges, requiring a high level of design expertise.
PERFORMANCE CHALLENGES
The development of high-performance personal computers, the requirement for
higher network performance and the increased level of connectivity among
different types of electronic devices have driven the demand for high-speed,
high-performance interface circuits to handle the transfer, routing and timing
of digital and analog signals at high speeds with minimal loss of signal
quality. High-speed signal transfer is essential to fully utilize the speed
and bandwidth of the microprocessor, the memory and the LAN or WAN. High
signal quality is equally essential to achieve optimal balance between high
data transmission rates and reliable system operation. Market requirements for
interface circuits are driven by the same market pressures as those imposed on
microprocessors, including higher speed, reduced power consumption, lower-
voltage operation, smaller size and higher levels of integration.
The problems associated with signal quality that must be addressed by the
interface ICs are magnified by increases in the speeds at which interface ICs
must transfer, route and time electrical signals, the number of interconnected
devices that send or receive signals and the variety of types of signals
processed by the interface ICs. The most significant performance challenges
faced by designers of interface ICs are the requirements to transfer signals
at high speed with low propagation delay, minimize signal degradation caused
by "noise," "jitter," and "skew" and reduce electromagnetic interference
("EMI"). Minimizing propagation delay sources of signal degradation and
interference is needed to enable today's state-of-the-art electronic systems
to function.
Propagation Delay. Propagation delay refers to the time it takes to
transfer an electrical signal from a source to a destination (e.g., from
the microprocessor to the memory). Such transmission time depends on the
strength of the transmitted signal, length of the signal path and the
electrical load. Long propagation delays create signal transfer bottlenecks
and cause a system to run slower.
Noise. Noise refers to electrical interference among a system's
components, which can distort, mask or weaken the intended signal.
Excessive noise causes poor signal quality and loss of signal fidelity,
misinterpretation of transmitted data (such as mistaking a "1" for a "0" as
a result of a distorted voltage
26
<PAGE>
level) and potential system malfunctions. The tendency of a system to
produce this kind of interference has grown as circuit operating
frequencies have increased and additional functions are integrated into the
system.
Jitter. Jitter refers to the inevitable random fluctuations in the
frequency and phase of signals. Excess jitter in a signal can cause a loss
of data or a system crash. As advanced microprocessors, memories and
certain interface ICs are designed to tighter tolerances, they require
clock sources with an increasingly precise frequency range to achieve
reliable operation. For example, a microprocessor designed to operate at
200 MHz needs a very precise clock timing source within a range of plus or
minus one ten-billionth of a second between adjacent clock cycles.
Skew. Skew refers to a failure of two or more given signals to properly
synchronize their arrival at a designated place in the IC or system for
reasons such as varying lengths and electrical loads of signal paths on the
system board or within the interconnects inside the ICs. The need to wait
for all signals to arrive before a function can be performed results in
added delay and lower system performance. As advanced systems operate at
higher frequencies and shorter cycle times, the acceptable amount of skew
has been decreasing.
Electromagnetic Interference. EMI refers to emissions from electronic
systems that generate noise and cause interference with other systems. As
these systems operate at increasingly higher frequencies, EMI emissions are
increasing and the systems are becoming more sensitive to such emissions.
Reduction in EMI is essential in order to remain in compliance with
governmental standards and obtain required certification from appropriate
government agencies.
Pericom believes that several major market trends will make reliable
operations of systems at high frequency and high data transfer rates even more
challenging in the future. Multimedia and high-performance network
applications will continue to push for more data bandwidth on system buses and
across system boundaries. Computer and networking system clock frequencies
will continue to increase at a very rapid rate, shortening the time available
to perform data transfers. While the data transfer rate is expected to
increase several fold within the next few years, the continuing desire for
higher system reliability with minimal system downtime will create increasing
pressure to achieve lower data error rates. Increasing system-wide EMI
emissions resulting from higher-frequency ICs compels system designers to
develop and implement new ways to further reduce these emissions. These
factors all increase the need for very high-speed interface circuits with
outstanding performance specifications.
Pericom also believes that electronic systems designers and OEMs are
increasingly requiring solutions to the technical challenges described above
in order to take advantage of continuing speed and performance enhancements in
microprocessor and memory ICs. These customers are also continuing to migrate
from single-part vendors to suppliers who can provide multiple parts for their
systems, both to reduce the number of vendors they must deal with and to
address interoperability requirements among the interface ICs within the
system. Due to the short design times and product life cycles these customers
face for their own products, they are requiring rapid response time and part
availability from interface IC vendors. Interface IC vendors are further
required to accomplish these tasks in a cost-effective manner that flexibly
responds to specific customer needs.
THE PERICOM SOLUTION
Pericom has combined its extensive signal transfer, routing and timing
technology with its responsiveness to the specific needs of electronic systems
developers to become a leading supplier of interface ICs. While Pericom's
products address a wide spectrum of applications, Pericom primarily devotes
its resources to responding to the requirements of the OEM customer base in
its target markets. Pericom currently offers approximately 300 standard
products, of which 81 were introduced during the twelve months ended
September 30, 1997, and is planning to introduce 34 new products during the
fourth quarter of calendar 1997.
27
<PAGE>
EXTENSIVE TECHNOLOGY UTILIZATION. Since its founding in 1990, Pericom has
developed and continuously refined a modular design methodology that enables
it to rapidly introduce proprietary and leading-performance products. Central
to this methodology is Pericom's library of digital and analog functions
composed of many high-performance macrocells, several of which are patented,
such as mixed-voltage input/output cells, a digital PLL, an analog PLL and a
charge pump, as well as numerous core functions, many of which are not
available in commercial ASIC libraries. The Company utilizes various digital
cells, analog cells and sea-of-gates arrays to rapidly design interface ICs
optimized for power, density, performance and manufacturability, while
addressing the market requirements for short propagation delay, low noise and
jitter, minimal skew and reduced EMI emissions. The Company's design
methodology utilizes common mask sets from which multiple designs can be
developed, resulting in rapid product introductions, lower development costs
and fast response to volume requirements at competitive pricing.
CUSTOMER RESPONSIVENESS. With a primary focus on three rapidly-growing
markets, Pericom has been able to work with leading designers of notebook
computing, networking and multimedia systems to develop products integral to
their designs. Pericom's approach is to provide its customers with extensive
solutions to their signal transfer, routing and timing needs, which has
allowed Pericom to become an important supplier to them, rather than only a
specific part provider. The Company endeavors to work with its customers at
the product specification stage, keeping abreast of system logic and memory
performance enhancements in order to anticipate the engineering challenges
interface ICs will face and thereby shorten customers' system development
cycle times. While Pericom can typically satisfy a customer need with one of
its standard designs, Pericom's design methodology can enable the design and
delivery of a derivative product solution in as little as four to six weeks to
meet that need.
THE PERICOM STRATEGY
Pericom is a market-driven supplier of high-performance digital, analog and
mixed-signal ICs, focusing on providing superior solutions for the transfer,
routing and timing of high-speed electrical signals. Utilizing the Company's
design expertise, advanced process technologies and collaborative
relationships with leading wafer foundries, the Company aims to expeditiously
deliver superior solutions to its customers, with the objective of becoming
the acknowledged leader in providing interface ICs that are both state-of-the-
art and cost-effective. Key elements of the Company's strategy for achieving
this objective are:
MARKET FOCUS. Pericom's market strategy is to focus on the high-growth,
high-performance segments of the computing and networking markets and emerging
opportunities in multimedia. Currently, the Company designs and sells products
for specific high-volume applications within these target markets, including
notebook computers, LAN and WAN switches, routers and hubs, and multimedia
switches. The Company's customers include a number of leading OEMs in each
market: Acer Incorporated, Compaq, Dell, Hitachi and IBM in the notebook
market; 3Com, Ascend Communications, Bay Networks, Cabletron Systems, Cisco
Systems, Hewlett-Packard and Samsung in the network equipment market; and
Acer, Avid, Diamond Multimedia Systems, Inc. and Trident Microsystems in the
multimedia applications market. Pericom intends to pursue new opportunities in
these markets where its rapid-cycle IC design and development expertise and
understanding of the product evolution of its customers enable Pericom to
become the leading solution supplier.
CUSTOMER FOCUS. Pericom's customer strategy is to use a superior level of
responsiveness to customer needs to continually expand its customer base and
further penetrate its existing customers. Key elements of the Company's
customer strategy are:
. Penetrate target accounts with appropriate business solutions. The
Company approaches prospective customers primarily by working with their
system design engineers at the product specification stage with the goal
that one or more Pericom ICs will be incorporated into a new system
design. Pericom's understanding of its customers' requirements combined
with its ability to develop and deliver reliable, high-performance
products within its customers' product introduction schedules has enabled
Pericom to establish strong relationships with several leading OEMs.
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<PAGE>
. Solidify customer relationships through superior responsiveness. Pericom
believes that its customer service orientation is a significant
competitive advantage. Pericom seeks to maintain short product lead times
and provide its customers with excellent delivery-to-schedule
performance, in part by having available adequate finished goods
inventory for anticipated customer demands. Pericom puts heavy emphasis
on product quality and maintaining very competitive defect levels for its
products. Pericom has been ISO-9001 certified since March 1995. The
Company is flexible in responding to its customers' changing
requirements, rescheduling deliveries if necessary or developing a new
derivative product, typically in four to six weeks, should a customer's
revised system design require modified performance features. The Company
regularly enhances the performance of its product lines through
innovation and seeks to offer products and implementation solutions at
the lowest achievable costs.
. Expand customer relationships through broad-based solutions. Pericom aims
to grow its business with existing customers by offering a product line
that provides an increasingly extensive solution for their signal
transfer, routing and timing needs. Pericom believes that suppliers with
the broadest offerings of high-performance, reliable, cost-effective and
dependably delivered products are enjoying increasing competitive
advantages as customers continue to seek reductions in their vendor
counts. By providing its customers with superior vendor support in
existing programs and anticipating its customers' needs in next-
generation products, Pericom has often been able to substantially
increase its overall volume of business with those customers. With its
larger customers Pericom has also initiated EDI and remote warehousing
programs, annual purchase and supply programs, joint development projects
and other services intended to enhance the Company's position as a key
vendor.
TECHNOLOGY FOCUS. Pericom's technology strategy is to maintain its leading
position in the development of new, higher-performance interface ICs by
continuing to design additional core cells that address the more challenging
problems of signal interface as electronic systems become faster and require
lower power and voltages. Pericom's primary efforts are in the creation of
additional proprietary digital, analog and mixed-signal functionalities.
Pericom is working closely with its wafer foundry partners to incorporate
their advanced CMOS process technologies to improve its ability to introduce
next generation products expeditiously. Pericom intends to expand its patent
portfolio with the goal of providing increasingly proprietary product lines.
MANUFACTURING FOCUS. The Company's manufacturing strategy is closely
integrated with its focus on customer needs. Central to this strategy is the
Company's intent to support high-volume shipment requirements on short notice
from customers. Pericom designs its products for manufacturability to enable
it to manufacture any one of many different ICs from a single partially-
processed wafer. Accordingly, the Company keeps inventory in the form of wafer
banks, from which wafers can be completed to produce a variety of specific ICs
in two to four weeks. This approach has enabled the Company to reduce its
overall work-in-process inventory while providing increased availability for a
single product. In addition, the Company keeps some inventory in the form of
die banks, which can become finished product in two weeks or less. To ensure
adequate, timely supply, the Company has established relationships with two
leading foundries, Chartered and TSMC, is qualifying LG as a third, and is
maintaining its relationships with AMS and NJRC for certain products which are
manufactured in BiCMOS or high-voltage CMOS processes.
STRATEGIC AND COLLABORATIVE RELATIONSHIPS FOCUS. Pericom pursues a strategy
of entering into new relationships and expanding existing relationships with
companies in the product design, manufacturing and marketing of integrated
circuits. The Company believes that these relationships have enabled it to
access additional design and application expertise, accelerate product
introductions, reduce costs and obtain additional needed capacity. In product
design, the Company has engaged PTI, an affiliated company, and certain design
houses to develop interface ICs as a means of rapidly expanding the Company's
product portfolio. Pericom has established collaborative relationships with
leading foundries capable not only of providing adequate capacity and advanced
process migration paths, but which also have digital core libraries of
sufficiently high performance to be utilized in the Company's future products.
In February 1996, the Company entered into a private label resale program with
Harris, under which Harris buys certain Pericom products and resells them
under its own name. Pericom intends to seek additional such relationships in
the future.
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<PAGE>
PRODUCTS
The Company has used its expertise in high-performance digital, analog and
mixed-signal IC design, its re-usable core cell library and its modular design
methodology to achieve a rapid rate of new product introductions. As
demonstrated by the chart below, the Company has evolved from one product line
in fiscal 1992 to four product lines currently, with a goal of providing an
increasing breadth of product solutions to its customers. Within each product
line, the Company has continued to introduce products with higher performance,
higher levels of integration, and new features and options.
[GRAPH OF COMPANY PRODUCTS]
SILICONINTERFACE
Through its SiliconInterface product line, Pericom offers a broad range of
high-performance 5-volt and 3.3-volt CMOS logic interface circuits. These
products provide logic functions to handle data transfer between
microprocessors and memory, bus exchange, backplane interface, and other logic
interface functions where high-speed, low-power, low-noise and high-output
drive characteristics are essential. The Company's thin and tight-lead-pitch
packages allow significant reduction in board space and provide enhanced
switching characteristics. The Company has two patents that relate to certain
SiliconInterface products: one that relates to mixed-voltage operations that
are scaleable for future generations of low-voltage logic families, and one
that relates to a high-speed, low-noise input/output buffer design. The
SiliconInterface product line is used in a wide array of systems applications,
including notebook computers, high-speed network hubs, routers and switches
and multimedia systems.
5-VOLT INTERFACE LOGIC. The Company's high-speed 5-volt interface logic
products in 8-, 16- and 32-bit configurations address specific system
applications, including a "Quiet Series" family for high-speed, low-noise,
point-to-point data transfer in computing and networking systems and a
"Balanced Drive" family with series resistors at output drivers to reduce
switching noise in high-capacitive load switching in the main and cache
memories of high-performance computers.
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3.3-VOLT INTERFACE LOGIC. Pericom's 3.3-volt interface logic products in 8-
and 16-bit configurations address a range of cost and performance
requirements. The Company's 3.3-volt ALVCH, LPT, LCX and FCT3 interface logic
families offer a comprehensive range of performance at very low power. The
ALVCH, LPT and LCX families allow customers the flexibility to use certain
Pericom 3.3-volt products in pure 3.3-volt or mixed 3.3/5-volt designs.
Because a full range of 3.3-volt components is not always available, this
flexibility is important as computer and networking designs make the
transition from 5 volts to 3.3 volts. ALVCH, a leading-edge performance family
that targets high-speed computer and networking designs, offers bus hold and
5-volt I/O tolerance options. LPT is a mid-range performance family and the
industry's first 3.3-volt CMOS logic family with 5-volt I/O tolerance. LCX is
a relatively slow-speed family that is targeted for low-cost applications.
FCT3 is a mid-range performance family that can interface only with 3.3-volt
components.
The table below lists Pericom's 223 SiliconInterface products, indicating
the number of 8-, 16- and 32-bit products in each product family.
SILICONINTERFACE PRODUCT LINE
<TABLE>
<CAPTION>
NUMBER OF
PRODUCTS OFFERED
-------------------
PRODUCT FAMILIES 8-BIT 16-BIT 32-BIT
<S> <C> <C> <C>
5-Volt Interface Logic
FCT Interface Logic Family 83 56 2
3.3-Volt Interface Logic
ALVCH Interface Logic Family -- 31 --
LPT Interface Logic Family 11 12 --
LCX Interface Logic Family 10 11 --
FCT3 Interface Logic Family 2 5 --
</TABLE>
SILICONSWITCH
Through its SiliconSwitch product line, Pericom offers a broad range of
high-performance ICs for switching digital and analog signals. The ability to
switch or route high-speed digital or analog signals with minimal delay and
signal distortion is a critical requirement in many high-speed computers,
networking and multimedia applications. Historically, systems designers have
used mechanical relays, solid-state relays and analog switches, which have
significant disadvantages compared to IC switches: mechanical relays are
bulky, dissipate significant power and have very low response times; solid-
state relays are expensive and dissipate significant power; and traditional
analog switches have relatively high resistance that can cause significant
signal distortion.
DIGITALSWITCH. The Company offers a family of digital switches in 8-, 16-
and 32-bit densities that address the switching needs of high-performance
systems. These digital switches offer performance and cost advantages over
traditional switch functions, offering low on-resistance (less than 5 ohms),
low propagation delay (less than 250 picoseconds), low standby power (less
than 1 microamp) and series resistor options that support low EMI emission
requirements. Applications for the Company's digital switches include 5-volt-
to-3.3-volt signal translation, high-speed data transfer and switching between
microprocessors and multiple memories, and hot plug interfaces in notebook and
desktop computers, servers and switching hubs and routers.
ANALOGSWITCH. The Company offers a family of analog switches for low-voltage
(2- to 5-volt) applications such as multimedia audio and video signal
switching with enhanced characteristics such as low power, high bandwidth, low
crosstalk and low distortion to maintain analog signal integrity. Traditional
analog switches cause unacceptable levels of distortion due to high on-
resistance. The Company's analog switches have significantly lower on-
resistance, resulting in significant improvement in bandwidth and distortion.
This allows the Company's analog switches to be used for state-of-the-art
video and audio switching applications where traditional analog
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switches cannot be used. Applications for Pericom's analog switches include
multimedia, telecommunications systems, cellular phones and instrumentation.
LANSWITCH AND VIDEOSWITCH. The Company offers a line of application-specific
standard product ("ASSP") switches for specific applications. These products
include LANSwitches, which are used to switch among multiple LAN protocols
(e.g., Ethernet, FastEthernet and Token Ring) on networking systems, and
VideoSwitches, which are used in graphic and multimedia systems to switch
among different video and audio sources at very high frequencies with minimal
distortion, hence preserving high video and audio fidelity.
The table below lists Pericom's 56 SiliconSwitch products.
SILICONSWITCH PRODUCT LINE
<TABLE>
<CAPTION>
NO. OF
PRODUCTS
PRODUCT FAMILIES OFFERED
<S> <C>
DigitalSwitch Family 40
AnalogSwitch Family 11
LANSwitch/VideoSwitch Family 5
</TABLE>
SILICONCLOCK
Through its SiliconClock product line, Pericom offers a broad range of
general-purpose solutions including clock buffers, PLL-based zero-delay clock
generators and ASSP PLL-based frequency synthesizer products for Pentium,
Pentium Pro, Pentium II and PowerPC-based systems, as well as a number of ASSP
clock products for laser printers and modem applications. As system designers
use microprocessors and memories that run at increasingly high frequencies,
there is a demand for correspondingly reliable clock management circuits to
generate and distribute high-precision, high-frequency timing control signals
for advanced computer, networking, multimedia and embedded applications. To
enable the reliable operations of these ICs with precise timing, the clock
circuits need to have short propagation delay, low jitter and low pin-to-pin
signal skew.
CLOCK BUFFERS AND ZERO-DELAY CLOCK GENERATOR. Clock buffers receive a
digital signal from a frequency source and create multiple copies of the
signal for distribution across system boards. Pericom offers 3.3-volt and 5-
volt clock buffers for high-speed, low-skew applications in computers and
networking equipment. PLL-based clock generators, also known as zero-delay
clock generators, virtually eliminate propagation delays by synchronizing the
clock outputs with the incoming frequency source. Pericom's zero-delay clock
generator offers frequencies of up to 100 MHz for applications in computer
servers, PCI bridges and SDRAM modules.
CLOCK FREQUENCY SYNTHESIZERS. Clock frequency synthesizers use single or
multiple PLLs to generate various output frequencies using a crystal
oscillator as an input frequency source. Clock frequency synthesizers are used
to provide critical timing signals to microprocessors, PCI buses, SDRAM and
peripheral functions. Pericom's PLL-based clock synthesizers support Pentium,
Pentium Pro, Pentium II and PowerPC microprocessors and are designed with an
emphasis on minimizing jitter and power consumption. In addition, some of the
products come with integrated serial I/2/C serial link communications and
options for spread-spectrum selection that meet low EMI requirements for
mobile and desktop PC motherboards. The Company's PLL-based laser printer
clock provides a cost effective solution for high-speed, high-resolution video
clock generation at 40 MHz for low-cost color laser printer controllers and at
80 MHz for high-speed color laser printer controllers. The Company offers
modem clocks to support 28.8K and 56K rack-mount modem designs.
FLEXCLOCK. To support embedded processor and data transmission operations,
telecom and datacom applications often require unique combinations of
frequencies on the system board. Traditionally, such requirements have been
handled by the simultaneous use of several crystal oscillators. This approach
is costly,
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however, and requires significant board space. Also, certain uncommon
frequencies require very long purchase order lead times. Supporting quick-turn
customer prototyping as well as volume production requirements, Pericom's
FlexClock product offers customers programmable PLL-based clock synthesizers
that provide multiple customer-specified frequencies in a single IC with short
lead time and with fast factory programming of custom requested frequencies.
The table below lists Pericom's 26 SiliconClock products.
SILICONCLOCK PRODUCT LINE
<TABLE>
<CAPTION>
NO. OF
PRODUCTS
PRODUCT FAMILIES OFFERED
<S> <C>
5-Volt Clock Buffers 7
3-Volt Clock Buffers 5
Zero-Delay Clock Generator 1
Clock Frequency Synthesizers 12
FlexClock 1
</TABLE>
SILICONCONNECT
Through its SiliconConnect product line, Pericom offers a range of highly-
integrated physical layer ("PHY") interface ICs for various high-speed LAN
standards such as Token Ring and FastEthernet. Pericom's earlier development
effort in Token Ring and other networking protocols helped the Company develop
expertise in the design and testing of high-speed network transceivers, much
of which expertise is applicable to the current FastEtherent development
efforts.
100TX FASTETHERNET TRANSCEIVERS. The Company is currently shipping
engineering samples of two recently-developed 4-port FastEthernet PHY
transceiver products for 100TX FastEthernet hub and switch markets. Pericom's
PI2C6040 is designed to integrate 4-port 100TX PHY channels into a single-chip
PHY for networking switch designs. For the repeater hub market, Pericom's
PI2C6050 is designed to integrate four-port 100TX PHY channels with
multiplexing circuits in a space-saving, 100-pin QFP package. By using higher
levels of integration, the Company is developing multiport PHY solutions
designed to connect seamlessly to popular physical medium dependent (PMD) ICs
at reduced system cost and board space.
PBX TELECOM SWITCHES. The Company offers two telecom products for digital
switch matrix PBX applications: the PT9085, which provides serial-to-parallel
or parallel-to-serial conversion, and the PT9085, which provides address and
switching functions for PBX switching stations.
TOKEN RING AND OTHER LAN PROTOCOL TRANSCEIVERS. For Token Ring switch hub
applications, the Company offers two Token Ring PHY transceivers that use a
patented attenuator retiming circuit that can significantly reduce signal
jitter as data is transmitted between network nodes. The Company also offers a
100Mbps transceiver that implements the physical layer interface for the
100VG-AnyLAN hub and network interface card applications.
33
<PAGE>
The table below lists Pericom's seven SiliconConnect products.
SILICONCONNECT PRODUCT LINE
<TABLE>
<CAPTION>
NO. OF
PRODUCTS
PRODUCT FAMILIES OFFERED
<S> <C>
100TX FastEthernet* 2
PBX Switch 2
Token Ring Transceivers 3
</TABLE>
* The Company is currently providing engineering samples of these
products.
The Company is continuing to enhance and refine the offerings in its
existing product lines, while working to add next-generation products which
address new market opportunities on a timely basis. In particular, the Company
is developing PCI bridge products targeted for the networking, workstation and
PC markets, additional 3.3-volt and high-voltage digital and analog switches
complementing its current product families, additional ALVCH 3.3-volt products
to expand the current ALVCH product family, additional high-performance
frequency synthesizers and clock buffers intended for new markets or
applications. The failure of the Company to complete and introduce new
products in a timely manner at competitive price/performance levels would
materially and adversely affect the Company's business and results of
operations. See "Risk Factors -- Technological Changes; Dependence on New
Products."
34
<PAGE>
TARGETED MARKETS AND APPLICATIONS
Pericom's products and technology are applicable to the transfer, routing
and timing of signals in many different system designs. Pericom currently
focuses on three high-volume, high-growth market segments: notebook computers,
networking and multimedia.
NOTEBOOK COMPUTERS
Pericom's SiliconInterface, SiliconSwitch and SiliconClock products are
currently used by notebook OEMs for a broad range of applications, including
docking station interface, high-speed transfer and timing of signals among
memories and microprocessors, mixed-voltage translations and audio and video
switching. Set forth below is a simplified block diagram of a typical high-
performance multimedia notebook computer connected to a docking station.
[FLOW CHART OF DOCKING STATION & HIGH-PERFORMANCE NOTEBOOK COMPUTER]
DOCKING STATION HIGH PERFORMANCE NOTEBOOK COMPUTER
[Inserted in the text are graphics consisting of two rectangular boxes with
smaller boxes inside, labeled as a docking station and a high performance
notebook computer, which are connected by a double-sided arrow. Within the
boxes, certain elements of the applicable items are depicted, with the
interconnection of such elements shown by lines. The elements offered by
Pericom are highlighted: "Switch" in the box depicting a docking station, and
"Logic," "Clock", and "Switch" in the box depicting a notebook. In addition,
the elements "Audio," "Video," and "LAN" are marked as functions that may also
incorporate Pericom products, as depicted on pages 34 and 35.]
High-performance notebook computers pose unique engineering challenges due
to their small size, the need for long battery life and the desire to achieve
performance levels comparable to desktop computers. To enable higher overall
system speed, Pericom provides fast interface logic and switches for data
buffering and memory bank switching between high-precision microprocessors and
memory. To reduce power consumption and extend battery life, Pericom provides
a variety of 3.3-volt interface logic, clock management and switching ICs. To
accommodate the smaller size of a notebook motherboard, many of the Company's
products feature high levels of integration with advanced packaging in 1 mm
thickness and 0.4 mm lead pitch. To comply with various governmental standards
regarding EMI emissions, the Company offers ICs with special circuits to
reduce EMI. To provide multimedia options in this demanding environment,
Pericom offers low-distortion, high-bandwidth video switches for high-
resolution video and low-distortion analog switches for high-fidelity audio
signal switching. To permit connection to office networks without turning the
power off, Pericom provides digital switches for implementing hot-plug docking
station interface and PCMCIA cards. Pericom's representative customers in the
notebook computer segment include Acer, Compaq, Dell, Hitachi and IBM.
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<PAGE>
NETWORKING HUBS, SWITCHES AND ROUTERS
Pericom currently supplies a broad range of products for high-performance
hubs, switches and routers, servicing applications such as Ethernet and
FastEtherent protocol switching, hub-to-hub connections, clock distribution,
backplane drive and hot plug interface. The Company has also started sampling
two integrated four-port FastEthernet PHY transceiver products targeting
FastEthernet repeater and switch designs. Set forth below is a simplified
block diagram of a typical network switching hub and adapter system connected
to a network interface card.
[GRAPH OF NETWORK SWITCH & NETWORK INTERFACE CARD]
[Inserted in the text are graphics consisting of rectangular boxes labeled
"Network Switch" and "Network Interface Card." Within the boxes, certain
elements of the applicable item are depicted, with the interconnection of such
elements shown by lines. The elements offered by Pericom are highlighted: two
"Switch[es]", "Logic," "Clock," "PHY," and "LAN Switch" in the box
representing a network switch and "Logic," "Clock," and "LAN Switch" in the
box representing a network interface card. The element "PHY" is marked to
indicate that Pericom is currently shipping engineering samples thereof. The
boxes depicting the systems are connected by a line.
Advanced networking systems require high-bandwidth performance, multi-
protocol processing and high levels of system integration, ease of maintenance
and reliability. Pericom offers numerous products to address these
requirements. For high-level system integration and high-bandwidth
performance, Pericom has developed a four-channel 100Mbps FastEthernet PHY
transceiver with low latency and higher data rate throughput. To save board
space, Pericom integrates the timing signals for the microprocessor, memory
and peripherals into a single programmable clock synthesizer that eliminates
multiple crystal oscillators. To support ease of system maintenance, Pericom
offers digital switches for hot-plug interfacing to permit insertion of
additional circuit boards while power remains on. To support multiple protocol
switching, Pericom offers two low-distortion LanSwitches for selecting
multiple LAN protocols. To support design flexibility, Pericom offers a 3.3-
volt interface with 5-volt tolerant I/Os for mixed-voltage system design
requirements.
Pericom's representative customers in this segment include 3Com, Ascend
Communications, Bay Networks, Cabletron Systems, Cisco Systems, Hewlett-
Packard and Samsung.
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<PAGE>
MULTIMEDIA
The Company currently supplies its high-bandwidth, low-noise VideoSwitch,
AnalogSwitch and other SiliconSwitch products to a variety of multimedia
system suppliers. These products support applications such as TV/PC monitor
video switching, picture-in-picture video overlay, audio switching and video
multiplexing. Set forth below are simplified block diagrams of typical sound
card and video card applications.
AUDIO CARD
[FLOW CHART OF AUDIO CARD]
VIDEO CARD
[FLOW CHART OF VIDEO CARD]
[Inserted in the text are graphics consisting of two rectangular boxes labeled
"Audio Card" and "Video Card." Within the boxes, certain elements of the
applicable card are depicted, with the interconnection of such elements shown
by lines. The elements offered by Pericom are highlighted: "Clock" and three
"Analog Switch[es]" in the box depicting an audio card, and "Digital Switch,"
"Clock," and "Video Switch" in the box depicting a video card.]
Products offered by Pericom.
Desktop and mobile computers integrate audio and other multimedia functions
either on the motherboard or through add-on cards. These functions are often
required to support both 3.3-volt and 5-volt signal levels, high-speed data
transfer between MPEG or other DSP processors and memory, hot-plug insertions
for card options and small packaging. Pericom supplies the following IC
solutions for multimedia applications: low-distortion analog switches for high
fidelity audio switching; high-bandwidth and low cross talk video switches for
high fidelity video switching; high-speed interface logic and switches for
interface between MPEG and DSP processor functions and memory; 3.3-volt
interface logic with 5-volt-tolerant I/Os for mixed 3.3/5-volt system
requirements; for processor and memory requirements, a low-cost FlexClock that
replaces multiple crystal oscillators with a single programmable IC for all
the multimedia clock signals; digital switches for hot-plug insertion; and
small, thin packages and a high level of circuit integration for small form
factor packaging requirements. Representative customers in this segment
include Acer, Avid, Diamond Multimedia and Trident Microsystems.
37
<PAGE>
OTHER MARKETS
In addition to Pericom's three target markets, its products are also used in
other market segments by customers such as Apple, Canon, Dell, Digital
Equipment Corporation, Hitachi, Samsung and Smart Modular Technologies. Some
of the more significant segments include desktop PCs and workstations, laser
printers, memory modules, instrumentation and set-top boxes. In particular,
Pericom offers high-frequency, programmable video clock generators for high-
speed, high-resolution laser printer engine designs; zero-delay clock
generators for high-performance PCs, workstations and memory modules; and
multiple-frequency output clock generators for rack-mounted modem
applications. Further, the Company offers telecom PBX switches and clock
generators for cellular base stations and clock generators for high-
performance embedded systems ranging from arcade games to medical instruments.
For all of these applications, Pericom also provides interface logic and
switches.
CUSTOMERS
The following is a list of selected customers of the Company, including end
users and OEMs:
<TABLE>
<CAPTION>
COMPUTER NETWORKING
<S> <C>
Acer 3Com
Apple Ascend Communications
Compaq Bay Networks
Dell Cabletron
Digital Equipment Corporation Cisco
Hitachi Samsung
IBM
Intel
Inventec MULTIMEDIA, PERIPHERALS AND OTHERS
NEC Adaptec
Toshiba Avid
Canon
CONTRACT MANUFACTURING Diamond Multimedia
AVEX Electronics Mylex
Celestica PictureTel
Jabil Circuit Trident Microsystems
SCI Xerox
Smart Modular Technologies
Solectron
</TABLE>
The Company's customers include a broad range of end users and OEMs in the
computer, peripherals, networking and contract manufacturing markets. In
fiscal 1996, sales to Apple and Pioneer Standard Electronics, Inc., a
distributor, accounted for approximately 20% and 16%, respectively, of net
revenues, and sales to the Company's top five customers accounted for
approximately 52% of net revenues. In fiscal 1997, sales to Harris and IBM
accounted for approximately 17% and 14%, respectively, of the Company's net
revenues, and sales to the Company's top five customers accounted for
approximately 47% of net revenues. In the first quarter of fiscal 1998, no
customer accounted for greater than 10% of net revenues, and the Company's top
five customers accounted for 35% of net revenues. See "Risk Factors --
Customer Concentration."
Contract manufacturers have become important customers for the Company as
systems designers in the Company's target markets are increasingly outsourcing
portions of their manufacturing. In addition, these contract manufacturers are
playing an increasingly vital role in determining which vendors' ICs are
incorporated into new designs.
38
<PAGE>
DESIGN AND PROCESS TECHNOLOGY
The Company's design efforts focus on the development of high-performance
digital, analog and mixed-signal ICs. To minimize design cycle times of high-
performance products, the Company utilizes a modular design methodology that
has enabled it to produce many new products each year and to meet its
customers' need for fast time-to-market response. This methodology uses state-
of-the-art computer-aided design software tools such as HDL description, logic
synthesis, full-chip mixed-signal simulation, and automated design layout and
verification using Pericom's library of high-performance digital and analog
core cells. This family of core cells has been developed over several years
and contains high-performance, specialized digital and analog functions not
available in commercial ASIC libraries. Among these cells are the Company's
proprietary mixed-voltage I/O cells, high-speed, low-noise I/O cells, analog
and digital PLLs, charge pumps and datacom transceiver circuits. Pericom has
been granted four U.S. patents relating to its circuit designs and has several
U.S. and foreign patent applications pending. Another advantage of this
modular design methodology is that it allows the application of final design
options late in the wafer manufacturing process to determine a product's
specific function. This option gives the Company the ability to use pre-staged
wafers, which significantly reduces the design and manufacturing cycle time
and enables the Company to respond rapidly to a customer's prototype needs and
volume requirements.
The Company utilizes advanced CMOS processes to achieve optimal performance
and die cost. The Company's process and device engineers work closely with its
independent wafer foundry partners to develop and evaluate new process
technologies. The Company's process engineers also work closely with circuit
design engineers to optimize the performance and reliability of its cell
library. The Company currently manufactures a majority of its products using
0.5 micron and 0.6 micron CMOS process technologies and is using an advanced
0.35 micron CMOS process in the design of a number of its new products. The
Company is also using a high-voltage CMOS process developed by one of its
foundry partners in the design of new switch products.
SALES AND MARKETING
The Company markets and distributes its products through a worldwide network
of independent sales representatives and distributors. In fiscal years 1995,
1996 and 1997, international sales comprised 35%, 30% and 37%, respectively,
of the Company's net revenues. The Company has five regional sales offices in
the United States, a sales office in Taiwan and a sales office in Europe. The
Company also supports field sales design-in and training activities with
application engineers. All marketing and product management personnel are
located at the Company's corporate headquarters in San Jose, California. See
"Risk Factors -- Risks of International Sales."
The Company focuses its marketing efforts on product definition, new product
introduction, product marketing, advertising and public relations. The Company
actively seeks cooperative relationships in product development and product
marketing. For example, the Company is working with NJRC on the development
and marketing of clock synthesis products for the Japanese market. In February
1996, the Company and Harris entered into a private label program (the "Harris
Agreement") pursuant to which Harris sells certain of the Company's
SiliconInterface products under its own label. The Company uses advertising
both domestically and internationally to market its products. Pericom product
information is available on its web site, which contains technical information
on all of its products and offers both fax-back and sample-request
capabilities online. The Company also publishes and circulates technical
briefs relating to its products and their applications.
The Harris Agreement sets forth the terms under which Harris may purchase
certain SiliconInterface products from the Company for resale under Harris's
private label. Under the Harris Agreement, the Company has guaranteed certain
production allocations and delivery times to Harris, and Harris may cancel a
portion of unshipped orders without liability. Further, Harris and the Company
have agreed to discuss the terms of an agreement to grant to PTI the right to
distribute certain Harris products in the Peoples Republic of China. If
Pericom determines to sell any of its technology that is incorporated into
Harris products, Harris has a 30-day right of first refusal to purchase such
technology. The Harris Agreement automatically terminates on a specified date,
or may be terminated earlier by either party upon notice or default of the
other party.
39
<PAGE>
In March 1997, the Company was issued ISO-9001 certification by the
International Organization for Standards for Quality Management after the
Company successfully completed the required Registration Assessment Audit with
Underwriter's Laboratories, which entails a rigorous quality assessment. To
maintain its ISO-9001 certification, the Company is required to pass semi-
annual Reassessment Audits, all of which the Company has passed to date. The
Company believes that ISO-9001 certification is a widely-recognized indicator
that its manufacturing processes satisfy certain objective quality control
standards and thus enhances its image as a reliable supplier of high-quality
products.
Pericom believes that contract manufacturing customers are growing in
importance and employs sales and marketing personnel who focus on servicing
these customers and on expanding Pericom's product sales via these customers
to OEMs. In addition, Pericom uses programs such as EDI, bonded inventories
and remote warehousing to enhance its service and attractiveness to contract
manufacturers.
Sales through domestic and international distributors were approximately 40%
of the Company's net revenues in fiscal 1996 compared to approximately 36% in
fiscal 1997. Major distributors in the United States include All American
Semiconductor, Bell Microproducts, Interface Electronics, Pioneer Standard,
and Reptron Electronics. Major international distributors include Ambar
(U.K.), Desner Electronics (Singapore), Internix (Japan), Macro Vision
(Taiwan), MCM (Japan) and Techmosa (Taiwan). See "Risk Factors -- Reliance on
Distributors."
The Company does not have long-term purchase agreements with any of its
customers, and customers can typically cancel or reschedule their orders
without significant penalty. As a result, customers frequently revise product
quantities and delivery schedules to reflect their changing needs. Since most
of the Company's backlog can be canceled or rescheduled, the Company does not
believe its backlog is a meaningful indicator of future revenue. See "Risk
Factors -- Limited Operating History; Potential Fluctuations in Operating
Results."
MANUFACTURING
The Company has adopted a fabless manufacturing strategy by subcontracting
its wafer production to independent wafer foundries. The Company has
established collaborative relationships with selected independent foundries
and targets additional foundry partners with which it can develop a strategic
relationship to the benefit of both parties. The Company believes that its
fabless strategy enables it to introduce high performance products quickly at
competitive cost. To date, the Company's principal manufacturing relationship
has been with Chartered. The Company provides Chartered with new product
designs to be used for testing and qualifying advanced manufacturing processes
from development to production. In exchange, Chartered provides the Company
with wafer allocation and early access to process technology. The Company has
also used AMS as a foundry since 1992. The Company is qualifying a 0.8 micron
high-voltage CMOS process at NJRC and plans to use this process for some of
its future products. Recently the Company qualified a 0.5 micron CMOS process
at TSMC.
In fiscal 1996 and 1997, approximately 90% of the wafers for the Company's
semiconductor products were manufactured by Chartered, and the remainder of
the Company's wafers were manufactured by AMS, NJRC and TSMC. The Company is
currently qualifying LG as a foundry supplier. The Company believes that it
will receive an increasing portion of its wafer requirements from TSMC and LG
in the future. The Company's reliance on independent wafer suppliers to
fabricate its wafers at their production facilities subjects the Company to
such possible risks as potential lack of adequate capacity and available
manufactured products, lack of control over delivery schedules and the risk of
events limiting production and reducing yields, such as fires or other damage
to production facilities or technical difficulties. Although, to date, the
Company has not experienced any material delays in obtaining an adequate
supply of wafers, there can be no assurance that the Company will not
experience delays in the future. Any inability or unwillingness of the
Company's wafer suppliers generally, and Chartered in particular, to provide
adequate quantities of finished wafers to meet the Company's needs in a timely
manner or in needed quantities would delay production and product shipments
and have a material adverse effect on the Company's business, financial
condition and results of operations.
40
<PAGE>
At present, the Company purchases wafers from its wafer suppliers through
the issuance of purchase orders based on rolling six-month forecasts provided
by the Company, and such purchase orders are subject to acceptance by each
wafer foundry. The Company does not have long-term purchase agreements with
any of its wafer suppliers, each of which has the right to reduce or terminate
allocations of wafers to the Company. In the event that these suppliers were
unable or unwilling to continue to manufacture the Company's key products in
required volumes, the Company would have to identify and qualify additional
foundries. In any event, the Company's future growth will also be dependent
upon its ability to identify and qualify new wafer foundries. The
qualification process can take up to six months or longer, and there can be no
assurance that any additional wafer foundries will become available to the
Company or will be in a position to satisfy any of the Company's requirements
on a timely basis. The Company also depends upon its wafer suppliers to
participate in process improvement efforts, such as the transition to finer
geometries, and any inability or unwillingness of such suppliers to do so
could delay or otherwise materially adversely affect the Company's development
and introduction of new products. Furthermore, sudden shortages of raw
materials or production capacity constraints can lead wafer suppliers to
allocate available capacity to customers other than the Company or for
internal uses, which could interrupt the Company's ability to meet its product
delivery obligations. Any significant interruption in the supply of wafers to
the Company would adversely affect the Company's operating results and
relations with affected customers. The Company's reliance on independent wafer
suppliers may also impact the length of
the development cycle for the Company's products, which may provide time-to-
market advantages to competitors that have in-house fabrication capacity. See
"Risk Factors -- Dependence on Independent Wafer Foundries" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company relies on foreign subcontractors primarily for the assembly and
packaging of its products and, to a lesser extent, for the testing of its
finished products. Some of these subcontractors are the Company's single
source supplier for certain new packages. Although the Company believes that
it is not materially dependent upon any such subcontractor, changes in the
Company's or a subcontractor's business could cause the Company to become
materially dependent on a subcontractor. The Company has from time to time
experienced difficulties in the timeliness and quality of product deliveries
from the Company's subcontractors. Although delays experienced to date have
not been material, there can be no assurance that the Company will not
experience similar or more severe difficulties in the future. The Company
generally purchases these single or limited source components or services
pursuant to purchase orders and has no guaranteed arrangements with such
subcontractors. There can be no assurance that these subcontractors will
continue to be able and willing to meet the Company's requirements for any
such components or services. Any significant disruption in supplies from, or
degradation in the quality of components or services supplied by, these
subcontractors, or any other circumstance that would require the Company to
qualify alternative sources of supply could delay shipments and result in the
loss of customers, or limitations or reductions in the Company's revenues, or
otherwise materially and adversely affect the Company's business and results
of operations. See "Risk Factors -- Dependence on Single or Limited Source
Assembly Subcontractors."
The manufacture and assembly of semiconductor products is highly complex and
sensitive to a wide variety of factors, including the level of contaminants in
the manufacturing environment, impurities in the materials used, and the
performance of manufacturing personnel and production equipment. In a typical
semiconductor manufacturing process, silicon wafers produced by the foundry
are sorted and cut into individual die that are then assembled into individual
packages and tested for performance. The Company's wafer fabrication suppliers
have from time to time experienced lower-than-anticipated yields of good die,
as is typical in the semiconductor industry. In the event of such decreased
yields, the Company would incur additional costs to sort wafers, an increase
in average cost per usable die and an increase in the time to market for its
products. See "Risk Factors -- Variation in Production Yields."
COMPETITION
The semiconductor industry is intensely competitive. Significant competitive
factors in the market for high- performance ICs include product features and
performance, product quality, price, success in developing new
41
<PAGE>
products, adequate wafer fabrication capacity and sources of raw materials,
efficiency of production, timing of new product introductions, ability to
protect intellectual property rights and proprietary information, and general
market and economic conditions. The Company's competitors include Cypress
Semiconductor Corporation, Integrated Circuit Systems, Inc., Integrated Device
Technology, Inc., Maxim Integrated Products, Inc., Quality Semiconductor, Inc.
and Texas Instruments, Inc., most of which have substantially greater
financial, technical, marketing, distribution and other resources, broader
product lines and longer-standing customer relationships than the Company. The
Company also competes with other major or emerging companies that sell
products to certain segments of the markets addressed by the Company.
Competitors with greater financial resources or broader product lines may also
have greater ability than the Company to engage in sustained price reductions
in the Company's primary markets in order to gain or maintain market share.
The Company believes that its future success will depend on its ability to
continue to improve and develop its products and processes. Unlike the
Company, many of the Company's competitors maintain internal manufacturing
capacity for the fabrication and assembly of semiconductor products, which may
provide such competitors with more reliable manufacturing capability, shorter
development and manufacturing cycles and time-to-market advantages. In
addition, competitors with their own wafer fabrication facilities that are
capable of producing products with the same design geometries as those of the
Company may be able to manufacture and sell competitive products at lower
prices. Introduction of products by competitors that are manufactured with
improved process technology could materially and adversely affect the
Company's business and results of operations. As is typical in the
semiconductor industry, competitors of the Company have developed and marketed
products having functionality similar or identical to the Company's products,
and the Company expects this trend to continue in the future. To the extent
the Company's products do not achieve performance, price, size or other
advantages over products offered by competitors, the Company is likely to
experience greater price competition with respect to such products. The
Company also faces competition from the makers of microprocessors and other
system devices, including ASICs, that have been and may be developed for
particular systems. These devices may include interface logic functions, which
may eliminate the need or sharply reduce the demand for the Company's products
in particular applications. There can be no assurance that the Company will be
able to compete successfully in the future or that competitive pressures will
not materially and adversely affect the Company's financial condition and
results of operations. Competitive pressures could also reduce market
acceptance of the Company's products and result in price reductions and
increases in expenses that could materially and adversely affect the Company's
business and results of operations. See "Risk Factors --Dependence Upon
Independent Wafer Foundries," "Risk Factors -- Competition," "Risk Factors --
Dependence on Single or Limited Source Assembly Subcontractors" and "--
Manufacturing."
RESEARCH AND DEVELOPMENT
The Company believes that the continued timely development of new interface
ICs is essential to maintaining its competitive position. Accordingly, the
Company has assembled a team of highly-skilled engineers whose activities are
focused on the development of signal transfer, routing and timing technologies
and products. As of September 30, 1997, Pericom had 29 employees engaged in
research and development activities, many of whom have advanced technical
degrees. Research and development expenses in fiscal 1995, 1996, and 1997 were
$2.9 million, $4.4 million and $4.2 million, respectively.
By leveraging its proprietary high-performance cell library, the Company
plans to expand product offerings in each of its key product lines. The
Company intends to design high-speed, low-noise 2.5-volt and 3.3-volt
interface logic products using its proprietary low-noise I/O technology. Some
of these logic products will also incorporate the Company's patented mixed-
voltage I/O technology. The Company intends to use the combination of low-
noise, mixed-voltage technology with advanced 0.35 micron and 0.25 micron
process technology to develop a broad portfolio of versatile, high-performance
interface logic circuits essential for high-speed, low-power computer and
networking systems. In the digital and analog switch areas, the Company
intends to apply its low-resistance, low-noise techniques to a family of
switches with new functions operating under different power supply voltages.
Based on the Company's core analog and digital PLL technologies, the Company
intends
42
<PAGE>
to develop new families of clock generators and frequency synthesizers for
applications in Pentium II class computers, laser printers and modems. The
Company is developing a new family of 100Base-X FastEthernet network
transceivers and PMD ICs based on the Company's mixed-signal design
technologies. In an effort to expand its product offerings in the mobile
computing and data communication markets, the Company is exploring
opportunities to develop new products for wireless applications.
To address increasing price/performance requirements, the Company intends to
continue to redesign its high-volume products by using more advanced
fabrication processes and refined design techniques, with the goal of
enhancing product performance and reducing die size and product costs. The
Company also intends to further refine noise performance by using newly
developed low-noise I/O technology.
Most of the Company's new products are manufactured using 0.5 micron and 0.6
micron process technologies. The Company plans to manufacture some of its
products using advanced 0.35 micron and 0.25 micron CMOS process technologies
beginning in fiscal 1998 and will continue new process technology work with
its foundry partners. In an effort to further reduce costs and enhance
reliability, the Company is developing new high-speed test hardware and
software to support testing and characterization of its products.
The success of new products depends on many factors, including product
selection, timely completion of product development, ability to gain access to
advanced fabrication processes, achievement of acceptable wafer fabrication
yield, and the ability to secure sufficient wafer fabrication capacity. There
can be no assurance that the Company will be able to successfully identify new
product opportunities and timely develop and bring to market such new
products. Failure of the Company to complete, introduce and bring to volume
production new products in a timely manner and at competitive
price/performance levels could adversely affect the Company's results of
operations. See "Risk Factors -- Technological Change; Dependence on New
Products."
INTELLECTUAL PROPERTY
In the United States, the Company holds five patents covering certain
aspects of its product designs and has eight additional patent applications
pending. The Company expects to continue to file patent applications where
appropriate to protect its proprietary technologies; however, the Company
believes that its continued success depends primarily on factors such as the
technological skills and innovation of its personnel, rather than on its
patents.
The Company's success depends in part on its ability to obtain patents and
licenses and preserve other intellectual property rights covering its products
and development and testing tools. Copyrights, mask work protection, trade
secrets and confidential technological know-how are also key elements of the
Company's business. There can be no assurance that any additional patents will
be issued to the Company or that the Company's patents or other intellectual
property will provide meaningful protection from competition. The Company may
be subject to or may initiate interference proceedings in the U.S. Patent and
Trademark Office, which can consume significant financial and management
resources. In addition to the foregoing, the laws of certain territories in
which the Company's products are or may be developed, manufactured or sold may
not protect the Company's products and intellectual property rights to the
same extent as the laws of the United States. The inability of the Company to
protect its intellectual property adequately could have a material adverse
effect on its business and results of operations.
The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights, and there can be no assurance
that the Company will not be subject to infringement claims by other parties.
In May 1995, Quality Semiconductor, Inc. ("QSI"), a competitor of the Company,
brought a lawsuit against the Company in the United States District Court for
the Northern District of California, San Francisco Division, claiming
infringement of one of its patents by certain features in certain of the
Company's bus switch products and seeking injunctive relief and unspecified
monetary damages. Discovery has commenced but is stayed pending a claim
construction hearing. The Company believes that it has meritorious defenses,
that the products involved are not material to the Company's business and that
the resolution of this matter will not
43
<PAGE>
have a material adverse effect on the Company's business, financial position
or results of operations. However, any litigation, whether or not determined
in favor of the Company, can result in significant expense to the Company and
can divert the efforts of the Company's technical and management personnel
from productive tasks. In the event of an adverse ruling in any litigation
involving intellectual property, the Company might be required to discontinue
the use of certain processes, cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing
technology or obtain licenses to the infringed technology, and may suffer
significant monetary damages, which could include treble damages. In the event
the Company attempts to license any allegedly infringed technology, there can
be no assurance that such a license would be available on reasonable terms or
at all. In the event of a successful claim against the Company and the
Company's failure to develop or license a substitute technology on
commercially reasonable terms, the Company's business and results of
operations would be materially and adversely affected. There can be no
assurance that the claims brought by QSI or any potential infringement claims
by other parties (or claims for indemnity from customers resulting from any
infringement claims) will not materially and adversely affect the Company's
business, financial condition and results of operations.
The process technology used by the Company's independent foundries,
including process technology that the Company has developed with its
foundries, can generally be used by such foundries to produce their own
products or to manufacture products for other companies, including the
Company's competitors. In addition, the Company does not generally have the
right to implement the process technology used to manufacture its products
with foundries other than the foundry with which it has developed such process
technology. See "Risk Factors -- Patents and Proprietary Rights."
EMPLOYEES
As of September 30, 1997, the Company had 137 full-time employees, including
26 in sales, marketing and customer support, 65 in manufacturing, assembly and
testing, 33 in engineering and quality assurance and 13 in finance and
administration, including information systems. The Company has never had a
work stoppage and no employee is represented by a labor organization. The
Company considers its employee relations to be good.
The Company's future success will depend to a large extent on the continued
contributions of its executive officers and other key management and technical
personnel, none of whom has an employment agreement with the Company and each
of whom would be difficult to replace. The Company does not maintain any key
person life insurance policy on any of such persons. The loss of the services
of one or more of the Company's executive officers or key personnel or the
inability to continue to attract qualified personnel could delay product
development cycles or otherwise have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Dependence on Key Personnel."
FACILITIES
The Company leases approximately 34,000 square feet of space in San Jose,
California in which its headquarters, technology and product development and
testing facilities are located. The facility is leased through 2001 with
certain renewal options. The Company also has sales offices located in San
Jose, California, Laguna Niguel, California, Marlborough, Massachusetts, Cary,
North Carolina and Austin, Texas, as well as in Taiwan and the United Kingdom.
The Company believes its current facilities are adequate to support its needs
through the end of fiscal 1998.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company and their
respective ages as of September 30, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Executive Officers and
Directors
Alex Chi-Ming Hui............. 41 Chief Executive Officer, President and Director
Chi-Hung (John) Hui, Ph.D.(1). 42 Vice President, Technology and Director
Patrick B. Brennan............ 59 Vice President, Finance and Administration
Daniel W. Wark................ 41 Vice President, Operations
Glen R. Wiley................. 47 Vice President, Sales
Yao T. (Michael) Yen, Ph.D.... 61 Vice President, Applications
Tay Thiam Song(1)(2).......... 42 Director
Jeffrey Young(1)(2)........... 48 Director
Key Employee
Van Lewing.................... 59 Director of Marketing
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Alex Chi-Ming Hui has been Chief Executive Officer, President and a member
of the Board of Directors of the Company since its inception in June 1990.
From August 1982 to May 1990, Mr. Hui was employed by LSI Logic Corporation,
most recently as its Director of Advanced Development. From August 1980 to
July 1982, Mr. Hui was a member of the technical staff of Hewlett-Packard
Company. Mr. Hui holds a B.S.E.E. from the Massachusetts Institute of
Technology and an M.S.E.E. from the University of California at Los Angeles.
Chi-Hung (John) Hui, Ph.D., has been Vice President, Technology and a member
of the Board of Directors of the Company since its inception in June 1990.
From August 1987 to June 1990, Dr. Hui was employed by Integrated Device
Technology, most recently as Manager of its Research and Development
Department. From August 1984 to August 1987, Dr. Hui was a member of the
technical staff of Hewlett-Packard Company. Dr. Hui holds a B.S.E.E. from
Cornell University and an M.S.E.E. and a Ph.D. in Electrical Engineering from
the University of California at Berkeley.
Patrick B. Brennan has been Vice President, Finance and Administration of
the Company since March 1993. From February 1991 to March 1993, Mr. Brennan
was employed by Datacord, Inc., a subsidiary of Newell Research, Inc., as its
Vice President, Finance, and from July 1985 to February 1991, he was employed
as the Vice President, Finance of SEEQ Technology, Inc. From January 1980 to
June 1985, he was employed by National Semiconductor Corporation, most
recently as Vice President and Treasurer. Mr. Brennan holds a B.S. in Business
Administration from Arizona State University.
Daniel W. Wark joined the Company in April 1996 as its Director of
Operations and became its Vice President, Operations in July 1997. From May
1983 to December 1995, Mr. Wark was employed by Linear Technology Corporation
("Linear"), most recently as Director of Corporate Services. Other positions
that Mr. Wark held at Linear included Managing Director of its Singapore
Operations and Production Control Manager. Prior to his employment with
Linear, Mr. Wark was employed by National Semiconductor Corporation and
Avantek, Inc. Mr. Wark holds a B.S. in Business Administration from San Jose
State University and an APICS certification.
45
<PAGE>
Glen R. Wiley has been Vice President, Sales of the Company since April
1997. From April 1992 to November 1996, Mr. Wiley was the Vice President of
Sales at Orbit Semiconductor, and from January 1990 to March 1992, he served
as Vice President of Pro Associates, a manufacturers' representative firm.
From January 1989 to December 1989, Mr. Wiley was employed by Gazelle
Microcircuits as its Western Area Sales Manager, and from February 1980 to
December 1988, he served as a Senior Account Salesman with Pro Associates.
Mr. Wiley holds a B.A. in English from Humboldt State University.
Yao T. (Michael) Yen, Ph.D., has been Vice President, Applications of the
Company since September 1992. From January 1990 to August 1992, Dr. Yen was
employed by Transcomputer Inc. as Vice President, Engineering, and from
January 1983 to December 1989, he was employed by Answer Software Corporation
as Vice President, Engineering. Dr. Yen was also employed as Engineering
Manager Microcomputer Systems at Intel Corporation. Dr. Yen holds a B.S.E.E.
from National Taiwan University and an M.S.E.E. and a Ph.D. in Electrical
Engineering from the University of Illinois at Urbana-Champaign.
Tay Thiam Song has been a member of the Board of Directors since June 1992.
Mr. Tay resides in Singapore, and, since 1985, has been serving as the
Executive Director of various companies in Singapore and Malaysia, including
Daiman Group (a Malaysian public company) and Chye Seng Tannery (Pte) Ltd. Mr.
Tay holds a B.A. in Accounting from the North East London Polytechnic
University.
Jeffrey Young has been a member of the Board of Directors since August 1995.
Since 1988, Mr. Young has been a resident of Singapore and has served as the
Executive Director of Daiman Roof Tiles Sdn. Bhd., a subsidiary of the Daiman
Group, and Great Wall Brick Work Sdn. Bhd., and as a Director of Daiman
Singapore (Pte) Ltd., Teletel System (Pte) Ltd. and Daiman Investments
(Australia) Pty. Ltd. Mr. Young holds a B.S. from the Electronic College of
Canton, People's Republic of China.
Van Lewing joined the Company in March 1995 as its Director of Marketing.
Prior to joining the Company, Mr. Lewing was employed as Marketing Manager,
Mixed-Signal Products at National Semiconductor Corporation from November 1993
to March 1995. He also served as Marketing Manager, RISC Microprocessors at
Performance Semiconductor from April 1990 to November 1993 and as Director of
Marketing, ASIC Products at LSI Logic Corporation from January 1987 to April
1990. Mr. Lewing holds a B.S.E.E. from the University of New Mexico and an
M.B.A. from National University.
All directors of the Company serve until the next annual meeting of the
shareholders of the Company and until their successors have been duly elected
and qualified. The Company's Articles of Incorporation provide for the
elimination of cumulative voting in the election of directors upon qualifying
as a "listed corporation" under the California Corporations Code, which will
occur when the Company has at least 800 shareholders of record as of its most
recent annual shareholders meeting. Each officer serves at the discretion of
the Board of Directors. Mr. Hui and Dr. Hui are brothers, and Mr. Young and
Mr. Tay are brothers-in-law. There are no other family relationships among any
of the directors, officers or key employees of the Company.
BOARD COMMITTEES
AUDIT COMMITTEE. The Audit Committee of the Board of Directors was formed in
September 1995, and has been inactive to date. The Company intends to activate
this committee upon completion of the offering, after which the Audit
Committee's duties will be to review the results and scope of the annual audit
and other services provided by the Company's independent auditors, review and
evaluates the Company's internal control functions and monitor transactions
between the Company and its employees, officers and directors. Dr. Hui, Mr.
Young and Mr. Tay are the members of the Audit Committee.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors, which was formed in September 1995, administers the 1995 Stock
Option Plan and 1997 Employee Stock Purchase Plan and reviews and approves the
compensation and benefits for the Company's executive officers. Mr. Young and
Mr. Tay are the members of the Compensation Committee.
46
<PAGE>
DIRECTOR COMPENSATION
The Company's directors receive no fees for their services as members of the
Board of Directors or committee members and are not reimbursed for expenses
incurred in connection with attending meetings of the Board of Directors or
any committee thereof. Each non-employee director was granted (i) on September
18, 1996 an option to purchase 7,500 shares of Common Stock at an exercise
price of $3.80 per share which was vested immediately upon grant and (ii) on
June 30, 1997 an option to purchase 7,500 shares of Common Stock at an
exercise price of $4.40 per share, 3,750 of which vested immediately upon
grant and 3,750 of which vest over a one year period, beginning on the date of
grant. Pursuant to the 1995 Stock Option Plan, all non-employee directors of
the Company receive automatic stock option grants upon joining the Board of
Directors and annually thereafter. The exercise price of such stock options is
equivalent to the fair market value of the underlying Common Stock on the date
of grant. See "-- Stock Plans -- 1995 Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and each of the other most highly
compensated executive officers of the Company whose aggregate salary, bonus
and other compensation exceeded $100,000 during fiscal 1997 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL
COMPENSATION SHARES
---------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- ------------------------------------------------- -------- ------- ------------
<S> <C> <C> <C>
Alex Chi-Ming Hui................................ $152,849 $23,000 --
Chief Executive Officer, President and Director
Chi-Hung (John) Hui.............................. 137,039 18,000 --
Vice President, Technology and Director
Patrick B. Brennan............................... 118,070 9,000 20,000
Vice President, Finance and Administration
Daniel W. Wark................................... 106,693 9,000 25,000
Vice President, Operations
Yao T. (Michael) Yen............................. 104,962 -- 5,000
Vice President, Applications
Henry O'Hara (1)................................. 119,214 -- --
Former Vice President, Sales
</TABLE>
- --------
(1) Mr. O'Hara resigned as Vice President, Sales in March 1997.
47
<PAGE>
OPTION GRANTS. The following table sets forth certain information concerning
stock option grants to each of the Named Executive Officers during fiscal
1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
----------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SHARES PERCENT OF TOTAL EXERCISE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED PRICE TERM(4)
OPTIONS TO EMPLOYEES IN PER EXPIRATION ---------------------------
NAME GRANTED FISCAL 1997(1) SHARE(2) DATE(3) 5% 10%
- ------------------------ ---------- ---------------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alex Chi-Ming Hui....... -- -- -- -- -- --
Chi-Hung (John) Hui..... -- -- -- -- -- --
Patrick B. Brennan...... 5,000 1.0% $3.80 09/26/06 $ 11,949 $ 30,281
15,000 3.1 2.40 04/24/07 22,640 57,375
Daniel W. Wark.......... 25,000 5.1 2.40 05/19/06 34,269 85,030
Yao T. (Michael) Yen.... 5,000 1.0 3.80 09/26/06 11,949 30,281
Henry O'Hara............ -- -- -- -- -- --
</TABLE>
OPTION GRANTS IN FISCAL 1997
- --------
(1) In fiscal 1997, the Company granted options to employees to purchase an
aggregate of 488,825 shares.
(2) Each of these options was granted pursuant to the Company's 1995 Stock
Option Plan and is subject to the terms of such plan as described below.
These options were granted at an exercise price equal to the fair market
value of the Company's Common Stock as determined by the Board of
Directors of the Company on the date of the grant. All such options vest
over a four-year period, subject to continued employment with the Company.
(3) Options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated or upon the optionee's
death or disability.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices.
OPTION EXERCISES AND YEAR-END HOLDINGS. The following table sets forth
certain information as of June 30, 1997 concerning exercisable and
unexercisable stock options held by each of the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF OPTIONS AT JUNE 30, 1997 JUNE 30, 1997 (2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alex Chi-Ming Hui....... -- -- 150,000 -- $210,000 --
Chi-Hung (John) Hui..... -- -- 100,000 -- 140,000 --
Patrick B. Brennan...... -- -- 54,376 21,624 113,000 $2,760
Daniel W. Wark.......... -- -- 6,771 18,229 -- --
Yao T. (Michael) Yen.... 50,000 $110,000 4,376 5,624 5,156 2,344
Henry O'Hara............ 45,104 67,966 -- -- -- --
</TABLE>
- --------
(1) No public market existed for the Company's Common Stock during fiscal
1997. The value realized represents the estimated value of shares of
Common Stock determined by the Board of Directors of the Company, less the
option exercise price.
(2) The value of "in-the-money" stock options represents the difference
between the exercise price of such stock options and the fair market value
of $2.40 per share of Common Stock as of June 30, 1997, as determined by
the Company's Board of Directors, multiplied by the total number of shares
subject to such options on June 30, 1997.
48
<PAGE>
STOCK PLANS
1990 STOCK OPTION PLAN. The Company's 1990 Stock Option Plan (the "1990
Plan") was approved by the Board of Directors in February 1991 and by the
Company's shareholders in May 1991. The 1990 Plan provides for the grant of
options intended to qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified
stock options. The 1990 Plan also provides for the issuance or sale of Common
Stock in connection with the performance of services to the Company or its
affiliates. As of September 30, 1997, 554,130 shares of Common Stock had been
issued upon exercise of options granted under the 1990 Plan and 719,794 shares
remained reserved for future issuance upon the exercise of outstanding
options. The Board of Directors terminated the 1990 Plan effective June 30,
1997, and no further options will be granted under the 1990 Plan.
The Board of Directors or a committee designated by the Board is authorized
to administer the 1990 Plan, including the selection of individuals eligible
for grants of options, issuances of Common Stock, the terms of such grants or
issuances and the interpretation of the terms of, and adoption of rules for,
the 1990 Plan. The maximum term of any stock option granted under the 1990
Plan is ten years, except that with respect to incentive stock options granted
to a person possessing more than 10% of the combined voting power of the
Company (a "10% Shareholder"), the term of such stock options shall be no more
than five years. The exercise price of nonqualified stock options and
incentive stock options granted under the 1990 Plan must be at least 85% and
100%, respectively, of the fair market value of the Company's Common Stock on
the grant date, except that the exercise price of incentive stock options
granted to a 10% Shareholder must be at least 110% of such fair market value
on the grant date. Options granted to employees under the 1990 Plan generally
vest over a four-year period. The aggregate fair market value on the date of
grant of the Common Stock for which incentive stock options are exercisable
for the first time by an employee during any calendar year may not exceed
$100,000. The 1990 Plan may be amended at any time by the Board, except that
certain amendments require shareholder approval.
1995 STOCK OPTION PLAN. The Company's 1995 Stock Option Plan (the "1995
Plan") was approved by the Board of Directors in September 1995 and by the
Company's shareholders in October 1995. The 1995 Plan permits the grant of
incentive stock options to employees of the Company (including officers and
directors who are also employees of the Company) and the grant of nonqualified
stock options to employees, officers, directors, independent contractors and
consultants of the Company. Initially, 1,800,000 shares of Common Stock were
reserved for issuance in connection with the grant of options under the 1995
Plan. The 1995 Plan provides that the share reserve will be increased on July
1 of each year by an amount equal to 10% of the total number of shares of
Common Stock outstanding as of the immediately preceding June 30; provided,
however, that the maximum number of shares of Common Stock reserved for
issuance under the 1995 Plan shall not exceed 2,700,000 shares. The aggregate
number of shares of Common Stock available for issuance pursuant to incentive
stock options, however, remains at 1,800,000 shares and is not subject to
annual adjustment. As of September 30, 1997, an aggregate of 2,251,120 shares
of Common Stock was reserved for issuance under the 1995 Plan, 896 shares had
been issued upon exercise of outstanding options under the 1995 Plan, 766,263
shares remained reserved for issuance upon the exercise of outstanding options
and 1,483,961 shares remained available for future grant. In addition, the
maximum number of shares of Common Stock with respect to which options may be
granted to any individual in any calendar year under the 1995 Plan is 150,000.
Options granted to employees under the 1995 Plan generally vest over a four-
year period.
The 1995 Plan provides for automatic grants to directors who are not
employees of the Company (the "Non-Employee Directors") of nonqualified
options to purchase 7,500 shares of Common Stock when first elected to the
Board ("Initial Grants") and 3,750 shares annually thereafter ("Subsequent
Grants") to continuing Non-Employee Directors immediately following each
annual meeting of shareholders of the Company. The exercise price of options
granted to Non-Employee Directors will be equal to the fair market value on
the date of grant. Initial Grants will be fully vested and exercisable as of
the date of grant and Subsequent Grants will vest at the rate of 25% each
quarter following the date of grant, so that the option will be fully vested
and exercisable twelve months following the date of grant. Non-Employee
Directors are not eligible to receive any other option grants under the 1995
Plan or any other current stock plans of the Company.
49
<PAGE>
The Board of Directors or a committee designated by the Board (the
"Committee") is authorized to administer the 1995 Plan, including the
selection of persons (other than Non-Employee Directors) to whom options may
be granted and the interpretation and implementation of the 1995 Plan. Options
granted under the 1995 Plan will vest and become exercisable as determined by
the Committee at the time of the option grant. The maximum term of an option
granted under the 1995 Plan is ten years (five years in the case of an
incentive stock option granted to a 10% Shareholder). The aggregate fair
market value, on the date of grant, of the Common Stock for which incentive
stock options are exercisable for the first time by an employee during any
calendar year may not exceed $100,000. The exercise price of each option
granted under the 1995 Plan shall not be less than the fair market value of
the Common Stock on the date of grant (or not less than 110% of fair market
value in the case of an incentive stock option granted to a 10% Shareholder).
Except for the provisions relating to the grant of stock options to Non-
Employee Directors, the 1995 Plan may be amended at any time by the Board of
Directors, although certain amendments require shareholder approval. The 1995
Plan will terminate in September 2005, unless earlier terminated by the Board.
1997 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1997 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), which was approved by the Board of
Directors in September 1997 and by the Company's shareholders in October 1997,
is intended to qualify as an "employee stock purchase plan" under Section 423
of the Code and to provide employees of the Company with an opportunity to
purchase shares of Common Stock through payroll deductions. A total of 300,000
shares of the Company's Common Stock has been reserved for issuance under the
Stock Purchase Plan, none of which have been issued. The Stock Purchase Plan
permits eligible employees to purchase Common Stock at a discount through
payroll deductions, during concurrent 24-month purchase periods, except that
the first purchase period will be 27 months. Each purchase period will be
divided into four consecutive six-month accrual periods, except that the first
accrual period will be nine months. The price at which stock is purchased
under the Stock Purchase Plan is equal to 85% of the fair market value of the
Common Stock on the first day of the purchase period or the last day of the
accrual period, whichever is lower. The initial purchase period will commence
on the Effective Date and will end on January 31, 2000. The maximum number of
shares of Common Stock that any employee may purchase under the Stock Purchase
Plan during an accrual period is 3,500 shares.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors,
executive officers, employees and other agents to the fullest extent permitted
by California law. Prior to the consummation of this offering, the Company
intends to enter into indemnification agreements with each of its directors
and executive officers and to obtain a directors' and officers' liability
insurance policy that insures such persons against the cost of defense,
settlement or payment of judgments under certain circumstances.
In addition, the Company's Amended and Restated Articles of Incorporation
(the "Articles") eliminate the liability of the Company's directors to the
fullest extent permitted by California law. This provision in the Articles
does not eliminate a director's duty of care and, in appropriate
circumstances, equitable remedies such as an injunction or other forms of non-
monetary relief would remain available under California law. Each director
will continue to be subject to liability for breach of the director's duty of
loyalty to the Company, acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, acts or omissions that
the director believes to be contrary to the best interests of the Company or
its shareholders, any transaction from which the director derived an improper
personal benefit, improper transactions between the director and the Company
and improper distributions to shareholders and loans to directors and
officers. This provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws, or federal or state
environmental laws. The Articles also authorize the Company's indemnification
of its agents for breach of their duty through Bylaw provisions or agreements
to the fullest extent permitted under California law.
There is no pending litigation or proceeding involving a director or officer
of the Company as to which indemnification is being sought, nor is the Company
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
50
<PAGE>
CERTAIN TRANSACTIONS
In April 1994, the Company, Alex Chi-Ming Hui, Chief Executive Officer,
President and a director of the Company, and Chi-Hung (John) Hui, Vice
President, Technology and a director of the Company, and Dato' Kia Hong Tay
and members of his immediate family, most of whom are principal shareholders
of the Company, formed Pericom Technology, Inc., a British Virgin Islands
corporation ("PTI") with principal offices in Shanghai, People's Republic of
China. 18.4% of the outstanding voting stock of PTI is held by the Company and
substantially all of the remaining 81.6% of the outstanding PTI voting stock
is held by the foregoing directors, officers and principal shareholders of the
Company. Each of the directors of the Company is a director of PTI, and Alex
Chi-Ming Hui is the President and Chief Executive Officer of PTI. Pericom and
PTI are parties to an agreement, dated as of March 17, 1995, which provides
for cost reimbursement between the Company and PTI for any facility sharing or
personnel time and certain procedures for funding research and development and
joint development projects. During the fiscal years ended June 30, 1996 and
1997, the Company sold $24,000 and $39,000 respectively, in services to PTI.
As of June 30, 1997, $99,000 was owed to the Company by PTI for certain
administrative expenses incurred by the Company on behalf of PTI. See
"Principal and Selling Shareholders" and Note 4 of Notes to Financial
Statements.
In September 1995, the Company and PTI entered into an international
distributor agreement, pursuant to which PTI was appointed a non-exclusive
distributor for certain Pericom products in People's Republic of China.
In February 1996, the Company entered into the Harris Agreement, pursuant to
which Harris and the Company have agreed to discuss the terms of an agreement
to grant PTI the right to distribute certain Harris products in the Peoples
Republic of China.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and
its officers, directors, principal shareholders and their affiliates,
including transactions with PTI, will continue to be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.
The Company intends to enter into indemnification agreements with each of
its executive officers and directors. See "Management -- Limitation of
Liability and Indemnification Matters."
51
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of September
30, 1997 and as adjusted to reflect the sale of the shares offered hereby, by
(i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers, (iv) each of the Selling
Shareholders, and (v) all executive officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED PRIOR TO SHARES TO BE BENEFICIALLY
5% SHAREHOLDERS, OFFERING(1) HARES TO BE OWNED AFTER OFFERING(1)
DIRECTORS AND NAMED ----------------- SOLD IN -----------------------------
EXECUTIVE OFFICERS NUMBER PERCENT OFFERING(1) NUMBER PERCENT
- ------------------------ --------- ------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
Dato' Kia Hong Tay(2)... 1,312,500 18.6% 120,000 1,130,000 12.5%
48 Andrew Road
Singapore 299964
Tay Thiam Song(3)....... 1,088,126 15.5 45,000 980,626 10.9
16 Linden Drive
Singapore 288691
Tay Tian Liang(4)....... 1,075,000 15.3 45,000 967,500 10.7
48 Andrew Road
Singapore 299964
Tay Thiang Phong(5)..... 1,075,000 15.3 45,000 967,500 10.7
No. 1, Chuan Walk
Singapore 558407
Tay Thiam Yew(6)........ 1,075,000 15.3 45,000 967,500 10.7
No. 3, Chuan Walk
Singapore 558409
Alex Chi-Ming Hui(7)(8). 919,278 12.8 -- 919,278 10.0
Jeffrey Young (9)....... 900,626 12.8 22,500 811,876 9.0
67 Saraca Road
Singapore 807402
Tay Lee Kiang (10)...... 900,626 12.8 3,750 811,876 9.0
67 Saraca Road
Singapore 807402
Chi-Hung (John)
Hui(8)(11).............. 717,180 10.1 -- 717,180 7.9
Chye Seng Tannery (Pte)
Ltd.(12)................ 625,000 8.9 62,500 562,500 6.2
741/743 Geylang Road
Singapore 0820
Patrick B. Brennan(13).. 59,979 * -- 59,979 *
Yao T. (Michael)
Yen(14)................. 55,312 * -- 55,312 *
Henry O'Hara............ 45,104 * -- 45,104 *
Daniel W. Wark(15)...... 10,313 * -- 10,313 *
All executive officers
and directors as a
group (8 persons)(16).. 3,125,814 42.5 67,500 2,992,064 32.0
<CAPTION>
OTHER SELLING
SHAREHOLDERS
- -------------
<S> <C> <C> <C> <C> <C>
Lee Chin-Chung.......... 156,250 2.2 15,625 140,625 1.6
Lue Shuh-Mei............ 156,250 2.2 15,625 140,625 1.6
Hsu Chih-Ray............ 150,000 2.1 25,000 125,000 1.4
Hsu Yu-Pu............... 125,000 1.8 12,500 112,500 1.2
Koh Quee Chew........... 75,000 1.1 7,500 67,500 *
Koh Kwee Khoon.......... 75,000 1.1 7,500 67,500 *
Koh Kwee Ngee........... 75,000 1.1 7,500 67,500 *
Hsu Chih-Fang........... 50,000 * 5,000 45,000 *
Hsu Mu-Chen............. 50,000 * 5,000 45,000 *
Tay Noi Hiang (17)...... 37,500 * 3,750 33,750 *
Tay Siang Kiang (18).... 37,500 * 3,750 33,750 *
Chen Yueh-Chin.......... 2,500 * 2,500 0 *
</TABLE>
- --------
* Less than 1% of the outstanding Common Stock.
52
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC"). In computing the number
of shares beneficially owned by a person and the percentage ownership of
that person, shares of Common Stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of
September 30, 1997 are deemed outstanding. Percentage of beneficial
ownership is based upon 7,023,790 shares of Common Stock outstanding
before this offering and 9,023,790 shares of Common Stock outstanding
after this offering, as of September 30, 1997 and assuming no exercise of
the Underwriters' over-allotment option. To the Company's knowledge,
except as set forth in the footnotes to this table and subject to
applicable community property laws, each person named in the table has
sole voting and investment power with respect to the shares set forth
opposite such person's name. Shares shown beside each shareholder's name
in the column captioned "Shares to be Sold in Offering" includes only
those shares held of record by that shareholder and does not include
other shares deemed to be beneficially owned by that shareholder pursuant
to the SEC's beneficial ownership rules. In the event that the
Underwriters' over-allotment option is exercised, the Selling
Shareholders and the Company may sell an additional aggregate of up to
375,000 shares, of which, approximately 90,000 may be sold by Alex Chi-
Ming Hui and approximately 70,000 may be sold by Chi-Hung (John) Hui.
(2) Dato' Kia Hong Tay is the father of Tay Thiam Song, a director of the
Company, Tay Tian Liang, Tay Thiang Phong, Tay Thiem Yew, Tay Noi Hiang,
Tay Siang Kiang, and Tay Lee Kiang and the father-in-law of Jeffrey
Young, a director of the Company. Includes 50,000 shares issuable upon
exercise of stock options exercisable within 60 days of September 30,
1997. Also includes 625,000 shares owned by Chye Seng Tannery (Pte) Ltd.,
which company is controlled by Dato' Kia Hong Tay, who may therefore be
deemed to beneficially own such shares. Dato' Kia Hong Tay disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein. See footnote 12.
(3) Tay Thiam Song is a brother-in-law of Mr. Young. Includes 13,126 shares
issuable upon exercise of stock options exercisable within 60 days of
September 30, 1997. Also includes 625,000 shares owned by Chye Seng
Tannery (Pte) Ltd. Mr. Tay, as Executive Director of Chye Seng Tannery
(Pte) Ltd., may be deemed to beneficially own such shares, but Mr. Tay
disclaims beneficial ownership of all such shares. See footnote 12.
(4) Tay Tian Liang is a son of Dato' Kia Hong Tay and, accordingly, is
related to other principal and selling shareholders. See footnote 2.
Includes 625,000 shares owned by Tian Liang Chye Seng Tannery (Pte) ltd.
Tay Tian Lian, as a Director of such entity, may be deemed to
beneficially own such shares, but Tay Tian Liang disclaims beneficial
ownership of all such shares. See footnote 12. Number of shares to be
beneficially owned after offering reflects the sale of 62,500 shares in
the offering by Chye Seng Tannery (Pte) Ltd.
(5) Tay Thiang Phong is a son of Dato' Kia Hong Tay and accordingly related
to other principal and selling shareholders. See footnote 2. Also
includes 625,000 shares owned by Chye Seng Tannery (Pte) Ltd. Tay Thiang
Phong, as a Director of such entity, may be deemed to beneficially own
such shares, but Tay Thiang Phong disclaims beneficial ownership of all
such shares. See footnote 12.
(6) Tay Thiam Yew is a son of Dato' Kia Hong Tay and, accordingly, is related
to other principal and selling shareholders. See footnote 2. Includes
625,000 shares owned by Chye Seng Tannery (Pte) Ltd. Tay Thiam Yew, as a
Director of such entity, may be deemed to beneficially own such shares,
but Tay Thiam Yew disclaims beneficial ownership of all such shares. See
footnote 12.
(7) Includes 158,333 shares issuable upon exercise of stock options
exercisable within 60 days of September 30, 1997.
(8) The address of such person is 2380 Bering Drive, San Jose, California
95131.
(9) Mr. Young is the husband of Tay Lee Kiang. Includes (i)13,126 shares
issuable upon exercise of stock options exercisable within 60 days of
September 30, 1997, (ii) 625,000 shares owned by Chye Seng Tannery (Pte)
Ltd., and (iii) 37,500 shares owned by Tay Lee Kiang. Mr. Young, as
Managing Director of Chye Seng Tannery (Pte) Ltd., may be deemed to
beneficially own the shares held by such entity, as well as the shares
held by Tay Lee Kiang, but Mr. Young disclaims beneficial ownership of
all such shares. See footnotes 10 and 12.
(10) Tay Lee Kiang is a daughter of Dato' Kia Hong Tay and, accordingly, is
related to other principal and selling shareholders. See footnote 2.
Includes 863,126 shares beneficially owned by her husband, Mr. Young, as
to which she disclaims beneficial ownership. See footnote 9.
(11) Includes 106,250 shares issuable upon exercise of stock options
exercisable within 60 days of September 30, 1997.
(12) Chye Seng Tannery (Pte) Ltd. is controlled by Dato' Kia Hong Tay, the
former Chairman of the Board of Directors of the Company and a principal
shareholder of the Company, and certain members of his immediate family,
each of whom is also a principal shareholder of the Company. See
footnotes 2, 3, 4, 5, 6 and 9.
(13) Includes 31,979 shares issuable upon exercise of stock options
exercisable within 60 days of September 30, 1997.
(14) Includes 50,000 shares held as community property with Mei Y. Yen and
5,312 shares issuable upon exercise of stock options exercisable within
60 days of September 30, 1997.
(15) Consists of 10,313 shares issuable upon exercise of stock options
exercisable within 60 days of September 30, 1997.
(16) Includes (i) 338,439 shares issuable upon exercise of stock options
exercisable within 60 days of September 30, 1997, (ii) 625,000 shares
owned by Chye Seng Tannery (Pte) Ltd. (see footnote 12), and (iii) 37,500
shares owned by Tay Lee Kiang (see footnote 10).
(17) Tay Noi Hiang is a daughter of Dato' Kia Hong Tay and, accordingly, is
related to other principal and selling shareholders. See footnote 2.
(18) Tay Siang Kiang is a daughter of Dato' Kia Hong Tay and, accordingly, is
related to other principal and selling shareholders. See footnote 2.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 30,000,000 shares of Common Stock,
no par value per share, and 5,000,000 shares of Preferred Stock, no par value
per share.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Articles, which
are included as an exhibit to the Registration Statement of which this
Prospectus is a part, and by the provisions of applicable law.
COMMON STOCK
As of September 30, 1997, there were 7,023,790 shares of Common Stock
outstanding that were held of record by approximately 126 shareholders,
including 4,612,500 that will be issued upon the automatic conversion of the
outstanding shares of Preferred Stock into Common Stock upon the closing of
the offering. As of September 30, 1997, 1,486,057 shares of Common Stock were
reserved for issuance pursuant to outstanding options. Upon completion of the
offering, there will be 9,023,790 shares of Common Stock outstanding. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of the shareholders of the Company. Subject
to preferences that may be granted to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available therefor
as well as any distributions to the shareholders. See "Dividend Policy." In
the event of a liquidation, dissolution or winding up of the Company, holders
of Common Stock are entitled to share ratably in all assets of the Company
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock. Holders of Common Stock have no preemptive
or other subscription or conversion rights. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of
Common Stock are, and all shares of Common Stock to be outstanding upon
completion of the offering will be, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
As of the closing of this offering, no shares of Preferred Stock will be
outstanding. Effective at such time and pursuant to the Company's Articles,
the Board of Directors will have the authority, without further action by the
Company's shareholders, to issue up to 5,000,000 shares of Preferred Stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and
the number of shares constituting any series or the designation of such
series, any or all of which may be greater than the rights of the Common
Stock. The issuance of Preferred Stock could adversely affect the voting power
of holders of Common Stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of the Company. The
Company has no present plan to issue any additional shares of Preferred Stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (the "Holders")
of approximately 3,915,000 shares of Common Stock after the completion of this
offering (the "Registrable Securities"), the Holders or their transferees are
entitled to certain rights with respect to the registration of such shares
under the Securities Act. If the Company proposes to register any of its
securities under the Securities Act, either for its own account or the account
of other security holders, the Company is required to use its best efforts to
effect such registration, and the Holders are entitled to notice of such
registration and, subject to certain conditions and limitations, are entitled
to include, at the Company's expense, such shares therein. In addition, at any
time, the Holders of at least 50% of the Registrable Securities may require
the Company, on not more than two occasions, to file a registration statement
under the Securities Act at the Company's expense, and the Company is required
to use its best efforts to effect such registration, subject to certain
conditions and limitations. Further, the Holders
54
<PAGE>
of such Registrable Securities may require the Company to file additional
registration statements on Form S-3 when such form becomes available to the
Company, subject to certain conditions and limitations. The expenses incurred
in connection with such Form S-3 registrations will be borne pro rata by the
Holders participating in such registrations.
LISTING
Application has been made for quotation of the Company's Common Stock on The
Nasdaq National Market under the symbol "PSEM."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Boston
EquiServe LP. Its address is 150 Royall Street, Canton, Massachusetts 02021,
and its telephone number is (617) 774-5573.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock after this offering
could adversely affect the market price of the Common Stock and could impair
the Company's ability to raise capital through the sale of equity securities.
Upon completion of this offering, the Company will have approximately
9,023,790 shares of Common Stock outstanding, based on the number of shares of
Common Stock outstanding as of September 30, 1997. Of these shares, the
2,500,000 shares offered hereby will be freely tradeable without restriction
under the Securities Act, unless they are held by "affiliates" of the Company
as that term is used in Rule 144 under the Securities Act.
The remaining 6,523,790 outstanding shares are "restricted securities"
within the meaning of Rule 144. None of these shares will be eligible for sale
in the public market as of the Effective Date. Upon the expiration of
agreements not to sell shares entered into with SoundView Financial Group,
Inc. and/or the Company, 180 days after the Effective Date, approximately
6,523,790 shares will become eligible for sale subject to the provisions of
Rule 144 or Rule 701 and approximately 826,891 additional shares subject to
vested options will be eligible for sale subject to compliance with Rule 144
and Rule 701. Any shares subject to lock-up agreements may be released by
SoundView Financial Group, Inc. prior to the expiration of the lock-up period
at any time without notice. See "Underwriting."
As soon as practicable after the Effective Date, the Company intends to file
one or more registration statements on Form S-8 under the Securities Act to
register up to approximately 3,267,518 shares of Common Stock reserved for
issuance under the Company's 1990 Plan, 1995 Plan and Stock Purchase Plan,
thus permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act unless subject to lock-up
agreements. Such registration statement(s) will become effective immediately
upon filing. See "Management -- Stock Plans."
Prior to this offering, there has been no public market for the Common Stock
of the Company, and any sale of substantial amounts in the open market may
adversely affect the market price of the Common Stock offered hereby. See
"Risk Factors -- Potential Effect of Shares Eligible for Future Sale on Market
Price of the Common Stock."
55
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions set forth in an underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below, for
whom SoundView Financial Group, Inc. and Unterberg Harris are acting as
representatives (the "Representatives"), have severally agreed to purchase
from the Company and the Selling Shareholders an aggregate of 2,500,000 shares
of Common Stock. The number of shares of Common Stock that each underwriter
has agreed to purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
SoundView Financial Group, Inc.....................................
Unterberg Harris...................................................
---------
Total............................................................ 2,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of
the shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares of Common Stock (other than the shares
of Common Stock covered by the over-allotment option described below) must be
so purchased.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers (who may include the Underwriters) at
such price less a concession not to exceed $ per share. The Underwriters
may allow, and such dealers may reallow, a concession not to exceed $ per
share to any other Underwriter and certain other dealers. After the initial
public offering of the shares offered hereby, the offering price and other
selling terms may be changed by the Representatives. The Representatives have
advised the Company that the Underwriters do not intend to confirm any shares
to any accounts over which they exercise discretionary control.
The Company and the Selling Shareholders have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase
up to an aggregate of 375,000 additional shares of Common Stock at the initial
public offering price less underwriting discounts and commissions. Such option
may be exercised solely for the purpose of converting overallotments, if any,
in connection with the offering of the shares offered hereby. To the extent
that the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase a number of additional
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.
The offering of the shares offered hereby is made for delivery when, as and
if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The Underwriters
reserve the right to reject an order for the purchase of shares in whole or in
part.
The Company, all directors and executive officers of the Company, and
certain shareholders and optionholders of the Company have agreed that,
without the prior written consent of SoundView Financial Group, Inc., they
will not, with certain limited exceptions, directly or indirectly, offer,
sell, contract to sell, grant
56
<PAGE>
any option to purchase or otherwise dispose of any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common
Stock or, in any manner, transfer all or a portion of the economic
consequences associated with the ownership of the Common Stock, for a period
of 180 days after the Effective Date, other than the shares of Common Stock
offered hereby. See "Shares Eligible for Future Sale."
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M under the Securities Exchange Act of
1934, as amended, pursuant to which such persons may bid for or purchase
shares of Common Stock for the purpose of stabilizing the market price for
shares of Common Stock. The Underwriters also may create a short position for
the account of the Underwriters by selling more shares of Common Stock in
connection with this offering than they are committed to purchase from the
Company and the Selling Shareholders, and in such case may purchase shares of
Common Stock in the open market following the completion of this offering to
cover all or a portion of the shares of Common Stock or by exercising the
Underwriters' over-allotment option referred to above. In addition, SoundView
Financial Group, Inc., on behalf of the Underwriters, may impose "penalty
bids" under contractual arrangements with the other Underwriters whereby it
may reclaim for an Underwriter (or a dealer participating in this offering)
for the account of the other Underwriters, the selling concession with respect
to shares of Common Stock that are distributed in this offering but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Common Stock at a level above that which might
otherwise prevail in the open market. None of the transactions described in
this paragraph are required, and, if they are undertaken, may be discontinued
at any time.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock offered hereby
will be determined by negotiation among the Company, the Selling Shareholders
and the Representatives. Among the factors to be considered in determining the
initial public offering price are prevailing market conditions, revenues and
earnings of the Company, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the history of and prospects for the Company's business and the
industry in which it competes, the Company's management and other factors
deemed relevant. The estimated initial public offering price range set forth
on the cover of this preliminary prospectus is subject to change as a result
of market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Morrison & Foerster LLP, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Gray Cary Ware & Freidenrich, A
Professional Corporation, Palo Alto, California.
EXPERTS
The financial statements as of June 30, 1996 and 1997 and for each of the
three years in the period ended June 30, 1997 included in this Prospectus and
the related financial statement schedule included elsewhere in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
registration statement, and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
57
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with Securities and Exchange Commission (the
"Commission") in Washington, D.C. a registration statement (together with all
amendments, the "Registration Statement") on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus, filed as
part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules
thereto, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and to such exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete and, in each instance, reference is made to the copy
of such contract, agreement or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected by anyone without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part of such
materials may be obtained from the Commission upon the payment of certain fees
prescribed by the Commission. Such reports and other information may also be
inspected without charge at the Commission's web site. The address of such
site is http://www.sec.gov.
58
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Independent Auditors' Report............................................. F-2
Balance Sheets as of June 30, 1996 and 1997 and September 30, 1997
(unaudited)............................................................. F-3
Statements of Income for the Fiscal Years Ended June 30, 1995, 1996 and
1997 and the three months ended September 30, 1996 and 1997 (unaudited). F-4
Statements of Shareholders' Equity for the Fiscal Years Ended June 30,
1995, 1996 and 1997 and the three months ended September 30, 1996 and
1997 (unaudited)........................................................ F-5
Statements of Cash Flows for the Fiscal Years Ended June 30, 1995, 1996
and 1997 and the three months ended September 30, 1996 and 1997
(unaudited)............................................................. F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Pericom Semiconductor Corporation:
We have audited the accompanying balance sheets of Pericom Semiconductor
Corporation as of June 30, 1996 and 1997, and the related statements of
income, shareholders' equity, and cash flows for each of the three years in
the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pericom Semiconductor Corporation at June
30, 1996 and 1997, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1997, in conformity with
generally accepted accounting principles.
San Jose, California
July 31, 1997
( , 1997 as to the third and fourth sentences of Note 1)
----------------
To the Board of Directors and Shareholders of Pericom Semiconductor
Corporation:
The financial statements included herein have been adjusted to give effect
to the one-for-two reverse stock split as described in the third and fourth
sentences of Note 1 to the financial statements. The above report is in the
form that will be signed by Deloitte & Touche LLP upon the effectiveness of
such reverse stock split assuming that from July 31, 1997 to the effective
date of such events, no other events shall have occurred that would affect the
accompanying financial statements or notes thereto.
Deloitte & Touche LLP
San Jose, California
October 14, 1997
F-2
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF JUNE 30,
--------------- AS OF
1996 1997 SEPTEMBER 30, 1997
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents....................... $ 8,556 $ 9,566 $ 9,544
Accounts receivable:
Trade (net of allowances of $1,605, $1,198
and $1,543).............................. 1,849 3,247 3,009
Related party............................. 74 99 74
Inventories................................ 5,469 6,182 6,445
Prepaid expenses and other current assets.. 82 149 146
Income taxes refundable.................... 295 -- --
Deferred income taxes...................... 413 339 339
------- ------- -------
Total current assets.................... 16,738 19,582 19,557
Property and equipment -- net............... 2,394 3,422 3,889
Investments................................. 625 545 515
Other assets................................ 63 32 125
------- ------- -------
Total................................... $19,820 $23,581 $24,086
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 3,283 $ 4,984 $ 4,092
Accrued liabilities........................ 1,310 1,203 1,364
Income taxes payable....................... -- 411 566
------- ------- -------
Total current liabilities............... 4,593 6,598 6,022
Commitments and contingencies (Notes 8 and
9)
Deferred income taxes....................... 132 188 188
Shareholders' equity:
Preferred stock, no par value; 14,225,000
shares authorized (aggregate liquidation
preference of outstanding series A, B and
C of $7,750,000):
Series A, 5,200,000 shares designated and
outstanding.............................. 2,588 2,588 2,588
Series B, 2,150,000 shares designated and
outstanding.............................. 2,137 2,137 2,137
Series C, 1,875,000 shares designated and
outstanding.............................. 2,992 2,992 2,992
Common stock, no par value, 30,000,000
shares authorized;
shares issued and outstanding: 1996,
2,165,251; 1997, 2,345,951; September 30,
1997, 2,411,290.......................... 79 201 259
Retained earnings.......................... 7,299 8,877 9,900
------- ------- -------
Total shareholders' equity.............. 15,095 16,795 17,876
------- ------- -------
Total................................... $19,820 $23,581 $24,086
======= ======= =======
</TABLE>
See notes to financial statements.
F-3
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------------- --------------
1995 1996 1997 1996 1997
-------- -------- -------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues..................... $ 22,732 $ 41,174 $ 33,166 $6,601 $11,398
Cost of revenues................. 12,873 22,797 20,986 3,996 6,839
-------- -------- -------- ------ -------
Gross profit.................... 9,859 18,377 12,180 2,605 4,559
-------- -------- -------- ------ -------
Operating expenses:
Research and development........ 2,942 4,414 4,187 986 1,169
Selling, general and
administrative................. 4,038 6,471 5,989 1,448 1,956
-------- -------- -------- ------ -------
Total.......................... 6,980 10,885 10,176 2,434 3,125
-------- -------- -------- ------ -------
Income from operations........... 2,879 7,492 2,004 171 1,434
Equity in net loss of joint
venture.......................... (55) (70) (80) -- (30)
Interest income.................. 203 402 431 105 123
Interest expense................. (4) -- -- -- --
Other expense.................... -- (382) -- -- --
-------- -------- -------- ------ -------
Income before income taxes....... 3,023 7,442 2,355 276 1,527
Provision for income taxes....... 982 2,732 777 91 504
-------- -------- -------- ------ -------
Net income....................... $ 2,041 $ 4,710 $ 1,578 $ 185 $ 1,023
======== ======== ======== ====== =======
Net income per common and
equivalent share................. $ 0.26 $ 0.57 $ 0.20 $ 0.02 $ 0.12
======== ======== ======== ====== =======
Shares used in computing per
share data....................... 7,975 8,269 8,092 8,224 8,210
======== ======== ======== ====== =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED
STOCK COMMON STOCK TOTAL
------------- ------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT EARNINGS EQUITY
------ ------ ------ ------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, July 1, 1994...... 9,225 $7,717 2,061 $ 29 $ 548 $ 8,294
Exercise of employee stock
options..................... -- -- 58 17 -- 17
Net income.................. -- -- -- -- 2,041 2,041
----- ------ ----- ---- ------ -------
Balances, June 30, 1995..... 9,225 7,717 2,119 46 2,589 10,352
Exercise of employee stock
options..................... -- -- 46 33 -- 33
Net income.................. -- -- -- -- 4,710 4,710
----- ------ ----- ---- ------ -------
Balances, June 30, 1996..... 9,225 7,717 2,165 79 7,299 15,095
Exercise of employee stock
options..................... -- -- 181 122 -- 122
Net income.................. -- -- -- -- 1,578 1,578
----- ------ ----- ---- ------ -------
Balances, June 30, 1997..... 9,225 7,717 2,346 201 8,877 16,795
----- ------ ----- ---- ------ -------
Exercise of employee stock
options*.................... -- -- 65 58 -- 58
Net income*................. -- -- -- -- 1,023 1,023
----- ------ ----- ---- ------ -------
Balances, September 30,
1997*....................... 9,225 $7,717 2,411 $259 $9,900 $17,876
===== ====== ===== ==== ====== =======
</TABLE>
- --------
*Unaudited
See notes to financial statements.
F-5
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
---------------------------- --------------
1995 1996 1997 1996 1997
-------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income...................... $ 2,041 $ 4,710 $ 1,578 $ 185 $1,023
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization.. 448 698 966 214 277
Equity in net loss of joint
venture....................... 55 70 80 -- 30
Deferred income taxes.......... 30 (97) 130 -- --
Changes in assets and
liabilities:
Accounts receivable........... (2,541) 1,287 (1,423) 254 263
Inventories................... (815) (2,050) (713) 599 (263)
Prepaid expenses and other
current assets............... (30) 18 (67) -- 3
Accounts payable.............. 1,862 533 1,701 (1,020) (892)
Accrued liabilities........... 418 306 (107) (353) 162
Income taxes payable
(refundable)................. 143 (600) 706 91 155
-------- -------- -------- ------ ------
Net cash provided by (used
in) operating activities... 1,611 4,875 2,851 (30) 758
-------- -------- -------- ------ ------
Cash flows from investing
activities:
Additions to property and
equipment..................... (1,260) (1,384) (2,001) (364) (745)
(Increase) decrease in other
assets........................ (7) (43) 31 1 (93)
Proceeds from sale of property
and equipment................. -- -- 7 -- --
-------- -------- -------- ------ ------
Net cash used for investing
activities................. (1,267) (1,427) (1,963) (363) (838)
-------- -------- -------- ------ ------
Cash flows from financing
activities:
Sale of common stock........... 17 33 122 10 58
Note payable repayments........ (123) -- -- -- --
-------- -------- -------- ------ ------
Net cash provided by (used
for) financing activities.. (106) 33 122 10 58
-------- -------- -------- ------ ------
Net increase (decrease) in cash
and equivalents 238 3,481 1,010 (383) (22)
Cash and equivalents:
Beginning of period............ 4,837 5,075 8,556 8,556 9,566
-------- -------- -------- ------ ------
End of period.................. $ 5,075 $ 8,556 $ 9,566 $8,173 $9,544
======== ======== ======== ====== ======
Supplemental disclosure of cash
flow information:
Cash paid during the period
for:
Interest...................... $ 4 $ -- $ -- $ -- $ --
======== ======== ======== ====== ======
Income taxes.................. $ 809 $ 3,429 $ 50 $ -- $ 350
======== ======== ======== ====== ======
</TABLE>
See notes to financial statements.
F-6
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Pericom Semiconductor Corporation (the "Company") was incorporated in June
1990. The Company designs, manufactures and markets high performance digital,
analog and mixed-signal integrated circuits for the personal computer,
servers, peripherals and networking markets. In September 1997 and October
1997, the Company's Board of Directors and shareholders, respectively,
approved a one-for-two reverse split of the common stock to be effected in
October 1997. All common stock data in the accompanying financial statements
have been retroactively adjusted to reflect the reverse split.
FINANCIAL STATEMENT ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period. Such estimates
include the level of the allowance for potentially uncollectible receivables,
estimated costs for sales returns, price protection, stock rotation and other
allowances, inventory reserves for obsolete, slow moving or nonsalable
inventory and accrued liabilities. Actual results could differ from those
estimates.
CASH EQUIVALENTS -- The Company considers all highly liquid debt instruments
purchased with a remaining maturity of three months or less to be cash
equivalents. The recorded carrying amounts of the Company's cash and cash
equivalents approximate their fair market value.
INVENTORIES are stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT are stated at cost. Depreciation and amortization are
computed using the straight-line method over estimated useful lives of three
to five years.
INVESTMENT IN JOINT VENTURE is accounted for using the equity method (see
Note 4).
LONG-LIVED ASSETS -- On July 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 121
requires long-lived assets to be evaluated for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company's policy is to review the recoverability of all
intangible assets based upon undiscounted cash flows on an annual basis at a
minimum, and in addition, whenever events or changes indicate that the
carrying amount of an asset may not be recoverable. Adoption of SFAS No. 121
did not have a material effect on the Company's financial statements.
INCOME TAXES -- The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes," which requires an asset and liability approach
to recording deferred taxes.
STOCK-BASED COMPENSATION -- The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock-Based Compensation."
REVENUE RECOGNITION -- Revenue from product sales is recognized upon
shipment. Estimated costs for sales returns, price protection, stock rotation
and other allowances are accrued in the period that sales are recognized.
Domestic distributors are permitted a return allowance of 10% of their net
purchases every six months. Revenue from design services, included in net
revenues, is recognized on the completion of project milestones set forth in
the related agreements.
FISCAL PERIOD -- The Company's fiscal years in the accompanying financial
statements have been shown as ending on June 30. Fiscal years 1995, 1996 and
1997 ended on July 1, 1995, June 29, 1996 and June 28, 1997, respectively, and
each includes 52 weeks.
F-7
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
CONCENTRATION OF CREDIT RISK AND CERTAIN SIGNIFICANT RISKS AND
UNCERTAINTIES -- The Company sells its products primarily to large
organizations and generally does not require its customers to provide
collateral or other security to support accounts receivable. The Company
maintains allowances for estimated bad debt losses.
The Company participates in a dynamic high technology industry and believes
that changes in any of the following areas could have a material adverse
effect on the Company's future financial position or results of operations:
advances and trends in new technologies; competitive pressures in the form of
new products or price reductions on current products; changes in product mix;
changes in the overall demand for products and services offered by the
Company; changes in customer relationships; litigation or claims against the
Company based on intellectual property, patent, product, regulatory or other
factors; risks associated with changes in domestic and international economic
and/or political conditions or regulations; availability of necessary
components; and the Company's ability to attract and retain employees
necessary to support its growth.
RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting
Comprehensive Income," which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major
customers. Adoption of these statements will not impact the Company's
financial position, results of operations or cash flows. Both statements are
effective for fiscal years beginning after December 15, 1997, with earlier
application permitted.
NET INCOME PER SHARE -- Net income per common and equivalent share is based
upon the weighted average number of common and dilutive common equivalent
shares (preferred stock, common stock options and warrants) outstanding.
Pursuant to rules of the Securities and Exchange Commission, all common shares
issued and options, warrants and other rights to acquire shares of Common
Stock at a price less than the initial public offering price granted by the
Company during the period subsequent to November 6, 1996 (using the treasury
stock method until shares are issued and an estimated initial public offering
price) have been included in the computation of common and common equivalent
shares outstanding for all periods presented.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." The
Company is required to adopt SFAS 128 in the second quarter of fiscal 1998 and
will restate at that time earnings per share (EPS) data for prior periods to
conform with SFAS 128. Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income attributable to common stockholders by the
weighted average of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
However, the SEC rules regarding share issuances and option and other rights
granted to acquire shares prior to an initial public offering, as stated
above, are still applicable and such amounts are included in both basic and
diluted EPS.
F-8
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Pro forma amounts for basic and diluted EPS assuming SFAS 128 had been in
effect for the periods presented are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS
JUNE 30, ENDED SEPTEMBER 30,
----------------- --------------------
1995 1996 1997 1996 1997
----- ----- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Basic EPS................ $0.71 $1.61 $0.54 $ 0.06 $ 0.33
Diluted EPS.............. $0.26 $0.57 $0.20 $ 0.02 $ 0.12
</TABLE>
UNAUDITED INTERIM FINANCIAL INFORMATION -- The unaudited interim financial
information as of September 30, 1997 and for the three months ended September
30, 1996 and 1997 has been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited information includes
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of this interim information. Operating results for the three
months ended September 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending June 30, 1998.
2. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
--------------- SEPTEMBER 30,
1996 1997 1997
------- ------- -------------
<S> <C> <C> <C>
Finished goods................................. $ 1,151 $ 1,327 $1,452
Work-in-process................................ 2,455 3,659 3,954
Raw materials.................................. 1,863 1,196 1,039
------- ------- ------
$ 5,469 $ 6,182 $6,445
======= ======= ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of (in thousands):
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
---------------- SEPTEMBER 30,
1996 1997 1997
------- ------- -------------
<S> <C> <C> <C>
Machinery and equipment...................... $ 1,809 $ 3,195 $3,411
Computer equipment and software.............. 1,545 1,844 1,878
Furniture and fixtures....................... 312 322 322
Leasehold improvements....................... 71 80 92
Construction-in-progress..................... 260 544 1,026
------- ------- ------
Total........................................ 3,997 5,985 6,729
Accumulated depreciation and amortization.... (1,603) (2,563) (2,840)
------- ------- ------
Property and equipment -- net................ $ 2,394 $ 3,422 $3,889
======= ======= ======
</TABLE>
F-9
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
4. INVESTMENT IN JOINT VENTURE
In fiscal 1994, the Company purchased 1,500,000 shares of Series A
Convertible Preferred Stock issued by Pericom Technology, Inc. ("PTI") for
$750,000 (an 18.4% equity investment). Such preferred stock is convertible at
the option of the Company into 1,500,000 shares of PTI common stock, does not
bear dividends, has a liquidation preference up to the purchase price and
votes based on the number of common shares into which it is convertible. PTI
was incorporated in 1994 and in 1995 established a design center and sales
office to pursue opportunities and participate in joint ventures in China. The
investment in PTI is accounted for using the equity method due to the
Company's significant influence over its operations. In addition, several of
the directors of the Company are also directors of PTI, and certain
shareholders of the Company are also shareholders of PTI. During the years
ended June 30, 1996 and 1997, the Company sold $24,000 and $39,000,
respectively, in services to PTI. At June 30, 1996 and 1997, $74,000 and
$99,000, respectively, was owed to the Company by PTI for reimbursement of
certain administrative expenses incurred by the Company on behalf of PTI.
Condensed financial information of the joint venture at June 30, 1997 is as
follows (in thousands):
<TABLE>
<S> <C>
Total assets................................................. $2,096
Total liabilities............................................ 99
Total equity................................................. 1,997
Expenses..................................................... 502
------
Operating loss............................................... (490)
Interest income.............................................. 65
------
Net loss..................................................... $ (425)
======
</TABLE>
The Company's investment in preferred stock of PTI has a liquidation
preference of $545,000 at June 30, 1997. This carrying value of the PTI
investment at June 30, 1997, is greater that the 18.4% equity interest
consistent with the Company's liquidation preference.
5. ACCRUED LIABILITIES
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF
--------------- SEPTEMBER 30,
1996 1997 1997
------- ------- -------------
<S> <C> <C> <C>
Accrued compensation........................... $ 716 $ 591 $ 462
External sales representative commissions...... 296 310 492
Other accrued expenses......................... 298 302 410
------- ------- ------
$1,310 $ 1,203 $1,364
======= ======= ======
</TABLE>
F-10
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
6. SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Significant terms of the Series A, Series B and Series C Convertible
Preferred Stock are as follows:
. Two shares of preferred stock are convertible at the option of the holder
into one share of common stock (subject to adjustments for events of
dilution). Shares will be converted automatically upon the earlier of the
closing of an underwritten public offering of the Company's common stock
meeting certain criteria, such as that contemplated by this offering, or
the voluntary conversion of 70% or more of the preferred stock.
. Each share of preferred stock has voting rights equivalent to the number
of shares of common stock into which it is convertible.
. Dividends may be declared at the discretion of the Board of Directors and
are noncumulative. Dividends of $0.04, $0.08 and $0.13 per share for
Series A, Series B and Series C preferred stock, respectively, must be
declared and paid before payment of any common stock dividends.
. In the event of liquidation, dissolution, merger or winding up of the
Company, Series A, Series B and Series C preferred shareholders are
entitled to receive $0.50 per share, $1.00 per share and $1.60 per share,
respectively, (subject to adjustments for events of dilution) plus all
accrued and unpaid dividends prior to any distribution to the common
shareholders. Any remaining assets will be shared by common shareholders
on a pro rata basis.
STOCK OPTION PLANS
Under the Company's 1990 Stock Option Plan and 1995 Stock Option Plans,
incentive and nonqualified stock options to purchase up to 3,525,044 shares of
common stock have been reserved at September 30, 1997 for issuance to
employees, officers, directors, independent contractors and consultants of the
Company.
The options may be granted at not less than the fair value, as determined by
the Board of Directors, and not less than 85% of the fair value on grant date
for incentive stock options and nonqualified stock options, respectively.
Options vest over periods of up to 48 months as determined by the Board.
Options granted under the Plans expire 10 years from grant date.
F-11
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
Activity in the Company's option plans is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Balance July 1, 1994.............................. 600,344 $0.36
Granted......................................... 567,251 1.12
Exercised....................................... (57,851) 0.28
Canceled........................................ (105,702) 0.46
--------- -----
Balance June 30, 1995............................. 1,004,042 0.78
Granted (weighted average fair value: $1.04 per
share)......................................... 639,881 4.42
Exercised....................................... (45,917) 0.82
Canceled........................................ (393,037) 3.98
--------- -----
Balance June 30, 1996............................. 1,204,969 1.56
Granted (weighted average fair value: $0.94 per
share)......................................... 488,825 2.48
Exercised....................................... (180,700) 0.64
Canceled........................................ (316,479) 3.08
--------- -----
Balance June 30, 1997............................. 1,196,615 1.70
--------- -----
Granted......................................... 406,575 4.84
Exercised....................................... (65,339) 0.89
Canceled........................................ (51,794) 2.68
--------- -----
Balance September 30, 1997........................ 1,486,057 $2.56
========= =====
</TABLE>
At September 30, 1997, 1,483,961 shares were available for future issuance
under the option plans.
In fiscal 1996, the Company canceled options to purchase 277,700 shares of
common stock with exercise prices ranging from $5.00 to $6.00 per share and
issued replacement options with an exercise price of $3.80 per share.
In fiscal 1997, the Company canceled options to purchase 160,700 shares of
common stock with an exercise price of $3.80 per share and issued replacement
options with an exercise price of $2.40 per share.
Additional information regarding options outstanding as of June 30, 1997 is
as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------
OPTIONS EXERCISABLE
WEIGHTED --------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.10-0.90 273,802 5.87 $0.30 265,522 $0.30
$1.00 250,000 7.22 1.00 250,000 1.00
$1.20-1.44 89,073 7.75 1.34 56,986 1.32
$2.40 453,636 9.37 2.40 58,930 2.40
$3.80 130,104 8.48 3.80 66,870 3.80
--------- -------
1,196,615 $1.70 698,308 $1.14
========= =======
</TABLE>
F-12
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
ADDITIONAL STOCK PLAN INFORMATION -- As discussed in Note 1, the Company
continues to account for its stock-based awards using the intrinsic value
method in accordance with Accounting Principles Board No. 25, "Accounting for
Stock Issued to Employees," and its related interpretations. Accordingly, no
compensation expense has been recognized in the financial statements for
employee stock arrangements.
SFAS No. 123, "Accounting for Stock-Based Compensation," (SFAS 123),
requires the disclosure of pro forma net income as if the Company had adopted
the fair value method as of the beginning of fiscal 1996. Under SFAS 123, the
fair value of stock-based awards to employees is calculated through the use of
option pricing models, even though such models were developed to estimate the
fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the terms of the Company's stock
option awards. These models also require subjective assumptions, including
expected time to exercise, which greatly affect the calculated values. The
Company's calculations were made using the Black-Scholes option pricing model
with the following weighted average assumptions: expected life, five years;
risk-free interest rates, 5.9% in 1996 and 6.3% in 1997; and no dividends
during the expected term. The Company's calculations are based on a single
option valuation approach, and forfeitures are recognized as they occur. If
the computed fair values of the 1996 and 1997 awards had been amortized to
expense over the vesting period of the awards, pro forma net income would have
been $4,637,000 ($0.56 per share) in 1996 and $1,398,000 ($0.17 per share) in
1997. However, the impact of outstanding nonvested stock options granted prior
to fiscal 1996 has been excluded from the pro forma calculation; accordingly,
the 1996 and 1997 pro forma adjustments are not indicative of future period
pro forma adjustments, when the calculation will apply to all applicable stock
options.
7. INCOME TAXES
The provision for income taxes consists of (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
-------------------
1995 1996 1997
----- ------ ----
<S> <C> <C> <C>
Federal:
Current................................................ $ 784 $2,552 $652
Deferred............................................... 180 (121) 104
----- ------ ----
964 2,431 756
State:
Current................................................ 168 277 (5)
Deferred............................................... (150) 24 26
----- ------ ----
18 301 21
----- ------ ----
Provision for income taxes.............................. $ 982 $2,732 $777
===== ====== ====
</TABLE>
F-13
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
A reconciliation between the Company's effective tax rate and the U.S
statutory rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED JUNE 30,
----------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Tax at federal statutory rate.............................. 35.0% 35.0% 35.0%
State income taxes, net of federal benefit................. 5.7 6.4 5.3
Research and development tax credits....................... (6.9) (3.6) (8.7)
Other...................................................... (1.3) (1.1) 1.4
---- ---- ----
Provision for income taxes................................. 32.5% 36.7% 33.0%
==== ==== ====
</TABLE>
The Company has provided income taxes for the three months ended September
30, 1996 and 1997 based on the expected annual income tax rate for that year.
The components of the net deferred tax assets were as follows (in
thousands):
<TABLE>
<CAPTION>
AS OF
JUNE 30,
------------
1996 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Accruals and reserves recognized in different periods......... $ 274 $ 398
Capitalized research and development costs.................... 17 4
Other......................................................... 122 11
----- -----
413 413
----- -----
Deferred tax liabilities:
Tax basis depreciation........................................ (132) (188)
Other......................................................... -- (74)
----- -----
(132) (262)
----- -----
Net deferred tax assets....................................... $ 281 $ 151
===== =====
</TABLE>
8. LEASES
The Company leases certain facilities under operating leases through 2001,
with an option to extend the facilities lease for an additional three years
upon termination of the original lease term. The future minimum operating
lease commitments at June 30, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
Fiscal Year:
1998.............................................................. $ 266
1999.............................................................. 275
2000.............................................................. 281
2001.............................................................. 235
------
$1,057
======
</TABLE>
Rent expense for operating leases for the years ended June 30, 1995, 1996
and 1997 was $211,000, $281,000 and $366,000, respectively.
F-14
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JUNE 30, 1995, 1996 AND 1997
(INFORMATION AS OF SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
9. CONTINGENCIES
The semiconductor industry is characterized by frequent claims and related
litigation regarding patent and other intellectual property rights. The
Company is party to one claim of this nature. Although the ultimate outcome of
this matter is not presently determinable, management believes that the
resolution of this matter will not have a material adverse effect on the
Company's financial position or results of operations.
10. MAJOR CUSTOMERS AND FOREIGN SALES
In fiscal 1995, two customers accounted for 12% and 11% of net product
sales, respectively, and one customer represented 21% of trade accounts
receivable at June 30, 1995. In fiscal 1996, two customers accounted for 20%
and 16% of net revenues, respectively, and three customers represented 14%,
11%, and 10% of trade accounts receivable at June 30, 1996. In fiscal 1997,
two customers accounted for 17% and 14% of net revenues, respectively, and two
customers represented 12% and 11% of trade accounts receivable, respectively,
at June 30, 1997. For the three months ended September 30, 1997, no customer
accounted for greater than 10% of net revenues, and one customer represented
10% of trade accounts receivable at September 30, 1997.
Total export sales represented approximately 35%, 30%, 37% and 42% of net
revenues in fiscal years 1995, 1996 and 1997 and the three months ended
September 30, 1997, respectively. Export sales to Asia were approximately 27%,
22%, 26% and 34% of net revenues in fiscal years 1995, 1996 and 1997 and the
three months ended September 30, 1997, respectively. Export sales to Europe
were approximately 11% in fiscal 1997 and were less than 10% in fiscal years
1995 and 1996 and the three months ended September 30, 1997.
11. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) tax-deferred savings plan under which eligible
employees may elect to have a portion of their salary deferred and contributed
to the plan. Employer matching contributions are determined by the Board of
Directors and are discretionary. There were no employer matching contributions
in fiscal 1995, 1996 or 1997.
F-15
<PAGE>
[Photo of an IC die]
Set forth on the left hand side of the inside back cover page is a
photo of an IC die, four areas of which are labeled as "ANALOG CELLS," "CORE
CELLS," "STANDARD CELLS," and "SEA OF GATES." The text under such photo reads:
"Pericom's products are designed with a modular methodology using a
combination of sea-of-gates arrays, standard cells, core cells and proprietary
analog cells. This methodology provides for the rapid design of interface
integrated circuits optimized for performance, density, low power and
manufacturability. The company's four-port FastEthernet PHY transceiver
product is designed with this innovative technology".
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, COMMON
STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
The Company............................................................... 14
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Dilution.................................................................. 16
Selected Financial Data................................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 18
Business.................................................................. 25
Management................................................................ 45
Certain Transactions...................................................... 51
Principal and Selling Shareholders........................................ 52
Description of Capital Stock.............................................. 54
Shares Eligible for Future Sale........................................... 55
Underwriting.............................................................. 56
Legal Matters............................................................. 57
Experts................................................................... 57
Additional Information.................................................... 58
Index to Financial Statements............................................. F-1
</TABLE>
------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPEC-
TUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
================================================================================
2,500,000 Shares
Shares
[PERICOM LOGO APPEARS HERE]
Common Stock
----------------
PROSPECTUS
----------------
SoundView Financial Group, Inc.
Unterberg Harris
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<CAPTION>
AMOUNT*
--------
<S> <C>
Securities and Exchange Commission Filing Fee................... $ 10,891
NASD Filing Fee................................................. 4,094
Nasdaq National Market Listing Fee.............................. 42,247
Accounting Fees and Expenses.................................... 105,000
Blue Sky Fees and Expenses...................................... 7,500
Legal Fees and Expenses......................................... 150,000
Transfer Agent and Registrar Fees and Expenses.................. 7,000
Directors' and Officers' Liability Insurance Premium............ 95,000
Printing Expenses............................................... 115,000
Miscellaneous Expenses.......................................... 63,268
--------
Total......................................................... $600,000
========
</TABLE>
- --------
* All amounts are estimates except the SEC filing fee and the NASD filing
fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 317 of the California Corporations Code, the Registrant has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Registrant's Bylaws also provide for mandatory indemnification of its
directors and executive officers and permissive indemnification of its
employees and agents, to the fullest extent permissible under California law.
The Registrant's Articles of Incorporation provide that the liability of its
directors for monetary damages shall be eliminated to the fullest extent
permissible under California law. Pursuant to California law, this includes
elimination of liability for monetary damages for breach of the directors'
fiduciary duty of care to the Registrant and its shareholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of non-
monetary relief will remain available under California law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under California law. The provision also does not affect a
director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
Prior to the effective date of this Registration Statement, the Registrant
intends to enter into agreements with its directors and certain of its
executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person
may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated entities,
provided such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
II-1
<PAGE>
The Registrant intends to obtain prior to the effective date of the
Registration Statement a policy of directors' and officers' liability
insurance that insures the Company's directors and officers against the cost
of defense, settlement or payment of a judgment under certain circumstances.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and its officers and directors for certain liabilities arising under the
Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since September 10, 1994, the Registrant has issued and sold the following
unregistered securities:
1. During the period, the Registrant granted stock options to employees,
directors and consultants under its 1990 Stock Option Plan and 1995 Stock
Option Plan covering an aggregate of 2,115,588 shares of the Registrant's
Common Stock, at exercise prices ranging from $1.20 to $7.80 per share.
<TABLE>
<CAPTION>
EXERCISE
QUARTER ENDED SHARES PRICE
------------- ------ --------
<S> <C> <C>
September 1994.................................... 332,750 $0.90 - $1.00
December 1994..................................... 0 N/A
March 1995........................................ 85,500 $1.20
June 1995......................................... 144,000 $1.44
September 1995.................................... 76,088 $2.40 - $5.80
December 1995..................................... 194,750 $5.00 - $6.00
March 1996........................................ 58,700 $5.00
June 1996......................................... 289,700 $3.80
September 1996.................................... 72,000 $2.40 - $3.80
December 1996..................................... 0 N/A
March 1997........................................ 231,575 $2.40
June 1997......................................... 200,250 $2.40
September 1997.................................... 406,575 $4.00 - $7.50
December 1997..................................... 23,700 $7.80
---------
Total......................................... 2,115,588
</TABLE>
2. During the period, the Registrant issued and sold an aggregate of
339,740 shares of its Common Stock to 45 employees for cash in the
aggregate amount of $227,737.40 upon exercise of stock options granted
pursuant to the Registrant's 1990 Stock Option Plan and 1995 Stock Option
Plan.
<TABLE>
<CAPTION>
QUARTER ENDED SHARES PROCEEDS
------------- ------ --------
<S> <C> <C>
September 1994....................................... 13,803 $ 2,760.50
December 1994........................................ 2,500 $ 1,500.00
March 1995........................................... 28,760 $ 7,522.90
June 1995............................................ 14,037 $ 5,078.30
September 1995....................................... 19,740 $ 16,196.24
December 1995........................................ 15,844 $ 10,087.85
March 1996........................................... 9,521 $ 6,650.40
June 1996............................................ 8,104 $ 10,669.80
September 1996....................................... 8,594 $ 10,312.80
December 1996........................................ 9,198 $ 7,451.60
March 1997........................................... 102,617 $ 38,735.26
June 1997............................................ 52,791 $ 54,952.15
September 1997....................................... 65,534 $ 58,080.10
December 1997........................................ 2,500 $ 500.00
------- -----------
Total............................................ 353,543 $230,497.90
</TABLE>
The sales and issuance of securities in the transactions described in
paragraphs 1 and 2 above were deemed to be exempt from registration under the
Securities Act by virtue of Rule 701 promulgated thereunder in that they were
offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by Rule
701.
II-2
<PAGE>
Appropriate legends were affixed to the stock certificates issued in the
above transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. No Underwriters were employed in any
of the above transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The exhibits are as set forth in the Exhibit Index.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts. See page II-6.
Schedules other than those listed above have been omitted since they are not
required or are not applicable or the required information is shown in the
financial statements or related notes. Columns omitted from schedules filed
have been omitted since the information is not applicable.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that:
(1) For purposes of any liability under the Act, the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall
be deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, State of California on the 13th day of October, 1997.
PERICOM SEMICONDUCTOR CORPORATION
By /s/ Alex C. Hui
_________________________________
Alex C. Hui
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
_________ _____ ____
<S> <C> <C>
/s/ Alex C. Hui Chief Executive Officer, October 13, 1997
____________________________________ President and Director
Alex C. Hui (Principal Executive
Officer)
/s/ Patrick B. Brennan Vice President, Finance & October 13, 1997
____________________________________ Administration
Patrick B. Brennan (Principal Financial and
Accounting Officer)
/s/ John Chi-Hung Hui* Vice President, Technology October 13, 1997
____________________________________ and Director
John Chi-Hung Hui
/s/ Jeffrey Young* Director October 13, 1997
____________________________________
Jeffrey Young
/s/ Tay Thiam Song* Director October 13, 1997
____________________________________
Tay Thiam Song
*By: /s/ Alex C. Hui
_____________________________
Alex C. Hui Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
Pericom Semiconductor Corporation:
We consent to the use in this Registration Statement No. 333-35327 of
Pericom Semiconductor Corporation (the "Company") on Form S-1 of our report
dated July 31, 1997 ( , 1997 as to the third and fourth sentences of Note
1), appearing in the Prospectus, which is a part of this Registration
Statement, and to the references to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of the Company, listed
in Item 16b. The financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
San Jose, California
October 14, 1997
----------------
The financial statements included in the Prospectus have been adjusted to
give effect to the one-for-two reverse stock split as described in the third
and fourth sentences of Note 1 to the financial statements. The above consent
and report is in the form which will be signed by Deloitte & Touche LLP upon
the effectiveness of such reverse stock split, assuming that from July 31,
1997 to the effective date of such reverse stock split, no other events shall
have occurred that would affect the accompanying financial statements or notes
thereto.
Deloitte & Touche LLP
San Jose, California
October 14, 1997
II-5
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ------------------------ ------------ ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Accounts receivable
allowances
June 30,
1995.................. $ 606 $129 $-- $-- $ 735
1996.................. 735 870 -- -- 1,605
1997.................. 1,605 19 -- 426 1,198
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
------- --------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1* Restated Articles of Incorporation of the Registrant, as currently in
effect.
3.2 Form of Certificate of Amendment of Articles of Incorporation of the
Registrant, to be filed prior to the closing of the offering made
under this Registration Statement.
3.3* Registrant's Bylaws.
3.4* Form of Registrant's Certificate of Amendment of Bylaws.
4.1 Specimen certificate for Common Stock (in standard printer form, not
provided).
5.1 Opinion of Morrison & Foerster LLP.
10.1* Registrant's 1990 Stock Option Plan, including forms of Agreements
thereunder.
10.2 Registrant's 1995 Stock Option Plan, including forms of Agreements
thereunder.
10.3 Registrant's 1997 Employee Stock Purchase Plan, including forms of
Agreements thereunder.
10.4 Lease, dated November 29, 1993, by and between Orchard Investment
Company Number 510 as Landlord and Registrant as Tenant, as amended.
10.5 Common Stock Purchase Agreement, dated June 25, 1990, by and between
Alex C. Hui and the Registrant.
10.6 Common Stock Purchase Agreement, dated June 25, 1990, by and between
Chi-Hung Hui and the Registrant.
10.7 Series A Stock Purchase Agreement, dated July 10, 1990, by and among
the Registrant and the Investors listed on the signature pages
thereto.
10.8 Series B Stock Purchase Agreement, dated December 30, 1991, by and
among the Registrant and the Investors listed on the signature pages
thereto.
10.9 Series C Stock Purchase Agreement, dated July 21, 1993 by and among
the Registrant and the Investors listed on the signature pages
thereto.
10.10* Second Amended Investors Rights Agreement, dated July 21, 1993, by
and among the Registrant and the holders of Series A, Series B and
Series C Preferred Stock.
10.11* Form of Indemnification Agreement.
10.12* Agreement, dated March 17, 1995, by and between the Registrant and
Pericom Technology, Inc.
10.13*+ Agreement, dated February 28, 1996, by and between the Registrant and
Harris Corporation.
11.1 Statement regarding calculation of net income per share.
23.1 Consent of Morrison & Foerster LLP. Reference is made to Exhibit 5.1.
23.2 Independent Auditors' Consent and Report on Schedule. Reference is
made to Page II-5.
24.1* Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
+ Confidential treatment has been requested as to a portion of this Exhibit.
<PAGE>
2,500,000 Shares
PERICOM SEMICONDUCTOR CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
November , 1997
---
SOUNDVIEW FINANCIAL GROUP, INC.
UNTERBERG HARRIS
As Representatives of the several Underwriters
c/o SoundView Financial Group, Inc.
22 Gatehouse Road
Stamford, Connecticut 06902
Ladies and Gentlemen:
1. DESCRIPTION OF SHARES. Pericom Semiconductor Corporation, a
California corporation (the "Company"), and the selling shareholders named in
-------
Schedule B attached hereto (the "Selling Shareholders") propose to sell, upon
- ---------- --------------------
the terms and subject to the conditions of this Agreement, to the several
underwriters named in Schedule A attached hereto (collectively, the
----------
"Underwriters," or each an "Underwriter"), an aggregate of 2,500,000 shares (the
------------ -----------
"Firm Shares") of the Company's common stock, no par value ("Common Stock"). The
----------- ------------
Selling Shareholders and the Company also propose to sell to the Underwriters,
upon the terms and subject to the conditions of this Agreement, as set forth in
Section 5, up to an aggregate of an additional 375,000 shares of Common Stock
(the "Option Shares," and, collectively with the Firm Shares, the "Shares").
------------- ------
2. REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form S-1 (File No. 333-35327) in the form in which it became or becomes
effective and also in such form as it may be when any post-effective amendment
thereto shall become effective with respect to the Shares, including any
preliminary prospectuses included as part of the registration statement as
originally filed or as part of any amendment or supplement thereto, or filed
pursuant to Rule 424 ("Rule 424") under the Securities Act of 1933, as amended
--------
(the "Securities Act"), and the rules and regulations (the "Rules and
-------------- ---------
Regulations") of the Securities and Exchange Commission (the "Commission")
- ----------- ----------
thereunder, copies of which amendments have heretofore been delivered to
SoundView Financial Group, Inc. ("SoundView") and Unterberg Harris, the
---------
representatives of the several Underwriters hereunder (collectively, the
"Representatives"), has been prepared by the Company in compliance with the
---------------
requirements of the Securities Act and has been filed with the Commission under
the Securities Act. One or more amendments to such registration statement,
including in each case an amended preliminary prospectus, copies of which
amendments have heretofore been delivered to the Representatives, have also been
so prepared and filed. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to such
<PAGE>
registration statement will be filed and must be declared effective before the
offering of the Shares may commence, the term "Registration Statement" as used
----------------------
in this Agreement means the registration statement as amended by said post-
effective amendment. The term "Registration Statement" as used in this Agreement
----------------------
shall also include any registration statement relating to the Shares that is
filed and declared effective pursuant to Rule 462(b) under the Securities Act.
The term "Prospectus" as used in this Agreement means the prospectus in the form
----------
included in the Registration Statement, or, (a) if the prospectus included in
the Registration Statement omits information in reliance on Rule 430A under the
Securities Act ("Rule 430A") and such information is included in a prospectus
---------
filed with the Commission pursuant to Rule 424(b) under the Securities Act, the
term "Prospectus" as used in this Agreement means the prospectus in the form
----------
included in the Registration Statement as supplemented by the addition of the
Rule 430A information contained in the prospectus filed with the Commission
pursuant to Rule 424(b), and (b) if prospectuses that meet the requirements of
Section 10(a) of the Securities Act are delivered pursuant to Rule 434 under the
Securities Act ("Rule 434"), then (i) the term "Prospectus" as used in this
-------- ----------
Agreement means the "prospectus subject to completion" (as such term is defined
in Rule 434(g) under the Securities Act) as supplemented by (A) the addition of
Rule 430A information or other information contained in the form of prospectus
delivered pursuant to Rule 434(b)(2) under the Securities Act or (B) the
information contained in the term sheets described in Rule 434(b)(3) under the
Securities Act, and (ii) the date of such prospectuses shall be deemed to be the
date of the term sheets. The term "Preliminary Prospectus" as used in this
----------------------
Agreement means the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the Registration
Statement with the Commission, and as such prospectus shall have been amended
from time to time prior to the date of the Prospectus.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) SECURITIES ACT COMPLIANCE. The Registration Statement has been
prepared in compliance with the requirements of the Securities Act and has
been filed with the Commission under the Securities Act. The Commission has
not issued or threatened to issue any order preventing or suspending the
use of any Preliminary Prospectus, and, at its date of issue, each
Preliminary Prospectus conformed in all material respects with the
requirements of the Securities Act and did not include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, when the
Registration Statement becomes effective and at all times subsequent
thereto up to and including the Closing Dates (as hereinafter defined), the
Registration Statement and the Prospectus and any amendments or supplements
thereto contained and will contain all material statements and information
required to be included therein by the Securities Act and conformed and
will conform in all material respects to the requirements of the Securities
Act, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, included or will include any untrue
statement of a material fact or omitted or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing representations,
-------- -------
warranties and agreements shall not apply to information contained in or
omitted
2
<PAGE>
from any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to the Company by
any Underwriter specifically for use in the preparation thereof. There is
no contract, agreement, lease, franchise or document required to be
described in the Registration Statement or Prospectus or to be filed as
an exhibit to the Registration Statement which is not described therein
or filed therewith as required, and all descriptions of any such
contracts, agreements, leases, franchises or documents contained in the
Registration Statement are accurate and complete descriptions of such
documents in all material respects.
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company has
been duly organized and is validly existing and in good standing as a
corporation under the laws of the State of California, with power and
authority (corporate and other) to own or lease its properties and to
conduct its business as described in the Prospectus. The Company is in
possession of and operating in compliance with all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and
orders required for the conduct of its business, all of which are valid and
in full force and effect, and is duly qualified to do business and in good
standing as a foreign corporation in all other jurisdictions where its
ownership or leasing of properties or the conduct of its business requires
such qualification. The Company has obtained all necessary consents,
approvals, authorizations, orders, registrations, qualifications, licenses
and permits of and from all public regulatory or governmental agencies and
bodies to own, lease and operate its properties and conduct its business as
now being conducted and as described in the Registration Statement and the
Prospectus, and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a materially
burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus.
(c) SUBSIDIARIES. The Company does not have any subsidiaries.
Except as set forth in the Prospectus, the Company does not own or control,
directly or indirectly, any interest in any other corporation, association
or other business entity.
(d) NO CHANGES. Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
except as set forth or contemplated in the Prospectus, the Company has not
incurred any liabilities or obligations, direct or contingent, and has not
entered into any transactions not in the ordinary course of business, and
there has not been any material adverse change in the condition (financial
or otherwise), properties, business, management, prospects, net worth or
results of operations of the Company, or any change in the capital stock,
short-term or long-term debt of the Company.
(e) VALID ISSUANCE OF THE SHARES. The Shares to be issued and sold
by the Company to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued, fully paid and
nonassessable and free of any preemptive or similar rights and will conform
to the description thereof in the Prospectus.
(f) AUTHORIZATION. The Company has the full corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder (including to issue, sell and deliver the Shares), and this
Agreement has been duly and validly authorized, executed and
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<PAGE>
delivered by the Company and is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that rights to indemnity and contribution hereunder
may be limited by federal or state securities laws or the public policy
underlying such laws.
(g) COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation of any of the
terms or provisions of, constitute a default under or result in the
creation of any lien under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party
or by which it or any of its properties is or may be bound, the Articles of
Incorporation, Bylaws or other organizational documents of the Company, or
any law, order, Rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties.
(h) LEGAL COMPLIANCE. The Company, in all material respects, is in
compliance with and conducts its business in conformity with all applicable
federal, state, local and foreign laws, rules and regulations of any court
or governmental agency or body, and, to the knowledge of the Company,
except as set forth in the Registration Statement and the Prospectus, no
prospective change in any of such federal or state laws, rules or
regulations has been adopted which, when made effective, would have a
material adverse effect on the operations of the Company.
(i) GOVERNMENTAL CONSENTS. No consent, approval, authorization or
order of any court or governmental agency or body is required for the
consummation by the Company of the transactions contemplated by this
Agreement, except such as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or under the Securities Act in
----
connection with the purchase and distribution of the Shares by the
Underwriters.
(j) FINANCIAL STATEMENTS. The financial statements, together with
the related notes and schedules, set forth in the Prospectus and elsewhere
in the Registration Statement fairly present, on the basis stated in the
Registration Statement, the financial condition and the results of
operations of the Company at the respective dates or for the respective
periods therein specified. Such statements and related notes and schedules
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as may be set forth in the
Prospectus. The selected financial and statistical data set forth in the
Prospectus under the caption "Selected Financial Data" fairly present, on
the basis stated in the Registration Statement, the information set forth
therein. The Company has provided the Representatives with all financial
statements from its inception to the date hereof that are available to the
officers of the Company.
(k) INDEPENDENT AUDITORS. Deloitte & Touche LLP, who have
expressed their opinions on the audited financial statements and related
schedules included in the Registration Statement and the Prospectus, are
independent public accountants as required by the Securities Act and the
Rules and Regulations.
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(l) CAPITALIZATION. The Company's authorized and outstanding
capital stock is on the date hereof, and will be on the Closing Dates, as
set forth under the heading "Capitalization" in the Prospectus and conforms
to the description thereof set forth under the heading "Description of
Capital Stock" in the Prospectus. The outstanding shares of Common Stock
(including the outstanding Shares) (i) conform to the description thereof
in the Prospectus, (ii) have been duly authorized and validly issued and
are fully paid and nonassessable, (iii) have been issued in compliance with
all federal and state securities laws, and (iv) were not issued in
violation of or subject to any preemptive rights or similar rights to
subscribe for or purchase securities. Except as disclosed in the Prospectus
and the financial statements of the Company and related notes thereto
included in the Prospectus, the Company does not have outstanding any
options or warrants to purchase, or any preemptive rights or other rights
to subscribe for or to purchase any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its
capital stock or any such options, rights, convertible securities or
obligations, except for options granted subsequent to the date of
information provided in the Prospectus pursuant to the Company's stock
option plans as disclosed in the Prospectus. The description of the
Company's stock option and other stock plans or arrangements and the
options or other rights granted or exercised thereunder, as set forth in
the Prospectus, accurately and fairly presents the information required to
be disclosed with respect to such plans, arrangements, options and rights.
All of the issued and outstanding shares of capital stock of Pericom
Technology, Inc., a British Virgin Islands corporation ("PTI"), have been
duly authorized and validly issued, are fully paid and nonassessable and
the shares of capital stock of PTI held by the Company, as set forth in the
Prospectus, are owned directly by the Company free and clear of any liens,
encumbrances, equities or claims.
(m) LITIGATION. Except as set forth in the Prospectus, there is no
legal or governmental action, suit, proceeding or investigation pending to
which the Company or any of its affiliates is a party or to which any
property of the Company or any affiliate is subject, which, if determined
adversely to the Company or any such subsidiary or affiliate, might
individually or in the aggregate (i) prevent or adversely affect the
transactions contemplated by this Agreement, (ii) suspend the effectiveness
of the Registration Statement, (iii) prevent or suspend the use of the
Preliminary Prospectus in any jurisdiction, or (iv) result in a material
adverse change in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of the
Company, and, to the best of the Company's knowledge, no such action, suit,
proceeding or investigation is threatened or contemplated against the
Company or any affiliate by governmental authorities or others. The Company
is not a party to and is not subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory body or
other governmental agency or body.
(n) TAX RETURNS AND PAYMENTS. The Company has filed all necessary
federal, state, local and foreign income, payroll, franchise and other tax
returns and has paid all taxes shown as due thereon or with respect to any
of its properties, and there is no tax deficiency that has been, or, to the
knowledge of the Company, is likely to be asserted against the Company or
any of its properties or assets that would adversely affect the financial
condition, business or operations of the Company. All distributions to the
shareholders of the Company prior to the
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date hereof have been made in compliance with applicable law and have not
exceeded the amounts to which such shareholders were legally entitled.
(o) REGISTRATION RIGHTS. No person or entity has the right to
require registration of shares of Common Stock or other securities of the
Company as a result of the filing or effectiveness of the Registration
Statement and, in any event, except as set forth in the Prospectus, no
person or entity has the right to require registration of shares of Common
Stock or other securities of the Company.
(p) PRICE STABILIZATION AND MANIPULATION. Neither the Company nor
any of its officers, directors or affiliates has taken or will take,
directly or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or which caused or
resulted in, or which might in the future reasonably be expected to cause
or result in, stabilization or manipulation of the price of any security of
the Company.
(q) PATENTS AND TRADEMARKS. The Company owns or possesses all
patents, trademarks, trademark registrations, service marks, service mark
registrations, tradenames, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectus as being owned by it or necessary
for the conduct of its business as now conducted or as proposed to be
conducted, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company with respect to
the foregoing. The Company's business as now conducted does not infringe or
conflict with in any material respect any trademarks, service marks,
tradenames, copyrights, trade secrets, licenses or other intellectual
property or franchise right, or, to the Company's knowledge, any patents,
of any person. No claim has been made against the Company alleging the
infringement by the Company of any patent, trademark, service mark,
tradename, copyright, trade secret, license in or other intellectual
property right or franchise right of any person, except as described in the
Prospectus or with respect to claims which, singly or in the aggregate,
will not have a material adverse affect on the business, financial
condition or operating results of the Company.
(r) MATERIAL CONTRACTS. The Company has performed all material
obligations required to be performed by it under all contracts required by
Item 601(b)(10) of Regulation S-K under the Securities Act to be filed as
exhibits to the Registration Statement, and neither the Company nor, to the
knowledge of the Company, any other party to such contract is in default
under or in breach of any such obligations, except with respect to any
defaults or breaches which, singly or in the aggregate, will not result in
a material adverse effect on the business, financial condition or operating
results of the Company. The Company has not received any notice of such
default or breach.
(s) LABOR AGREEMENTS AND ACTIONS. The Company is not involved in
any labor dispute, and no such dispute is threatened. The Company is not
aware that (i) any executive, key employee or significant group of
employees of the Company plans to terminate employment with the Company, or
(ii) any such executive or key employee is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar agreement
that would be violated by the present or proposed business activities of
the Company. The Company does not and does not expect to have any liability
for any prohibited transaction or funding
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deficiency or any complete or partial withdrawal liability with respect to
any pension, profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to which the
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Company makes or ever has made a contribution and in which any employee of
the Company is or has ever been a participant. With respect to such plans,
the Company is in compliance in all material respects with all applicable
provisions of ERISA, except with respect to any non-compliance with such
provisions which, singly or in the aggregate, will not have a material
adverse effect on the business, financial condition or operating results of
the Company.
(t) LOCK-UP AGREEMENTS. Except as disclosed in the Prospectus, the
Company has obtained the written agreement, in substantially the form
attached hereto as Schedule C, from each of its officers and directors and
----------
each holder of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for or rights to purchase or acquire shares of
Common Stock.
(u) TITLE TO PROPERTY AND ASSETS. The Company has and, as of the
Closing Dates, will have good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned
or proposed to be owned by it which is material to the business of the
Company, in each case free and clear of all liens, encumbrances and defects
except such as are described the Prospectus or such as would not have a
material adverse effect on the Company. Any real property and buildings
held under lease by the Company or proposed to be held after giving effect
to the transactions described in the Prospectus are, or will be as of the
Closing Dates, held by it under valid, subsisting and enforceable leases
with such exceptions as would not have a material adverse effect on the
Company, in each case except as described in or contemplated by the
Prospectus.
(v) INSURANCE. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as are customary in the business in which it is engaged or proposes to
engage in after giving effect to the transactions described in the
Prospectus, and the Company has no reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company, except as described in or
contemplated by the Prospectus.
(w) BROKERS. Other than as contemplated by this Agreement, there
is no broker, finder or other party that is entitled to receive from the
Company any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(x) INTERNAL ACCOUNTING CONTROLS. The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the
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recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) DISTRIBUTION OF OFFERING MATERIALS. The Company has not
distributed and will not distribute prior to the later of (i) the First
Closing Date or the Option Closing Date, as the case may be, and (ii) the
completion of the distribution of the Shares, any offering material in
connection with the offering and sale of the Shares other than any
Preliminary Prospectus, the Prospectus, the Registration Statement and
other materials, if any, permitted by the Securities Act.
(z) PAYMENT OR RECIPIENT OF FUNDS. Except as set forth in the
Prospectus, neither the Company nor, to the Company's knowledge, any
employee or agent of the Company has made any payment of funds of the
Company or received or retained any funds in violation of any law, Rule or
regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(aa) INVESTMENT COMPANY. The Company is not an "investment company"
or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
(bb) ENVIRONMENTAL LAWS. The Company is in compliance with all
federal, state, local and foreign laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
-------------
Laws"). The Company has received no notice from any governmental authority
----
of any claim under any Environmental Laws. No property that is owned,
leased or occupied by the Company has been designated as a Superfund site
pursuant to the Comprehensive Response, Compensation and Liability Act of
1980, as amended (420 U.S.C. (S) 9601 et seq.), or otherwise designated as
------
a contaminated site under applicable state or local laws.
(cc) PERMITS. The Company has such permits, licenses, franchises
and authorizations of governmental or regulatory authorities ("permits"),
-------
including, without limitation, under any applicable Environmental Laws, as
are necessary to own, lease and operate its property and to conduct its
business. The Company has fulfilled and performed all of its material
obligations with respect to such permits and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such permit, and, except as described in the
Prospectus, such permits contain no restrictions that are materially
burdensome to the Company.
(dd) EMPLOYMENT MATTERS. The Company has not violated any federal
or state law relating to discrimination in the hiring, promotion or pay of
employees nor any applicable federal or state wages and hours laws, nor any
provisions of ERISA or the rules and regulations promulgated thereunder,
which in each case might result in any material adverse change in the
business, prospects, financial condition or results of operation of the
Company.
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(ee) 1934 ACT REGISTRATION. The Company has filed a registration
statement pursuant to Section 12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), which registration statement has been or
------------
will be declared effective simultaneously with the effectiveness of the
Registration Statement.
(ff) NASDAQ LISTING. The Common Stock has been approved for
quotation on the Nasdaq National Market, subject to official notice of
issuance.
(gg) CERTIFICATES. Each certificate signed by any officer of the
Company and delivered to the Underwriters or counsel for the Underwriters
pursuant to this Agreement or in connection with the offering contemplated
hereby shall be deemed to be a representation and warranty of the Company
as to the matters covered thereby.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder, severally and not jointly, represents and warrants to, and
agrees with, the several Underwriters that:
(a) VALID AND MARKETABLE TITLE. Such Selling Shareholder now has,
and on the Closing Dates will have, valid and marketable title to the
Shares to be sold by such Selling Shareholder, free and clear of any lien,
claim, security interest or other encumbrance, including, without
limitation, any restriction on transfer, and has full right, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement (each as hereinafter defined), and each of the several
Underwriters will acquire valid and marketable title to all of the Shares
being sold to the Underwriters by such Selling Shareholder, free and clear
of any liens, encumbrances, equities claims, restrictions on transfer or
other defects whatsoever.
(b) AUTHORITY. Such Selling Shareholder now has, and on the
Closing Dates will have, upon delivery of and payment for each of the
Shares hereunder, full right, power and authority, and shall have obtained
any approval required by law, to sell, transfer, assign and deliver the
Shares being sold by such Selling Shareholder hereunder.
(c) MARKET STAND-OFF. Such Selling Shareholder has executed and
delivered to the Representatives a lock-up agreement in substantially the
form attached hereto as Schedule C (the "Lock-Up Agreement"), providing
---------- -----------------
that, with certain limited exceptions specified therein, and as provided in
more detail therein, for a period of one hundred eighty (180) days after
the effective date of the Registration Statement, without the consent of
SoundView, such Selling Shareholder will not offer to sell, sell, contract
to sell or otherwise dispose of any shares of Common Stock, or securities
convertible into or exchangeable for shares of Common Stock, including,
without limitation, shares of Common Stock which may be deemed to be
beneficially owned by such Selling Shareholders in accordance with the
Rules and Regulations, except for the Shares being sold hereunder.
(d) POWER OF ATTORNEY. Such Selling Shareholder has duly executed
and delivered a power of attorney, in substantially the form heretofore
delivered to the Representatives (the "Power of Attorney"), appointing Alex
-----------------
Chi-Ming Hui and Patrick B. Brennan, and each of them, as attorney-in-fact
(the "Attorneys-in-Fact") with authority to execute
-----------------
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and deliver this Agreement on behalf of such Selling Shareholder, to
authorize the delivery of the Shares to be sold by such Selling Shareholder
hereunder and otherwise to act on behalf of such Selling Shareholder in
connection with the transactions contemplated by this Agreement.
(e) CUSTODY AGREEMENT. Such Selling Shareholder has duly executed
and delivered a custody agreement, in substantially the form heretofore
delivered to the Representatives (the "Custody Agreement"), with Boston
-----------------
EquiServe, L.P. as custodian (the "Custodian"), pursuant to which
---------
certificates in negotiable form for the Shares to be sold by such Selling
Shareholder hereunder have been placed in custody for delivery under this
Agreement.
(f) BINDING OBLIGATIONS. Such Selling Shareholder has, by
execution and delivery of each of this Agreement, the Power of Attorney,
the Custody Agreement and the Lock-Up Agreement, created valid and binding
obligations of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with their respective terms, except to the extent
that rights to indemnity hereunder may be limited by federal or state
securities laws or the public policy underlying such laws.
(g) COMPLIANCE WITH OTHER INSTRUMENTS. The performance of this
Agreement, the Custody Agreement and the Power of Attorney, and the
consummation of the transactions contemplated hereby and thereby, will not
result in a breach or violation by such Selling Shareholder of any of the
terms or provisions of, or constitute a default by such Selling Shareholder
under, (i) any indenture, mortgage, deed of trust, trust (constructive or
other), loan agreement, lease, franchise, license or other agreement or
instrument to which such Selling Shareholder is a party or by which such
Selling Shareholder or any of its properties is bound, (ii) any judgment of
any court or governmental agency or body applicable to such Selling
Shareholder or any of its properties, or any statute, decree, order, Rule
or regulation of any court or governmental agency or body applicable to
such Selling Shareholder or any of its properties, or (iii) if such Selling
Shareholder is other than a natural person, any provisions of the charter,
bylaws or other organizational documents of such Selling Shareholder.
(h) NO REVOCATION. Each Selling Shareholder agrees that (i) the
Shares represented by the certificates held in custody under the Custody
Agreement are for the benefit of and coupled with and subject to the
interests of the Underwriters and the Company hereunder, (ii) the
arrangement for such custody and the appointment of the Attorneys-in-Fact
are irrevocable, (iii) that the obligations of such Selling Shareholder
hereunder shall not be terminated by operation of law, whether by the death
or incapacity, liquidation or distribution of such Selling Shareholder, or
any other event, and (iv) if such Selling Shareholder should die or become
incapacitated or is liquidated or dissolved or any other event occurs,
before the delivery of the Shares hereunder, certificates for the Shares to
be sold by such Selling Shareholder shall be delivered on behalf of such
Selling Shareholder in accordance with the terms and conditions of this
Agreement and the Custody Agreement, and action taken by the Attorneys-in-
Fact or any of them under the Power of Attorney shall be as valid as if
such death, incapacity, liquidation or dissolution or other event had not
occurred, whether or not the Custodian, the Attorneys-in-Fact or any of
them shall have notice of such death, incapacity, liquidation or
dissolution or other event.
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(i) NO STABILIZATION OR MANIPULATION. Such Selling Shareholder has
not taken, and will not take, directly or indirectly, any action designed
to, or which might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares pursuant to the distribution
contemplated by this Agreement, and, other than as permitted by the
Securities Act, the Selling Shareholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(j) GOVERNMENTAL CONSENTS. The execution, delivery and performance
of this Agreement by such Selling Shareholder, compliance by such Selling
Shareholder with all the provisions hereof and the consummation of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
Securities Act or by the NASD.
(k) BENEFICIAL OWNERSHIP. The information set forth under the
heading "Principal and Selling Shareholders" in the Prospectus which
specifically relates to such Selling Shareholder does not, and will not on
the Closing Dates, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of circumstances under which they
were made, not misleading, and such Selling Shareholder has agreed to
immediately notify the Company if, at any time during the period when a
Prospectus is required by law to be delivered in connection with sales of
Common Stock by an Underwriter or a dealer, there is any change in such
information.
(l) ORGANIZATION AND GOOD STANDING. Such Selling Shareholder, if
other than a natural person, has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
organization as the type of entity it purports to be.
(m) NO PREEMPTIVE OR OTHER RIGHTS. Such Selling Shareholder does
not have, or has waived prior to the date hereof, any preemptive right, co-
sale right or right of first refusal or other similar right to purchase any
of the Shares that are to be sold by the Company or any of the other
Selling Shareholders to the Underwriters pursuant to this Agreement. Such
Selling Shareholder does not have, or has waived prior to the date hereof,
any registration right or other similar right to participate in the
offering made by the Prospectus, other than such rights of participation as
have been satisfied by the participation of such Selling Shareholder in the
transactions to which this Agreement relates in accordance with the terms
of this Agreement. Such Selling Shareholder does not own any warrants,
options or similar rights to acquire, and does not have any right or
arrangement to acquire, any capital stock, rights, warrants, options or
other securities from the Company, other than those described in the
Registration Statement and the Prospectus.
5. PURCHASE AND SALE OF THE SHARES. The Company and the Selling
Shareholders agree, severally and not jointly, to sell to the Underwriters the
Firm Shares, with the number of shares to be sold by the Company and each
Selling Shareholder being the number of Shares set opposite his, her or its name
in Schedule B attached hereto, and on the basis of the representations,
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warranties, covenants and agreements herein contained, but upon the terms and
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subject to the conditions herein set forth, the Underwriters agree, severally
and not jointly, to purchase the Firm Shares from the Company and the Selling
Shareholders, with the number of shares of Firm Shares to be purchased by each
Underwriter being set opposite its name in Schedule A attached hereto, subject
----------
to adjustment in accordance with Section 14 hereof. The number of Shares to be
purchased by each Underwriter from each Selling Shareholder hereunder shall bear
the same proportion to the total number of Shares to be purchased by such
Underwriter hereunder as the number of Shares being sold by each Selling
Shareholder bears to the total number of Shares being sold by all of the Selling
Shareholders, subject to adjustment by the Representatives to eliminate
fractions.
(a) PURCHASE PRICE. The purchase price per Share to be paid by the
Underwriters to the Company and the Selling Shareholders will be $
---------
per share (the "Purchase Price").
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(b) CLOSING. The Company and the Selling Shareholders will deliver
the Firm Shares to the Representatives for the respective accounts of the
several Underwriters in the form of definitive certificates, issued in such
names and in such denominations as the Representatives may direct by notice
in writing to the Company and the Selling Shareholders given at or prior to
10:00 a.m., California time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received,
in the names of the respective Underwriters or in such other names as
SoundView may designate (solely for the purpose of administrative
convenience) and in such denominations as SoundView may determine, against
payment of the aggregate Purchase Price therefor in Federal or other
immediately available funds, by certified or official bank check or checks
payable to the order of the Company and the Custodian or by wire transfer
to accounts designated by the Company and the Custodian, all at the offices
of Morrison & Foerster LLP, 755 Page Mill Road, Palo Alto, California
94304. Such delivery and closing shall occur at 7:00 a.m., California time,
on the fourth business day after the date of this Agreement (the "First
-----
Closing Date"). The First Closing Date and the location of delivery of, and
------------
the form of payment for, the Firm Shares may be varied by agreement between
the Company and SoundView. The First Closing Date may be postponed pursuant
to the provisions of Section 14.
(c) CERTIFICATES FOR THE SHARES. The Company and the Selling
Shareholders shall make the certificates for the Firm Shares available to
the Representatives for examination on behalf of the Underwriters not later
than 12:00 p.m., New York time, on the business day preceding the First
Closing Date at such location within New York, New York as may be
designated by the Representatives. If the Representatives so elect,
delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
(d) PAYMENT ON BEHALF OF UNDERWRITERS. It is understood that the
Representatives, individually and not as Representatives of the several
Underwriters, may (but shall not be obligated to) make payment to the
Company or the Selling Shareholders on behalf of any Underwriter or
Underwriters for the Shares to be purchased by such Underwriter or
Underwriters. Any such payment by the Representatives shall not relieve
such Underwriter or Underwriters from any of its or their other obligations
hereunder.
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(e) INITIAL PUBLIC OFFERING. The several Underwriters agree to
make an initial public offering of the Firm Shares at the initial public
offering price of $ per share as soon after the effectiveness
--------------
of the Registration Statement as, in their judgment, is advisable. The
Representatives shall promptly advise the Company and the Selling
Shareholders of the making of the initial public offering. After the
initial public offering, the several Underwriters may, in their discretion,
vary the public offering price.
(f) OVER-ALLOTMENT OPTION.
(i) OPTION SHARES. For the purpose of covering any over-
allotments in connection with the distribution and sale of the Firm Shares
as contemplated by the Prospectus, the Company and the Selling Shareholders
hereby grant to the Underwriters an option (the "Option") to purchase,
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severally and not jointly, up to the aggregate number of shares of Option
Shares set forth opposite each of the names of the Company and such Selling
Shareholders on Schedule B attached hereto, for an aggregate of up to
----------
375,000 shares of Common Stock. The price per share to be paid for the
Option Shares shall be the Purchase Price. The Option may be exercised as
to all or any part of the Option Shares at any time, and from time to time,
not more than thirty (30) days subsequent to the effective date of this
Agreement. No Option Shares shall be sold and delivered unless the Firm
Shares previously have been, or simultaneously are, sold and delivered.
The right to purchase the Option Shares or any portion thereof may be
surrendered and terminated at any time upon notice by the Underwriters to
the Company.
(ii) EXERCISE OF OPTION. The Option may be exercised by the
Underwriters by giving written notice from SoundView to the Company and the
Selling Shareholders setting forth the number of shares of the Option
Shares to be purchased by them and the date and time for delivery of and
payment for the Option Shares (the "Option Closing Date," and, collectively
-------------------
with the First Closing Date, the "Closing Dates"). The Option Closing Date
-------------
shall not be earlier than the First Closing Date and shall in no event be
earlier than two (2) business days nor later than ten (10) business days
after written notice is given. All purchases of Option Shares from the
Selling Shareholders and the Company shall be made on a pro rata basis in
accordance with the allocations set forth on Schedule B attached hereto.
----------
Option Shares shall be purchased for the account of each Underwriter in the
same proportion as the number of Firm Shares set forth opposite such
Underwriter's name on Schedule A attached hereto bears to the total number
----------
of Firm Shares (subject to adjustment by the Underwriters to eliminate odd
lots). Upon exercise of the Option by the Underwriters, the Selling
Shareholders agree to sell to the Underwriters the number of Option Shares
set forth in the written notice of exercise and the Underwriters agree,
severally and not jointly and upon the terms and subject to the conditions
herein set forth, to purchase the number of such shares determined as
aforesaid.
(iii) OPTION CLOSING. The Selling Shareholders will deliver
the Option Shares to the Underwriters (in the form of definitive certificates,
issued in such names and in such denominations as the Representatives may direct
by notice in writing to the Company and the Selling Shareholders given at or
prior to 10:00 a.m, California time, on the second full business day preceding
the Option Closing Date or, if no such direction is received, in the names of
the respective Underwriters or in such other names as SoundView may designate
(solely for the
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purpose of administrative convenience) and in such denominations as SoundView
may determine, against payment of the aggregate Purchase Price therefor in
Federal or other immediately available funds, by certified or official bank
check or checks payable to the order of the Company and/or the Custodian or by
wire transfer to accounts designated by the Company and the Custodian, all at
the offices of Morrison & Foerster LLP, 755 Page Mill Road, Palo Alto,
California 94304. The Company the Selling Shareholders shall make the
certificates for the Option Shares available to the Underwriters for examination
not later than 12:00 p.m., New York time, on the business day preceding the
Option Closing Date, at such location within New York, New York as may be
designated by the Representatives. If the Representatives so elect, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives. The
Option Closing Date and the location of delivery of, and the form of payment
for, the Option Shares may be varied by agreement between the Company and
SoundView. The Option Closing Date may be postponed pursuant to the provisions
of Section 14.
6. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters that:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Company will (i)
if the Company and the Representatives have determined not to proceed
pursuant to Rule 430A, use its best efforts to cause the Registration
Statement to become effective, (ii) if the Company and the Representatives
have determined to proceed pursuant to Rule 430A, use its best efforts to
comply with the provisions of and make all requisite filings with the
Commission pursuant to Rule 430A and Rule 424, (iii) if the Company and the
Representatives have determined to deliver Prospectuses pursuant to Rule
434, to use its best efforts to comply with all the applicable provisions
thereof, and (iv) use its best efforts to cause any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations
as may be required subsequent to the date the Registration Statement is
declared effective to become effective as promptly as possible. The Company
will advise the Representatives promptly as to the time at which the
Registration Statement becomes effective, will advise the Representatives
promptly of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose, and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible the
lifting thereof, if issued. The Company will advise the Representatives
promptly of the receipt of any comments of the Commission or any request by
the Commission for any amendment of or supplement to the Registration
Statement or the Prospectus or for additional information and will not at
any time file any amendment to the Registration Statement or supplement to
the Prospectus which shall not previously have been submitted to the
Representatives a reasonable time prior to the proposed filing thereof or
to which the Representatives shall reasonably object in writing or which is
not in compliance with the Securities Act and the Rules and Regulations.
(b) AMENDMENTS AND REPORTS. The Company will prepare and file with
the Commission, promptly upon the request of the Representatives, any
amendments or supplements to the Registration Statement or the Prospectus
which in the opinion of the Representatives may be necessary to enable the
several Underwriters to continue the distribution of the Shares and will
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<PAGE>
use its best efforts to cause the same to become effective as promptly as
possible. The Company will promptly file all reports and any definitive
proxy or information statements required to be filed with the Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act subsequent to the
date of the Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Shares.
(c) PROSPECTUS. If, at any time after the effective date of the
Registration Statement when a prospectus relating to the Shares is required
to be delivered under the Securities Act, any event relating to or
affecting the Company occurs as a result of which the Prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Securities Act, the Company will promptly
notify the Representatives thereof and will prepare an amended or
supplemented prospectus which will correct such statement or omission.
(d) COPIES OF REGISTRATION STATEMENT AND PROSPECTUS. The Company
will deliver to the Representatives, at or before the Closing Dates,
manually signed copies of the Registration Statement, and each amendment
thereto, including all financial statements and exhibits thereto, and will
deliver to the Representatives such number of copies of the Registration
Statement, including such financial statements but without exhibits, and
all amendments thereto, as the Representatives may reasonably request. The
Company will deliver or mail to or upon the order of the Representatives,
from time to time until the effective date of the Registration Statement,
as many copies of the Preliminary Prospectus as the Representatives may
reasonably request. The Company will deliver or mail to or upon the order
of the Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a
prospectus relating to the Shares is required under the Securities Act, as
many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request.
(e) SECTION 11(A) EARNINGS STATEMENT. The Company will make
generally available to its shareholders as soon as practicable, but not
later than fifteen (15) months after the effective date of the Registration
Statement, an earnings statement which will be in reasonable detail (but
which need not be audited) and which will comply with Section 11(a) of the
Securities Act, covering a period of at least twelve (12) months beginning
after the "effective date" (as defined in Rule 158 under the Securities
Act) of the Registration Statement.
(f) BLUE SKY QUALIFICATION. The Company will cooperate with the
Representatives to enable the Shares to be registered or qualified for
offering and sale by the Underwriters and by dealers under the securities
laws of such jurisdictions as the Representatives may reasonably request.
(g) REPORTS TO SHAREHOLDERS. The Company will furnish to its
shareholders annual reports containing financial statements certified by
independent public accountants and will
15
<PAGE>
furnish or make available to its shareholders quarterly summary financial
information in reasonable detail, which may be unaudited.
(h) NASDAQ NATIONAL MARKET. The Company will use its best efforts
to maintain the listing of the Common Stock on the Nasdaq National Market
for a period of five (5) years after the effective date of the Registration
Statement.
(i) TRANSFER AGENT AND REGISTRAR. The Company will maintain a
transfer agent and registrar for its Common Stock.
(j) REVIEW OF AUDITORS. Prior to filing its Quarterly Reports on
Form 10-Q under the Exchange Act, the Company will have its independent
accountants perform a limited review of its quarterly numbers.
(k) MARKET STAND-OFF. The Company will not offer, sell, assign,
transfer, encumber, contract to sell, grant an option to purchase or
otherwise dispose of any shares of Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock (including, without
limitation, Common Stock which may be deemed to be beneficially owned by
the Company in accordance with the Rules and Regulations) during the 180
days following the effective date of the Registration Statement, other than
the Company's sale of Common Stock hereunder and the Company's issuance of
Common Stock upon the exercise of stock options which are presently
outstanding and described in the Prospectus. In addition, during the 180
days following the effective date of the Registration Statement, the
Company will not release any officer, director or securityholder of the
Company from their obligations under any similar agreement with the Company
not to sell, transfer or dispose of securities of the Company for the 180-
day period following the effective date of the Registration Statement.
(l) USE OF PROCEEDS. The Company will apply the net proceeds from
the sale of the Shares as set forth in the description under the heading
"Use of Proceeds" in the Prospectus, which description complies in all
respects with the requirements of Item 504 of Regulation S-K under the
Securities Act.
(m) SEC CORRESPONDENCE. The Company will supply the
Representatives with copies of all correspondence to and from, and all
documents issued to and by, the Commission in connection with the
registration of the Shares under the Securities Act.
(n) FINANCIAL STATEMENTS. Prior to the Closing Dates the Company
will furnish to the Representatives, as soon as they have been prepared,
copies of any unaudited interim financial statements of the Company for any
periods subsequent to the periods covered by the financial statements
appearing in the Registration Statement and the Prospectus.
(o) PRESS RELEASES. Prior to the Closing Dates and during the
period when a prospectus relating to the Shares is required to be delivered
under the Securities Act, the Company will issue no press release or other
communications directly or indirectly and hold no press conference with
respect to the Company or its financial condition, results of operation,
business, prospects, assets or liabilities, or the offering of the Shares,
without the prior consent of
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<PAGE>
the Representatives, which consent shall not be unreasonably withheld. For
a period of twelve (12) months following the Closing Date, the Company will
use its best efforts to provide to the Representatives copies of each press
release or other public communications with respect to the financial
condition, results of operations, business, prospects, assets or
liabilities of the Company at least twenty-four (24) hours prior to the
public issuance thereof or such longer advance period as may reasonably be
practicable.
(p) REPORTS TO REPRESENTATIVES. During the period of five (5)
years from the date hereof, the Company will furnish to the
Representatives, and, upon request of the Representatives, to each of the
Underwriters (i) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of income,
shareholder's equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants, (ii) as soon as
practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Report on
Form 8-K or other report filed by the Company with the Commission, Nasdaq
or any securities exchange, (iii) as soon as available, copies of any
report or communication of the Company mailed generally to holders of its
Common Stock, and (iv) such other information concerning the Company as the
Representatives may reasonably request from time to time.
(q) FORM S-8. The Company will not file any registration
statements on Form S-8 covering shares of Common Stock issuable under its
stock option plans for a period of ninety (90) days following the
effectiveness of the Registration Statement.
7. PAYMENT OF EXPENSES.
(a) EXPENSES OF THE COMPANY. The Company will pay, either directly
or by reimbursement, all costs, fees and expenses incurred in connection
with expenses incident to the performance of the obligations of the Company
and of the Selling Shareholders under this Agreement and in connection with
the transactions contemplated hereby, including, but not limited to, (i)
all expenses and taxes incident to the issuance and delivery of the Shares
to the Representatives, (ii) all expenses incident to the registration of
the Shares under the Securities Act, (iii) all costs of preparing stock
certificates, including printing and engraving costs, (iv) all fees and
expenses of the registrar and transfer agent of the Shares, (v) all
necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Shares to the Underwriters, (vi) all fees and
expenses of the Company's counsel and the Company's independent
accountants, (vii) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the
Registration Statement, each Preliminary Prospectus and the Prospectus,
including all exhibits and financial statements, and all amendments and
supplements provided for herein, the Powers of Attorney, the Custody
Agreement, the Underwriters' Questionnaire, the Blue Sky memoranda and this
Agreement, (viii) all filing fees and attorneys' fees and expenses incurred
by the Company or the Underwriters in connection with exemptions from
qualifying or registering (or obtaining qualification or registration of)
all or any part of the Shares for offer and sale and determination of its
eligibility for investment under the Blue Sky or other securities laws of
such jurisdictions as the Representatives may designate, (ix) all fees and
expenses paid or incurred in connection with filings made with the NASD,
(x) all fees and expense s associated with
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<PAGE>
the listing of the Shares and the Common Stock on the Nasdaq National
Market, and (xi) all other costs and expenses incident to the performance
of their obligations hereunder which are not otherwise specifically
provided for in this Section.
(b) EXPENSES OF THE SELLING SHAREHOLDERS. Each Selling Shareholder
will pay, either directly or by reimbursement, all fees and expenses
incident to the performance of such Selling Shareholder's obligations under
this Agreement which are not otherwise specifically provided for herein,
including, but not limited to, any fees and expenses of counsel for such
Selling Shareholder, such Selling Shareholder's pro rata share of fees and
expenses of the Attorneys-in-Fact and the Custodian and all expenses and
taxes incident to the sale and delivery of the Shares to be sold by such
Selling Shareholder to the Underwriters hereunder.
(c) REIMBURSEMENT OF UNDERWRITERS BY THE COMPANY. In addition to
its other obligations under Section 8(a) hereof, the Company agrees that,
as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon (i)
any statement or omission or any alleged statement or omission described in
Section 8(a) or Section 8(b), or (ii) any breach or inaccuracy in their
representations and warranties contained in this Agreement, the Company
will reimburse each Underwriter on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligation to reimburse
each Underwriter for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is
so held to have been improper, each Underwriter shall promptly return it to
the Company, together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of
the highest credit standing) listed from time to time in the Wall Street
Journal (the "Prime Rate"). Any such interim reimbursement payments which
----------
are not made to an Underwriter in a timely manner as provided below shall
bear interest at the Prime Rate from the due date for such reimbursement.
This expense reimbursement agreement will be in addition to any other
liability which the Company may otherwise have, but shall be subject to the
limitation on liability set forth in clause (i) of the first sentence of
Section 8(e). The request for reimbursement will be sent to the Company.
(d) REIMBURSEMENT OF THE UNDERWRITERS BY THE SELLING SHAREHOLDERS.
Each Selling Shareholder, severally and not jointly, agrees that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission or any alleged statement or omission described in Section 8(b)
hereof, it will reimburse each Underwriter on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding notwithstanding the absence of a judicial determination
as to the propriety and enforceability of the Selling Shareholder's
obligation to reimburse each Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Selling Shareholder, together with
interest, compounded daily, determined on the basis of
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<PAGE>
the Prime Rate. Any such interim reimbursement payments which are not made
to an Underwriter in a timely manner as provided below shall bear interest
at the Prime Rate from the due date for such reimbursement. This expense
reimbursement will be in addition to any other liability which any Selling
Shareholder may otherwise have, but shall be subject to the provisions of
Section 8(e).
(e) ARBITRATION. It is agreed that any dispute or controversy
arising out of the operation of the interim reimbursement arrangements set
forth in Section 7(c) or Section 7(d) including the amounts of any
requested reimbursement payments and the method of determining such
amounts, shall be settled by arbitration conducted under the provisions of
the Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a written demand
for arbitration or written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in
such demand or notice, then the party responding to said demand or notice
is authorized to do so. Such an arbitration would be limited to the
operation of the interim reimbursement provisions contained in Section 7(c)
or Section 7(d) and would not resolve the ultimate propriety or
enforceability of the obligation to reimburse expenses which is created by
the provisions of Section 8.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Underwriter, each person, if any, who
controls such Underwriter within the meaning of the Securities Act and the
respective officers, directors, partners, employees, representatives and
agents of each of such Underwriter and controlling person (collectively,
the "Underwriter Indemnified Parties" and, each, an "Underwriter
Indemnified Party") against any losses, claims, damages, liabilities or
expenses (including the reasonable cost of investigating and defending
against any claims therefor and fees of counsel incurred in connection
therewith), joint or several, which may be based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company or the
Selling Shareholders contained herein, or (ii) the Securities Act, the
Exchange Act, or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that any
Preliminary Prospectus, the Registration Statement or the Prospectus (or
any Preliminary Prospectus, the Registration Statement or the Prospectus as
from time to time amended or supplemented) includes or allegedly includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon,
and in conformity with, written information furnished to the Company by any
Underwriter, directly or through the Representatives, specifically for use
in the preparation thereof. The Company will be entitled to participate at
its own expense in the defense or, if it so elects, to assume the defense
of any suit brought to enforce any such liability, but, if the Company
elects to assume the defense, such defense shall be conducted by counsel
chosen by it. In the event the Company elects to assume the defense of any
such suit and retain such counsel, any Underwriter Indemnified Parties,
defendant or defendants in the suit, may retain additional counsel but
shall bear the fees and expenses of such counsel unless (i) the Company
shall have specifically authorized the retaining of
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<PAGE>
such counsel, or (ii) the parties to such suit include any such Underwriter
Indemnified Parties, and the Company and such Underwriter Indemnified
Parties have been advised by counsel to the Underwriters that one or more
legal defenses may be available to it or them which may not be available to
the Company, in which case the Company shall not be entitled to assume the
defense of such suit, notwithstanding its obligation to bear the fees and
expenses of such counsel. This indemnity agreement is not exclusive and
will be in addition to any liability which the Company might otherwise have
and shall not limit any rights or remedies which may otherwise be available
at law or in equity to each Underwriter Indemnified Party.
(b) INDEMNIFICATION BY THE SELLING SHAREHOLDERS. Each Selling
Shareholder jointly and severally agrees to indemnify and hold harmless
each Underwriter Indemnified Party against any losses, claims, damages,
liabilities or expenses (including, unless such Selling Shareholder elects
to assume the defense, the reasonable cost of investigating and defending
against any claims therefor and fees of counsel incurred in connection
therewith), joint or several, which may be based upon (i) any breach of any
representation, warranty, agreement or covenant of any Selling Shareholder
herein contained, or (ii) the Securities Act, the Exchange Act, or any
other federal, state, local or foreign statute or regulation, or at common
law, on the ground or alleged ground that any Preliminary Prospectus, the
Registration Statement or the Prospectus (or any Preliminary Prospectus,
the Registration Statement or the Prospectus, as from time to time amended
and supplemented) includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, unless such statement or omission was
made in reliance upon, and in conformity with, written information
furnished to the Company by any Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof; provided,
--------
however, that the indemnification obligation arising under this Section
-------
8(b) shall apply only to the extent that such loss, claim, damage,
liability or expense is caused by or related to an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with information relating to such Selling Shareholder
furnished in writing to the Company by or on behalf of such Selling
Shareholder expressly for use in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendments or supplements
thereto. Such Selling Shareholder shall be entitled to participate at his
own expense in the defense, or, if he so elects, to assume the defense of
any suit brought to enforce any such liability, but, if such Selling
Shareholder elects to assume the defense, such defense shall be conducted
by counsel chosen by him. In the event that any Selling Shareholder elects
to assume the defense of any such suit and retain such counsel, the
Underwriter Indemnified Parties, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such
counsel unless (i) such Selling Shareholder shall have specifically
authorized the retaining of such counsel, or (ii) the parties to such suit
include such Underwriter Indemnified Parties and such Selling Shareholder
and such Underwriter Indemnified Parties have been advised by counsel to
the Underwriters that one or more legal defenses may be available to it or
them which may not be available to such Selling Shareholder, in which case
such Selling Shareholder shall not be entitled to assume the defense of
such suit notwithstanding its obligation to bear the fees and expenses of
such counsel. Subject to Section 8(e) below, this indemnity agreement is
not exclusive and will be in addition to any liability which such Selling
Shareholder might otherwise have and shall not limit any rights or remedies
which may otherwise be available at law or in
20
<PAGE>
equity to each Underwriter Indemnified Party. The Company and the Selling
Shareholders may agree, as among themselves and without limiting the rights
of the Underwriters under this Agreement, as to their respective amounts of
such liability for which they each shall be responsible.
(c) INDEMNIFICATION BY UNDERWRITERS. Each Underwriter severally
agrees to indemnify and hold harmless the Company, each of its directors,
each of its officers who have signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the
Securities Act (collectively, the "Company Indemnified Parties") and each
Selling Shareholder and each person, if any, who controls a Selling
Shareholder within the meaning of the Securities Act (collectively, the
"Shareholder Indemnified Parties") against any losses, claims, damages,
liabilities or expenses (including, unless the Underwriter or Underwriters
elect to assume the defense, the reasonable cost of investigating and
defending against any claims therefor and fees of counsel incurred in
connection therewith), joint or several, which arise out of or are based in
whole or in part upon the Securities Act, the Exchange Act or any other
federal, state, local or foreign statute or regulation, or at common law,
on the ground or alleged ground that any Preliminary Prospectus, the
Registration Statement or the Prospectus (or any Preliminary Prospectus,
the Registration Statement or the Prospectus, as from time to time amended
and supplemented) includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading, but only insofar as any such
statement or omission was made in reliance upon, and in conformity with,
written information furnished to the Company by such Underwriter, directly
or through the Representatives, specifically for use in the preparation
thereof, and the parties acknowledge and agree that the only information
furnished by the Underwriters to the Company for inclusion in any
Preliminary Prospectus, the Registration Statement or the Prospectus, as
from time to time amended or supplemented, is the information set forth in
the last paragraph of the front cover page (insofar as such information
relates to the Underwriters), the information on page 2 concerning
stabilization and over-allotment by the Underwriters, and certain
information under the caption "Underwriting"; provided, however, that in no
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case is such Underwriter to be liable with respect to any claims made
against any Company Indemnified Party or Shareholder Indemnified Party
against whom the action is brought unless such Company Indemnified Party or
Shareholder Indemnified Party shall have notified such Underwriter in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon the Company Indemnified Party or Shareholder Indemnified Party,
but failure to notify such Underwriter of such claim shall not relieve it
from any liability which it may have to any Company Indemnified Party or
Shareholder Indemnified Party otherwise than on account of its indemnity
agreement contained in this paragraph. Such Underwriter shall be entitled
to participate at its own expense in the defense, or, if it so elects, to
assume the defense of any suit brought to enforce any such liability, but,
if such Underwriter elects to assume the defense, such defense shall be
conducted by counsel chosen by it. In the event that any Underwriter elects
to assume the defense of any such suit and retain such counsel, the Company
Indemnified Parties or Shareholder Indemnified Parties and any other
Underwriter or Underwriters or controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, respectively. The Underwriter against whom
indemnity may be sought shall not be liable to
21
<PAGE>
indemnify any person for any settlement of any such claim effected without
such Underwriter's consent. This indemnity agreement is not exclusive and
will be in addition to any liability which such Underwriter might otherwise
have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to any Company Indemnified Party or
Shareholder Indemnified Party.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 8 is unavailable or insufficient to hold harmless an indemnified
party under subsection (a) or (b) or (c) above in respect of any losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
referred to herein, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders on the one
hand, and the Underwriters on the other hand, from the offering of the
Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party
shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the Selling
Shareholders on the one hand, and the Underwriters on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Shareholders on the one
hand, and the Underwriters on the other hand, shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Shareholders or
the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Shareholders and the Underwriters agree
that it would not be just and equitable if contribution were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above. The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses (or actions in respect thereof) referred
to above shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating,
defending, settling or compromising any such claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations to contribute are several in proportion to their respective
underwriting obligations and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f)
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of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) LIMITATION OF LIABILITY. Notwithstanding any provision herein
to the contrary, (i) the indemnity agreements contained in Section 8(a) and
Section 8(b) with respect to any Preliminary Prospectus and the
reimbursement provisions of Section 7(c) and 7(d) shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter)
from whom the person asserting any such loss, claim, damage, liability or
expense purchased the Shares which are the subject thereof if at or prior
to the written confirmation of the sale of such Shares a copy of the
Prospectus (or the Prospectus as amended or supplemented) was not sent or
delivered to such person (excluding the documents incorporated therein by
reference), the untrue statement or omission of a material fact contained
in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented), and such failure to send or deliver
a copy of the Prospectus (or the Prospectus as amended or supplemented) was
not the result of the Company's non-compliance with the provisions of
Section 6(d), (ii) the liability (including any liability for
indemnification under Section 8(b), any liability for breach of any
representation, warranty or agreement contained herein, and any liability
for reimbursement pursuant to Section 7(d)) of each Selling Shareholder
shall not exceed the Purchase Price of the Shares sold by such Selling
Shareholder to the Underwriters, and (iii) such liability shall be further
limited for each Selling Shareholder such that such Selling Shareholder's
liability, in proportion to the aggregate liability of all Selling
Shareholders as a group, shall not exceed the proportion that the number of
Shares sold by such Selling Shareholder bears to the aggregate number of
Shares sold by all Selling Shareholders hereunder; provided, however, that
-------- -------
the limitation on liability set forth in the foregoing clause (iii) shall
not apply with respect to any particular Selling Shareholder if such
liability is attributable to such Selling Shareholder, as set forth in the
first sentence of Section 8(b); and, provided, further, that nothing in the
-------- -------
foregoing clause (iii) shall require the Underwriters to seek
indemnification from any other Selling Shareholder(s) as a condition of
their being entitled to indemnification from any particular Selling
Shareholder. Notwithstanding anything to the contrary in this Agreement,
the Underwriters and their control persons shall not seek indemnification
pursuant to this Section 8 or reimbursement of expenses pursuant to Section
7 from the Selling Shareholders unless they shall have first reasonably
determined that the Company is unable or not required to fully satisfy the
indemnification and reimbursement obligations of the Selling Shareholders
pursuant to such Sections.
9. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company, the Selling Shareholders and the several
Underwriters, as set forth in this Agreement or made by them respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, the Selling
Shareholders, the Company or any of its officers or directors or any controlling
person, and shall survive delivery of and payment for the Shares.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations
of the several Underwriters hereunder shall be subject to the material accuracy,
at and (except as otherwise stated herein) as of the date hereof and at and as
of the Closing Dates, of the
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representations and warranties made herein by the Company and the Selling
Shareholders, to compliance at and as of the Closing Dates by the Company and
the Selling Shareholders with their covenants and agreements herein contained
and other provisions hereof to be satisfied at or prior to the Closing Dates,
and to the following additional conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose shall
have been initiated or, to the knowledge of the Company or the
Representatives, shall be threatened by the Commission, and any request for
additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Representatives. Any
filings of the Prospectus, or any supplement thereto, required pursuant to
Rule 424(b) or Rule 434 of the Rules and Regulations, shall have been made
in the manner and within the time period required by Rule 424(b) and Rule
434 of the Rules and Regulations, as the case may be.
(b) CHANGES. The Representatives shall have been reasonably
satisfied that there shall not have occurred any change prior to the
Closing Dates in the condition (financial or otherwise), properties,
business, prospects, net worth or results of operations of the Company, or
any change in the capital stock, short-term or long-term debt of the
Company, such that (i) the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact
which, in the reasonable opinion of the Representatives, is material, or
omits to state a fact which, in the reasonable opinion of the
Representatives, is required to be stated therein or is necessary to make
the statements therein not misleading, or (ii) it is impracticable in the
reasonable judgment of the Representatives to proceed with the public
offering or to purchase the Shares as contemplated hereby.
(c) LITIGATION. The Representatives shall be satisfied that no
legal or governmental action, suit, proceeding or investigation affecting
the Company which is material and adverse to the Company or which affects
or may affect the Company's or the Selling Shareholders' ability to perform
their respective obligations under this Agreement shall have been
instituted or threatened, and there shall have occurred no material adverse
development in any existing such action, suit, proceeding or investigation.
(d) COMFORT LETTER. Prior to the execution of this Agreement, the
Representatives shall have received from Deloitte & Touche L.L.P.,
independent certified public accountants, a letter, dated the date hereof,
in form and substance reasonably satisfactory to the Underwriters.
(e) BRING-DOWN. The Representatives shall have received from
Deloitte & Touche L.L.P, independent certified public accountants, letters,
dated the Closing Dates, to the effect that such accountants reaffirm, as
of the Closing Dates, and as though made on the Closing Dates, the
statements made in the letter furnished by such accountants pursuant to
Section 10(d); provided, however, that the letter delivered on the First
-------- -------
Closing Date shall use a "cut-off date"
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not earlier than the date hereof, and the letter delivered on the Option
Closing Date shall use a "cut-off date" not more than five (5) business
days prior to such Option Closing Date.
(f) LEGAL OPINION OF COUNSEL FOR THE COMPANY. The Representatives
shall have received from Morrison & Foerster LLP, counsel for the Company
and the Selling Shareholders, an opinion, dated the Closing Dates, which
opinion shall be rendered to the Underwriters at the request of the Company
or one or more Selling Shareholders (and shall so state therein) to the
effect that:
(i) the Company has been duly incorporated, is validly
existing as corporation in good standing under the laws of its jurisdiction
of incorporation and has the corporate power and authority required to
carry on its business as described in the Prospectus and to own, lease and
operate its property;
(ii) the Company is duly qualified and is in good standing
as a foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Company;
(iii) the Company has no subsidiaries and does not control,
directly or indirectly, any corporation, partnership, association or other
business organization;
(iv) all of the outstanding shares of Common Stock
(including the Shares to be sold by the Selling Shareholders) have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights, except as disclosed in the
Prospectus;
(v) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement, will
have been validly issued and will be fully paid and non-assessable, and the
issuance of such shares is not subject to any preemptive or similar rights;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company and each Selling Shareholder and is a valid and
binding agreement of the Company and each Selling Shareholder enforceable
in accordance with its terms (except as rights to indemnity and
contribution hereunder may be limited by applicable law);
(vii) the authorized capital stock of the Company, including
the Common Stock, conforms as to legal matters to the description thereof
contained in the Prospectus;
(viii) the Registration Statement has become effective under
the Securities Act, no stop order suspending its effectiveness has been
issued and no proceedings for that purpose are, to the knowledge of such
counsel, pending before or contemplated by the Commission;
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(ix) the statements under the captions "Certain Transactions,"
"Shares Eligible for Future Sale" and "Description of Capital Stock" and
the statements in the third paragraph under the caption "Business--
Intellectual Property" in the Prospectus and Items 14 and 15 of Part II of
the Registration Statement insofar as such statements constitute a summary
of agreements, legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such agreements,
legal matters, documents and proceedings;
(x) the Company is not in violation of its Articles of
Incorporation or bylaws and, to such counsel's knowledge, the Company is
not in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument material to
the conduct of the business of the Company, to which the Company is a party
or by which it or its property is bound;
(xi) the execution, delivery and performance of this Agreement
by the Company and each Selling Shareholder, compliance by the Company and
each Selling Shareholder with all the provisions hereof and the
consummation of the transactions contemplated hereby will not require any
consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body (except as such may
be required under the Securities Act) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the Articles of Incorporation or bylaws of the Company, or any
agreement, indenture or other instrument known to such counsel to which the
Company is a party or by which the Company or its property is bound, or, to
such counsel's knowledge, violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to the Company or its
property;
(xii) to such counsel's knowledge, there is no legal or
governmental proceeding pending or threatened to which the Company is a
party or to which any of its property is subject which is required to be
described in the Registration Statement or the Prospectus and is not so
described, or of any contract or other document which is required to be
described in the Registration Statement or the Prospectus or is required to
be filed as an exhibit to the Registration Statement which is not described
or filed as required;
(xiii) the Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(xiv) to such counsel's knowledge, except otherwise set forth
in the Registration Statement, no holder of any security of the Company has
any right to require registration of shares of Common Stock or any other
security of the Company;
(xv) to such counsel's knowledge, except as otherwise set
forth in the Registration Statement or such as are not material to the
business, prospects, financial condition or results of operation of the
Company, the Company has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions except liens for taxes not yet
due and payable, to all property and assets described in the Registration
Statement as being owned by it;
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<PAGE>
(xvi) to such counsel's knowledge, all leases to which the
Company is a party are valid and binding and no default has occurred or is
continuing thereunder which might result in any material adverse change in
the business, prospects, financial condition or results of operation of the
Company, and the Company enjoys peaceful and undisturbed possession under
all such leases to which it is a party as lessee with such exceptions as do
not materially interfere with the use made by the Company;
(xvii) (A) the Registration Statement (including any
Registration Statement filed under Rule 462(b) under the Securities Act, if
any) and the Prospectus and any supplement or amendment thereto (except for
financial statements as to which no opinion need be expressed) comply as to
form in all material respects with the Securities Act, and (B) nothing has
come to the attention of such counsel which has caused it to believe that
(except for financial statements, as aforesaid) the Registration Statement
and the prospectus included therein at the time the Registration Statement
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, or that the Prospectus, as
amended or supplemented, if applicable (except for financial statements, as
aforesaid) contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(xviii) the Custody Agreement has been duly authorized,
executed and delivered by each Selling Shareholder and is a valid and
binding agreement of such Selling Shareholder enforceable in accordance
with its terms;
(xix) this Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Shareholder;
(xx) each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than any approval
imposed by the applicable state securities and Blue Sky laws) to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Shareholder in the manner provided in this Agreement and the Custody
Agreement;
(xxi) each Selling Shareholder has good and clear title to
the certificates for the Shares to be sold by such Selling Shareholder and,
upon delivery thereof, pursuant hereto and payment therefor, good and clear
title will pass to the Underwriters, severally, free of all restrictions on
transfer, liens, encumbrances, security interests and claims whatsoever;
and
(xxii) the Power of Attorney signed by each Selling
Shareholder appointing Alex Chi-Ming Hui and Patrick B. Brennan, or either
of them, as such Selling Shareholder's attorney-in-fact to the extent set
forth therein with regard to the transactions contemplated hereby has been
duly authorized, executed and delivered by or on behalf of each Selling
Shareholder and are valid and binding instruments of such Selling
Shareholder, and pursuant to such power of attorney, each of the Selling
Shareholders has authorized Alex Chi-Ming Hui and Patrick B. Brennan, or
either of them, to execute and deliver on their behalf
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<PAGE>
this Agreement and any other documents necessary or desirable in connection
with transactions contemplated hereby and to deliver the Shares to be sold
by them pursuant to this Agreement.
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or the State of California upon
opinions of local counsel, and as to questions of fact upon representations
or certificates of officers of the Company, the Selling Shareholders or
officers of the Selling Shareholders (when such Selling Shareholder is not
a natural person), and of government officials, in which case their opinion
is to state that they are so relying and that they have no knowledge of any
material misstatement or inaccuracy in any such opinion, representation or
certificate. Copies of any opinion, representation or certificate so relied
upon shall be delivered to the Representatives and to counsel for the
Underwriters.
(g) LEGAL OPINION OF COUNSEL FOR THE UNDERWRITERS. The
Representatives shall have received from Gray Cary Ware & Freidenrich,
counsel for the Underwriters, their opinion or opinions, dated the Closing
Dates, with respect to the incorporation of the Company, the validity of
the Shares, the Registration Statement and the Prospectus and such other
related matters as it may reasonably request, and the Company and the
Selling Shareholders shall have furnished to such counsel such documents as
they may request for the purpose of enabling them to pass upon such
matters.
(h) OFFICERS' CERTIFICATE. The Representatives shall have received
a certificate, dated the Closing Dates, of the Chief Executive Officer of
the Company and the Chief Financial Officer of the Company to the effect
that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the best of the knowledge
of the signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act;
(ii) Neither any Preliminary Prospectus, as of its date, nor
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(iii) The representations and warranties of the Company in
this Agreement are true and correct in all material respects at and as of
the Closing Dates, and the Company has substantially complied with all of
the agreements and substantially performed or satisfied all of the
conditions on its part to be performed or satisfied at or prior to the
Closing Dates; and
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, (A) there has not been any
material adverse change or a development involving a material adverse
change in the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of the Company,
(B) the business and
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operations conducted by the Company have not sustained a loss by strike,
fire, flood, accident or other calamity (whether or not insured) of such a
character as to interfere materially with the conduct of the business and
operations of the Company, (C) no legal or governmental action, suit,
proceeding or investigation is pending or threatened against the Company
which is material to the Company, whether or not arising from transactions
in the ordinary course of business, or which may materially and adversely
affect the transactions contemplated by this Agreement, (D) since such
dates and except as so disclosed, the Company has not incurred any material
liability or obligation, direct, contingent or indirect, made any change in
its capital stock (except pursuant to its stock option plans), made any
material change in its short-term or funded debt or repurchased or
otherwise acquired any of the Company's capital stock, (E) the Company has
not declared or paid any dividend, or made any other distribution, upon its
outstanding capital stock payable to shareholders of record on a date prior
to the Closing Date, and (F) the Company has not entered into any material
transactions not in the ordinary course of business.
(i) CERTIFICATE OF SELLING SHAREHOLDERS. The Representatives shall
have received a certificate or certificates, dated the Closing Dates, of
the Attorneys-in-fact on behalf of each of the Selling Shareholders to the
effect that as of the Closing Dates its representations and warranties in
this Agreement are true and correct as if made on and as of the Closing
Dates, and that it has performed all its obligations and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Dates.
(j) OPINION OF PATENT COUNSEL. The Representatives shall have
received from Townsend and Townsend and Crew, special patent counsel for
the Company, an opinion, dated the Closing Dates, with respect to certain
patent law matters. Such opinion shall be in form and substance reasonably
satisfactory to the Underwriters.
(k) ADDITIONAL CERTIFICATES. The Company and each of the Selling
Shareholders shall have furnished to the Representatives such additional
certificates as the Representatives may have reasonably requested as to the
accuracy, at and as of the Closing Dates, of the representations and
warranties made herein by them and as to compliance at and as of the
Closing Dates by them with their covenants and agreements herein contained
and other provisions hereof to be satisfied at or prior to the Closing
Dates, and as to satisfaction of the other conditions to the obligations of
the Underwriters hereunder.
(l) SATISFACTION. All opinions, certificates, letters and other
documents will be in compliance with the provisions hereunder only if they
are reasonably satisfactory in form and substance to the Representatives.
The Company will furnish to the Representatives such number of original and
conformed copies of such opinions, certificates, letters and other
documents as the Representatives shall reasonably request. If any of the
conditions hereinabove provided for in this Section 8 shall not have been
satisfied when and as required by this Agreement, this Agreement may be
terminated by the Representatives by notifying the Company of such
termination in writing or by telegram at or prior to the Closing Dates, but
SoundView shall be entitled to waive any of such conditions.
11. EFFECTIVE DATE. This Agreement shall become effective at the
earlier of (a) 6:30 a.m., California time, on the first business day following
the effective date of the
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Registration Statement, and (b) the time of the initial public offering of any
of the Shares by the Underwriters after the Registration Statement becomes
effective. The time of the initial public offering shall mean the time of the
release by the Representatives for publication of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or facsimile, whichever shall first occur. By giving notice as set
forth in Section 15 before the time this Agreement becomes effective, the
Representatives or the Company may prevent this Agreement from becoming
effective without liability of any party to any other party, except as provided
in Section 7, Section 8 and Section 13 and except as provided in Section 14 as
to the liability of defaulting Underwriters.
12. TERMINATION. The Representatives shall have the right to terminate
this Agreement by giving notice to the Company as hereinafter specified at any
time at or prior to the First Closing Date or the Option Closing Date, as the
case may be, (a) if the Company or any Selling Shareholder shall have failed,
refused or been unable to perform any agreement on its part to be performed, or
because any other condition of the Underwriters' obligations hereunder required
to be fulfilled is not fulfilled, including, without limitation, any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in the sole reasonable judgment of the
Representatives, is material and adverse, or (b) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange or
on the American Stock Exchange or in the over-the-counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over-the-counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (c) if the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as to interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured, or (d) if there
shall have been a material adverse change in the general political or economic
conditions or financial markets as in the reasonable judgment of the
Representatives makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (e) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. In the event of termination pursuant to this Section 12 the
Company shall remain obligated to pay costs and expenses pursuant to Section 7,
Section 8 and Section 13 hereof. If the Company shall elect to prevent this
Agreement from becoming effective as provided in Section 11, the Company shall
promptly notify the Representatives by telephone, facsimile or telegraph, in
each case confirmed by letter. If the Representatives elect to prevent this
Agreement from becoming effective as provided in Section 11 or to terminate this
Agreement as provided in this Section 12, the Representatives shall promptly
notify the Company by telephone, facsimile or telegraph, in each case confirmed
by letter.
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13. REIMBURSEMENT OF UNDERWRITERS. Notwithstanding any other provisions
hereof, if this Agreement shall not become effective by reason of any election
of the Company pursuant to Section 11 or shall be terminated by the
Representatives under Section 10 or Section 12(a), the Company will bear and pay
the expenses specified in Section 7 hereof and, in addition to its obligations
pursuant to Section 8 hereof, the Company will reimburse the reasonable out-of-
pocket expenses of the several Underwriters (including reasonable fees and
disbursements of counsel for the Underwriters) incurred in connection with this
Agreement and the proposed purchase of the Shares, and promptly upon demand the
Company will pay such amounts to the Representatives.
14. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall default in its or their obligations to purchase shares of Shares hereunder
and the aggregate number of shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent (10%) of
the total number of shares underwritten, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters shall so default and the
aggregate number of shares with respect to which such default or defaults occur
is more than ten percent (10%) of the total number of shares underwritten and
arrangements satisfactory to the Representatives and the Company for the
purchase of such shares by other persons are not made within forty-eight (48)
hours after such default, this Agreement shall terminate. If the remaining
Underwriters or substituted Underwriters are required hereby or agree to take up
all or part of the shares of Shares of a defaulting Underwriter or Underwriters
as provided in this Section 14, (a) the Company and the Selling Shareholders
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company and the Selling
Shareholders may effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (b) the respective numbers of shares to be purchased by the
remaining Underwriters or substituted Underwriters shall be taken as the basis
of their underwriting obligation for all purposes of this Agreement. Nothing
herein contained shall relieve any defaulting Underwriter of its liability to
the Company, the Selling Shareholders or the other Underwriters for damages
occasioned by its default hereunder. Any termination of this Agreement pursuant
to this Section 14 shall be without liability on the part of any non-defaulting
Underwriter, the Selling Shareholders or the Company, except for expenses to be
paid or reimbursed pursuant to Section 7 and except for the provisions of
Section 8.
15. NOTICES. All communications hereunder shall be in writing and, (a)
if sent to the Underwriters, shall be mailed, delivered, transmitted by
facsimile or telegraphed and confirmed to the Representatives, c/o SoundView, 22
Gatehouse Road, Stamford, Connecticut 06902 (facsimile: (203) 462-7257), except
that notices given to an Underwriter pursuant to Section 8 hereof shall be sent
to such Underwriter at the address furnished by the Representatives, or (b) if
sent to the Company, shall be mailed, delivered, transmitted by facsimile or
telegraphed and confirmed to the Company, 2380 Bering Drive, San Jose,
California 95131, Attn: President (facsimile: (408) 435-1100), or (c) if sent to
the Selling Shareholders, shall be mailed, delivered,
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transmitted by facsimile or telegraphed and confirmed to the Selling
Shareholders, c/o Attorneys-in-fact, c/o the Company, 2380 Bering Drive, San
Jose, California 95131 (facsimile: (408) 435-1100).
16. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and the Selling Shareholders
and their respective successors and legal representatives. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
other than the persons mentioned in the preceding sentence any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person, except that the representations,
warranties, covenants, agreements and indemnities of the Company and the Selling
Shareholders contained in this Agreement shall also be for the benefit of the
person or persons, if any, who control any Underwriter or Underwriters within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the indemnities of the several Underwriters shall also be for the
benefit of each director of the Company, each of its officers who has signed the
Registration Statement and the person or persons, if any, who control the
Company or any Selling Shareholders within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act.
17. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
principles of conflicts of laws.
18. AUTHORITY OF REPRESENTATIVES. In connection with this Agreement,
the Representatives will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representatives will be binding on
all the Underwriters, and any action taken under this Agreement by any of the
Attorneys-in-Fact will be binding on all of the Selling Shareholders.
19. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof. If any
section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
20. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
21. GENERAL. In this Agreement, the masculine, feminine and neuter
genders and the singular and the plural include on another. The section headings
in this Agreement are for the convenience of the parties only and will not
affect the construction or interpretation of this Agreement. This Agreement may
be amended or modified, and the observance of any term of this
32
<PAGE>
Agreement may be waived, only by a writing signed by the Company, the Selling
Shareholders and the Representatives.
22. COUNTERPARTS. This Agreement may be signed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
23. ATTORNEY-IN-FACT. Any person executing and delivering this
Agreement as Attorney-in-Fact for the Selling Shareholders represents by so
doing that he has been duly appointed as Attorney-in-Fact by such Selling
Shareholder pursuant to a validly existing and binding Power of Attorney which
authorizes such Attorney-in-Fact to take such action.
33
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
PERICOM SEMICONDUCTOR CORPORATION
By:
---------------------------------------------
Alex C. Hui, President
and Chief Executive Officer
SELLING SHAREHOLDERS NAMED IN SCHEDULE B
By:
--------------------------------------------
Alex C. Hui
As Attorney-in-Fact of the Selling
Shareholders listed in Schedule B hereto.
Agreed to and accepted as of
the date first set forth above:
SOUNDVIEW FINANCIAL GROUP, INC.
UNTERBERG HARRIS
By: SoundView Financial Group, Inc.
By:
-------------------------------------
Jonathan Meyers, Managing Director
34
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm Number of Option
Shares to be Shares to be
Name Purchased Purchased
- ------------------------------------------------------ --------------------- ------------------
<S> <C> <C>
SoundView Financial Group, Inc........................
Unterberg Harris......................................
--------------------- -------------------
TOTAL............................................
===================== ===================
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Number of Firm Number of Option
Name Shares to be Sold Shares to be Sold
- ------------------------------------------------------ --------------------- ---------------------
<S> <C> <C>
Pericom Semiconductor Corporation..................... 2,000,000
Selling Shareholders:
- --------------------
Dato' Sri Tay Kia Hong...............................
Chye Seng Tannery (Pte) Ltd...........................
Tay Tian Liang........................................
Tay Thiang Phong......................................
Tay Thiam Song........................................
Tay Thiam Yew.........................................
Jeffrey Young.........................................
Lee Chin-Chung........................................
Lue Shuh-Mei..........................................
Hsu Chih-Ray..........................................
Hsu Yu-Pu.............................................
Koh Quee Chew.........................................
Koh Kwee Khoon........................................
Koh Kwee Ngee.........................................
--------------------- ---------------------
TOTAL............................................
===================== =====================
</TABLE>
<PAGE>
SCHEDULE C
LOCK-UP AGREEMENT
SoundView Financial Group, Inc.
Unterberg Harris
c/o SoundView Financial Group, Inc.
22 Gatehouse Road
Stamford, Connecticut 06902
Ladies and Gentlemen:
The undersigned is a director, officer and/or securityholder of Pericom
Semiconductor Corporation (the "Company") and wishes to facilitate the proposed
initial public offering (the "Offering") of the Company's common stock ("Common
Stock") pursuant to a registration statement on Form S-1 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the "SEC").
The undersigned recognizes and agrees that the Offering will benefit the
undersigned as a director, officer or securityholder of the Company.
In consideration of the foregoing, and in order to induce the several
underwriters to act as such in connection with the Offering, the undersigned
hereby irrevocably agrees not to, directly or indirectly, offer, sell, contract
to sell, transfer the economic risk of ownership in, make any short sale,
pledge, establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Securities Exchange Act of 1934, as amended, grant any option
to sell, transfer or otherwise dispose of any shares of Common Stock, or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock, or publicly announce the undersigned's
intention to do any of the foregoing, without the prior written consent of
SoundView Financial Group, Inc., for a period commencing on the date hereof and
terminating one hundred eighty (180) days after the effective date of the
Registration Statement (the "Lock-Up Period"); provided, however, that shares of
-------- -------
Common Stock purchased by the undersigned in the pubic market after the Offering
shall not be subject to this agreement.
Notwithstanding the foregoing, if the undersigned is an individual, he or
she may transfer any shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock either during his or her lifetime
or on death by will or intestacy to his or her immediate family or to a trust if
the beneficiaries of such trust are exclusively the undersigned and/or a member
or members of his or her immediate family; provided, however, that prior to any
-------- -------
such transfer each transferee shall execute an agreement, satisfactory to
SoundView Financial Group, Inc., pursuant to which each transferee shall agree
to receive and hold such shares of Common Stock, or securities convertible into
or exchangeable or exercisable for Common Stock, subject to the provisions
hereof, and there shall be no further transfer except in accordance with the
provisions hereof. In addition, if the undersigned is a partnership, the
partnership may transfer any shares of Common Stock or securities convertible
into or exchangeable or exercisable for
<PAGE>
Common Stock to a partner of such partnership, to a retired partner of such
partnership, or to the estate of any such partner or retired partner, and any
such partner who is an individual may transfer such shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock by
gift, will or intestacy to a member or members of his or her immediate family;
provided, however, that prior to any such transfer each transferee shall execute
- -------- -------
an agreement, satisfactory to SoundView Financial Group, Inc., pursuant to which
each transferee shall agree to receive and hold such shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock,
subject to the provisions hereof, and there shall be no further transfer except
in accordance with the provisions hereof. For purposes of this paragraph,
"immediate family" shall mean spouse, lineal descendant, father, mother, brother
or sister of the transferor.
In addition, the undersigned agrees that, without the prior written consent
of SoundView Financial Group, Inc., the undersigned will not, during the Lock-Up
Period, make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
The undersigned confirms that he or she understands that the underwriters
of the Offering and the Company will rely upon the representations set forth in
this agreement in proceeding with the Offering. The undersigned further
confirms that this agreement is irrevocable and shall be binding upon the
undersigned's heirs, legal representatives, successors and assigns so long as
the closing of the Offering occurs on or prior to May 31, 1998. The undersigned
agrees and consents to the entry of stop transfer instructions with the
Company's transfer agent against the transfer of Common Stock or other
securities of the Company held by the undersigned except in compliance with this
agreement.
Dated: , 1997. --------------------------------------
----------------- Name of Securityholder
By:
-----------------------------------
--------------------------------------
Print Name
--------------------------------------
Title
2
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
OF
PERICOM SEMICONDUCTOR CORPORATION,
a California Corporation
-------------------------------------
The undersigned Alex C. Hui and Chi-Hung Hui hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of Pericom Semiconductor Corporation, a California corporation
(the "Corporation").
TWO: The Articles of Incorporation of said Corporation are amended as
follows:
Article III Paragraph A shall be amended in its entirety to read as
follows:
"ARTICLE III
A. Classes of Stock. This Corporation is authorized to issue two
classes of shares, designated "Preferred Stock" and "Common Stock."
The total number of shares which the Corporation is authorized to
issue is forty-four million two hundred and twenty-five thousand
(44,225,000) shares. Thirty million (30,000,000) shares shall be
Common Stock, without par value, (the "Common Stock") and fourteen
million two hundred and twenty-five thousand (14,225,000) shares
shall be Preferred Stock, without par value (the "Preferred Stock").
Five million two hundred thousand (5,200,000) shares or Preferred
Stock are hereby designated "Series A Preferred Stock," two million
one hundred and fifty thousand (2,150,000) shares are hereby
designated "Series B Preferred Stock," one million eight hundred and
seventy-five thousand (1,875,000) shares are designated "Series C
Preferred Stock" and five million (5,000,000) shares shall remain
undesignated.
Effective upon the amendment of the Articles of Incorporation as set
forth herein, each outstanding share of Common Stock of the
Corporation shall be reverse split into one-half (1/2) of a share of
Common Stock, rounded up to the nearest whole share.
THREE: The foregoing amendment of the Articles of Incorporation has
been duly approved by the Board of Directors of the Corporation.
FOUR: The foregoing amendment of the Articles of Incorporation was
duly approved by the holders of the requisite number of shares of the
Corporation in accordance with Sections 902 and 903 of the California General
Corporation Law; the total number of outstanding shares entitled to vote with
respect to the foregoing amendment was shares of Common Stock,
------------------
5,200,000 shares of Series A Preferred Stock, 2,150,000 shares of Series B
Preferred Stock and 1,875,000 shares of
<PAGE>
Series C Preferred Stock. The number of shares voting in favor of the foregoing
amendments equaled or exceeded the vote required, such required voting being a
majority of the outstanding shares of Common Stock and Preferred Stock, voting
together as a single class, and more than 50% of the number of outstanding
shares of Common Stock and Preferred Stock, each voting separately as a single
class.
The undersigned declare under penalty of perjury that they have read the
foregoing Certificate of Amendment of Articles of Incorporation and know the
contents thereof, and that the statements therein are true and correct of their
own knowledge.
Executed at San Jose, California, on October , 1997.
----
--------------------------------
Alex C. Hui,
President
--------------------------------
Chi-Hung Hui,
Secretary
2
<PAGE>
[LETTERHEAD OF MORRISON & FOERSTER LLP]
Pericom Semiconductor Corporation
2380 Bering Drive
San Jose, CA 95131
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-1 filed by Pericom Semiconductor Corporation, a California corporation (the
"Company"), with the Securities and Exchange Commission on September 10,
1997 (Registration No. 333-35327) and Amendment No. 1 thereto filed October 14,
1997 (the "Registration Statement"), relating to the registration under the
Securities Act of 1933, as amended, of up to 2,875,000 shares of the Company's
common stock, no par value (the "Stock"), including up to _____ authorized but
unissued shares being offered by the Company and up to _______ presently
issued and outstanding shares being offered by certain selling shareholders
(the "Selling Shareholders") to be issued and sold by the Company or sold by
the Selling Shareholders. The Stock is to be sold to the underwriters named in
the Registration Statement for resale to the public.
As counsel to the Company, we have examined the proceedings taken by
the Company in connection with the proposed issuance and sale by the Company
of up to 2,375,000 shares of Stock. We have also examined the proceedings
taken by the Company in connection with the sale of up to 875,000 shares of
Stock that may be sold by the Selling Shareholders.
We are of the opinion that (a) the shares of Stock to be offered and
sold by the Company have been duly authorized and, when issued and sold by the
Company in the manner described in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be legally issued, fully paid and nonassessable, and (b) the
shares of Stock that may be sold by the Selling Shareholders ate legally and
validly issued, fully paid and nonassessable.
<PAGE>
Pericom Semiconductor Corporation
October 14, 1997
Page 2
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
<PAGE>
EXHIBIT 10.2
PERICOM SEMICONDUCTOR CORPORATION
---------------------------------
1995 STOCK OPTION PLAN
----------------------
1. Establishment, Purpose, and Definitions.
---------------------------------------
(a) There is hereby adopted the 1995 Stock Option Plan (the "Plan") of
Pericom Semiconductor Corporation (the "Company").
(b) The purpose of the Plan is to provide a means whereby eligible
individuals (as defined in Section 4, below) can acquire Common Stock of the
Company (the "Stock"). The Plan provides employees (including officers and
directors who are employees) of the Company and of its Affiliates an opportunity
to purchase shares of Stock pursuant to options which may qualify as incentive
stock options (referred to as "incentive stock options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and employees,
officers, directors, independent contractors, and consultants of the Company and
of its Affiliates an opportunity to purchase shares of Stock pursuant to options
which are not described in Sections 422 or 423 of the Code (referred to as
"nonqualified stock options").
(c) The term "Affiliates" as used in the Plan means parent or
subsidiary corporations, as defined in Sections 424(e) and (f) of the Code (but
substituting "the Company" for "employer corporation"), including parents or
subsidiaries which become such after adoption of the Plan.
2. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"). Subject to Section 2(e) below, the Board may delegate
the responsibility for administering the Plan to a committee, under such terms
and conditions as the Board shall determine (the "Committee"). The Committee
shall consist of two or more members of the Board or such lesser number of
members of the Board as permitted by Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3"). Except as permitted by Rule
16b-3, none of the members of the Committee shall receive, while serving on the
Committee, or during the one-year period preceding appointment to the Committee,
a grant or award of equity securities under (i) the Plan or (ii) any other plan
of the Company or its affiliates under which the participants are entitled to
acquire Stock (including restricted Stock), stock options, stock bonuses,
related rights or stock appreciation rights of the Company or any of its
affiliates, other than pursuant to the grant of automatic options provided in
Section 7 below and pursuant to transactions in any such other plan which do not
disqualify a director from being a disinterested person under Rule 16b-3. The
limitations set forth in this Section 2(a) shall automatically incorporate any
additional requirements that may in the future be necessary for the Plan to
comply with Rule 16b-3. Members of the Committee shall serve at the pleasure of
the Board. The Committee shall select one of its members as chairman, and shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a
1
<PAGE>
quorum and acts of the Committee at which a quorum is present, or acts reduced
to or approved in writing by all the members of the Committee, shall be the
valid acts of the Committee. If the Board does not delegate administration of
the Plan to the Committee, then each reference in this Plan to "the Committee"
shall be construed to refer to the Board.
(b) Except for options granted to Non-Employee Directors pursuant to
Section 7, the Committee shall determine which eligible individuals (as defined
in Section 4, below) shall be granted options under the Plan, the timing of such
grants, the terms thereof (including any restrictions on the Stock), and the
number of shares subject to such options.
(c) Except for options granted to Non-Employee Directors pursuant to
Section 7, the Committee may amend the terms of any outstanding option granted
under this Plan, but any amendment which would adversely affect the optionee's
rights under an outstanding option shall not be made without the optionee's
written consent. The Committee may, with the optionee's written consent, cancel
any outstanding stock option or accept any outstanding stock option in exchange
for a new option.
(d) The Committee shall have the sole authority, in its absolute
discretion to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and the regulations, and the instruments
evidencing options or Stock granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
binding on all participants. Notwithstanding the foregoing, the Committee shall
not exercise any discretionary functions with respect to options granted to Non-
Employee Directors pursuant to Section 7.
(e) Notwithstanding the foregoing provisions of this Section 2, grants
of options to any "Covered Employee," as such term is defined by Section 162(m)
of the Code shall be made only by a subcommittee of the Committee which, in
addition to meeting other applicable requirements of this Section 2, is composed
solely of two or more "outside directors," within the meaning of Section 162(m)
of the Code and the regulations thereunder (the "Subcommittee") to the extent
necessary to qualify such grants as "performance-based compensation" under
Section 162(m). In the case of such grants to Covered Employees, references to
the "Committee" shall be deemed to be references to the Subcommittee as
specified above.
3. Stock Subject to the Plan.
-------------------------
(a) The aggregate number of shares of Common Stock of the Company
available for grant of options under the Plan initially shall be 1,200,000
shares, and commencing with the first business day of each fiscal year of the
Company thereafter beginning with July 1, 1996, such maximum number of shares
reserved for issuance hereunder shall be increased by a number equal to ten
percent (10%) of the number of shares of Common Stock outstanding as of June 30
of the immediately preceding year; provided, however, that such maximum number
of shares shall not exceed 1,800,000 shares. Notwithstanding the foregoing, the
aggregate number
2
<PAGE>
of shares of Common Stock available for grant of incentive stock options shall
be 1,200,000 shares, and such number shall not be subject to annual adjustment.
If an option is surrendered (except surrender for shares of Stock) or for any
other reason ceases to be exercisable in whole or in part, the shares which were
subject to such option but as to which the option had not been exercised shall
continue to be available under the Plan.
(b) If there is any change in the Stock subject to any option granted
under the Plan, through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend (in excess of two percent), or
other change in the capital structure of the Company, appropriate adjustments
shall be made by the Committee in order to preserve but not to increase the
benefits to the individual, including adjustments to the number and kind of
shares and the price per share subject to outstanding options.
4. Eligible Individuals. The persons eligible to participate in the Plan
--------------------
(other than pursuant to Section 7) are such employees, officers, independent
contractors, and consultants of the Company or an Affiliate as the Committee, in
its discretion, shall designate from time to time. Notwithstanding the
foregoing, only employees of the Company or an Affiliate (including officers and
directors who are bona fide employees) shall be eligible to receive incentive
stock options. Except for grants pursuant to Section 7, Eligible Individuals
shall not include Non-Employee Directors.
5. The Option Price. Except as provided in Section 7, the exercise price
----------------
of the each option shall be not less than the per share fair market value of the
Stock subject to such option on the date the option is granted. Notwithstanding
the foregoing, in the case of an incentive stock option granted to a person
possessing more than ten percent of the combined voting power of the Company or
an Affiliate, the exercise price shall be not less than 110 percent of the fair
market value of the Stock on the date the option is granted. The exercise price
of an option shall be subject to adjustment to the extent provided in Section
3(b), above.
6. Terms and Conditions of Options.
-------------------------------
(a) Each option granted pursuant to the Plan will be evidenced by a
written Stock Option Agreement executed by the Company and the person to whom
such option is granted.
(b) The Committee shall determine the term of each option granted
under the Plan; provided, however, that (i) the term of each option shall not be
-------- -------
more than 10 years, (ii) in the case of an incentive stock option granted to a
person possessing more than ten percent of the combined voting power of the
Company or an Affiliate, the term of each incentive stock option shall be no
more than five years, and (iii) the term of an option granted pursuant to
Section 7 shall be as provided in Section 7.
(c) In the case of incentive stock options, the aggregate fair market
value (determined as of the time such option is granted) of the Stock with
respect to which incentive stock options are exercisable for the first time by
an eligible employee in any calendar year
3
<PAGE>
(under this Plan and any other plans of the Company or its Affiliates) shall not
exceed $100,000. If the aggregate fair market value of stock with respect to
which incentive stock options are exercisable by an optionee for the first time
during any calendar year exceeds $100,000 such options shall be treated as
nonqualified options to the extent required by Section 422 of the Code. The rule
set forth in the preceding sentence shall be applied by taking options into
account in the order in which they were granted.
(d) Except for grants to Non-Employee Directors pursuant to Section 7,
which shall be granted on the form of Stock Option Agreement attached hereto as
Exhibit A, the Stock Option Agreement may contain such other terms, provisions,
and conditions as may be determined by the Committee not inconsistent with this
Plan. If an option, or any part thereof is intended to qualify as an incentive
stock option, the Stock Option Agreement shall contain those terms and
conditions which are necessary to so qualify it.
(e) The maximum number of Shares with respect to which options may be
granted to any individual per calendar year under the Plan shall be 100,000
shares, subject to adjustment pursuant to Section 3(b). To the extent required
by Section 162(m) of the Code or the regulations thereunder, in applying the
foregoing limitation with respect to an employee, if any option is cancelled,
the cancelled option shall continue to count against the maximum number of
shares for which options may be granted to the employee under this Section 6(e).
For this purpose, the repricing of an option shall be treated as a cancellation
of the existing option and the grant of a new option.
7. Stock Options for Non-Employee Directors.
----------------------------------------
(a) All grants of options pursuant to this Section 7 shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
provisions of this Section 7. No person shall have any discretion to select
which Non-Employee Directors shall be granted options or to determine the number
of shares of Stock to be covered by options granted to Non-Employee Directors,
the timing of such option grants or the exercise price thereof.
(b) An option to purchase 5,000 shares of Stock shall be granted
("Initial Grant") to each director who is not an officer of the Company ("Non-
Employee Director"), such Initial Grant to be made (i) to the then-existing Non-
Employee Directors upon approval of the Plan by the stockholders of the Company
("Approval Date") and (ii) to other Non-Employee Directors elected or appointed
to the Board after the Approval Date upon the date each such Non-Employee
Director first becomes a Non-Employee Director following the Approval Date. In
addition, immediately following each annual meeting of the Company's
stockholders, each Non-Employee Director who continues as a Non-Employee
Director following such annual meeting shall be granted an option to purchase
2,500 shares of Stock ("Subsequent Grant"); provided that no Subsequent Grant
shall be made to any Non-Employee Director who has not served as a director of
the Company, as of the time of such annual meeting, for at least one (1) year.
Each such Subsequent Grant shall be made on the date of the annual stockholders'
meeting in question. If any option ceases to be exercisable in whole or in
part, the shares which were subject to such option but as to which the option
had not been exercised shall continue to be
4
<PAGE>
available under the Plan. All options granted to Non-Employee Directors shall be
nonqualified stock options.
(c) The exercise price per share of Stock covered by each option shall
be the per-share fair market value of the Stock on the date the option is
granted. The exercise price of an option granted under the Plan shall be
subject to adjustment to the extent provided in Section 3(b) hereof. The term
of each option shall be for ten years.
(d) Each Initial Grant shall be fully vested and exercisable as to all
of the shares covered thereby at the time of grant. Each Subsequent Grant shall
vest and become exercisable as to 625 of the shares covered thereby on the
expiration of each three (3) month period following the date of grant such that
the option will be fully exercisable one (1) year after its date of grant.
8. Use of Proceeds. Cash proceeds realized from the sale of Stock under
---------------
the Plan or pursuant to options granted under the Plan shall constitute general
funds of the Company.
9. Amendment, Suspension, or Termination of the Plan.
-------------------------------------------------
(a) The Board may at any time amend, suspend or terminate the Plan as
it deems advisable; provided that such amendment, suspension or termination
complies with all applicable requirements of state and federal law, including
any applicable requirement that the Plan or an amendment to the Plan be approved
by the shareholders, and provided further that, except as provided in Section
3(b), above, the Board shall in no event amend the Plan in the following
respects without the consent of stockholders then sufficient to approve the Plan
in the first instance:
(i) To increase the maximum number of shares subject to stock
options issued under the Plan; or
(ii) To change the designation or class of persons eligible to
receive incentive stock options under the Plan.
(b) No option may be granted nor any Stock issued under the Plan
during any suspension or after the termination of the Plan, and no amendment,
suspension, or termination of the Plan shall, without the affected individual's
consent, alter or impair any rights or obligations under any option previously
granted under the Plan. The Plan shall terminate on the tenth anniversary of
the date of adoption of the Plan, unless previously terminated by the Board
pursuant to this Section 9.
(c) Notwithstanding the provisions of Sections 9(a) and 9(b), above,
the provisions set forth in Section 7 of the Plan (and any other sections of the
Plan that affect the formula award terms of option grants to Non-Employee
Directors required to be specified in the Plan by Rule 16b-3) shall not be
amended periodically and in no event more than once every six months, other than
to comport with changes to the Code, the Employee Retirement Income Security Act
of 1974, as amended, or any applicable rules and regulations thereunder.
5
<PAGE>
10. Assignability. To the extent required by Rule 16b-3, no option
-------------
granted pursuant to this Plan shall be transferable by the holder except by
operation of law or by will or the laws of descent and distribution; provided,
that, if Rule 16b-3 is amended after the date of the Board's adoption of the
Plan to permit broader transferability of options under that Rule, (i) options
granted under Section 7 to Non-Employee Directors shall be transferable to the
fullest extent permitted by Rule 16b-3 as so amended, (ii) any other option
shall be transferable to the extent provided in the option agreement covering
the option, and the Committee shall have discretion to amend any such
outstanding option to provide for broader transferability of the option as the
Committee may authorize within the limitations of Rule 16b-3. Notwithstanding
the foregoing, if required by the Code, each incentive stock option under the
Plan shall be transferable by the optionee only by will or the laws of descent
and distribution, and, during the optionee's lifetime, shall be exercisable only
by the optionee. In the event of any Rule 16b-3 permitted transfer of an option
hereunder, the transferee shall be entitled to exercise the option in the same
manner and only to the same extent as the optionee (or his personal
representative or the person who would have acquired the right to exercise the
option by bequest or intestate succession) would have been entitled to exercise
the option under Sections 6, 7 and 11 had the option not been transferred.
11. Payment Upon Exercise of Options.
--------------------------------
(a) Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in cash, by optionee's personal check, a certified
check, bank draft, or postal or express money order payable to the order of the
Company in lawful money of the United States (collectively, "Cash
Consideration"); provided, however, that, except for options granted under
Section 7, the Committee, in its sole discretion, may permit an optionee to pay
the option price in whole or in part (i) with shares of Stock owned by the
optionee or with shares of Stock withheld from the shares otherwise deliverable
to the optionee upon exercise of the option; (ii) by delivery on a form
prescribed by the Committee of an irrevocable direction to a securities broker
approved by the Committee to sell shares of Stock and deliver all or a portion
of the proceeds to the Company in payment for the Stock; (iii) by delivery of
the optionee's promissory note with such recourse, interest, security, and
redemption provisions as the Committee in its discretion determines appropriate;
or (iv) in any combination of the foregoing. The exercise price of any options
granted under Section 7 shall be paid in Cash Consideration, the consideration
specified in clauses (i) or (ii) of the preceding sentence, or in any
combination thereof. Any Stock used to exercise options shall be valued at its
fair market value on the date of the exercise of the option. In addition, the
Committee, in its sole discretion, may authorize the surrender by an optionee of
all or part of an unexercised option (excluding options granted under Section 7,
above) and authorize a payment in consideration thereof of an amount equal to
the difference between the aggregate fair market value of the Stock subject to
such option and the aggregate option price of such Stock. In the Committee's
discretion, such payment may be made in cash, shares of Stock with a fair market
value on the date of surrender equal to the payment amount, or some combination
thereof.
(b) In the event that the exercise price is satisfied by shares
withheld from the shares of Stock otherwise deliverable to the optionee, the
Committee may issue the optionee an
6
<PAGE>
additional option, with terms identical to the option agreement under which the
option was exercised, entitling the optionee to purchase additional shares of
Stock equal to the number of shares so withheld but at an exercise price equal
to the fair market value of the Stock on the grant date of the new option;
provided, however, that no such additional options may be granted with respect
to options granted pursuant to Section 7, above. Any additional option shall be
subject to the provisions of Section 6(e), above.
12. Withholding Taxes.
-----------------
(a) No Stock shall be delivered under the Plan to any participant
until the participant has made arrangements acceptable to the Committee (or in
the case of exercise of options granted to Named Executives, the Subcommittee)
for the satisfaction of federal, state, and local income and social security tax
withholding obligations, including, without limitation, obligations incident to
the receipt of Stock under the Plan or to the failure to satisfy the conditions
for treatment as incentive stock options under applicable tax law. Upon
exercise of a stock option the Company shall withhold from the optionee an
amount sufficient to satisfy federal, state and local income and social security
tax withholding obligations.
(b) In the event that such tax withholding is satisfied by the Company
or the optionee's employer withholding shares of Stock otherwise deliverable to
the optionee, the Committee may issue the optionee an additional option, with
terms identical to the option agreement under which the option was exercised,
entitling the optionee to purchase additional shares of Stock equal to the
number of shares so withheld but at an exercise price equal to the fair market
value of the Stock on the grant date of the new option; provided, however, that
no such additional options may be granted with respect to options granted
pursuant to Section 7, above. Any additional option shall be subject to the
provisions of Section 6(e), above.
13. Change in Control.
-----------------
(a) For purposes of this Section 13, a "Change in Control" shall be
deemed to occur upon:
(i) The direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding Stock;
(ii) A change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members cease,
by reason of one or more contested elections for Board membership or by one or
more actions by written consent of stockholders, to be comprised of individuals
who either (A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for
7
<PAGE>
election as Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board;
(iii) Approval by the Company's stockholders of a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the
Company is incorporated;
(iv) Approval by the Company's stockholders of (A) the sale,
transfer or other disposition of all or substantially all of the assets of the
Company (including the capital stock of the Company's subsidiary corporations)
or (B) the complete liquidation or dissolution of the Company; or
(v) Approval by the Company's stockholders of any reverse merger
in which the Company survives as an entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to such merger.
(vi) For the purpose of this Section 13, "Approval by the
Company's Stockholders" shall mean approval by a majority of those shares of
Stock voting at a stockholder's meeting at which a quorum is present, excluding
shares beneficially owned (within the meaning of Rule 13d-3 under the Exchange
Act) by the Non-Employee Directors.
(b) Except for options granted to Non-Employee Directors under Section
7, the Committee may provide in any stock option agreement (or in an amendment
thereto) that, in the event of any Change in Control, any outstanding options
covered by such an agreement shall be fully vested, nonforfeitable and become
exercisable, as of the date of the Change in Control.
(c) If the Committee determines to incorporate a Change in Control
provision in any option agreement hereunder, the agreement shall provide that,
(i) in the event of a Change in Control described in clauses (i), (ii) and (v)
of paragraph (a) above, the option shall remain exercisable for the remaining
term of the option and (ii) in the event of a Change in Control described in
clauses (iii) or (iv) of paragraph (a) above, the option shall terminate as of
the effective date of the merger, disposition of assets, liquidation or
dissolution described therein.
(d) As to any options granted under Section 7 to Non-Employee
Directors, (i) in the event of a Change in Control described in clauses (i),
(ii) or (v) of paragraph (a) above, any such outstanding options under the Plan
shall become fully vested and remain exercisable for the remaining term of such
options and (ii) in the event of a Change in Control described in clauses (iii)
or (iv) of paragraph (a) above, outstanding options under the Plan shall
terminate as of the effective date of the merger, disposition of assets,
liquidation or dissolution described therein.
(e) Notwithstanding the foregoing provisions of this Section 13, an
outstanding option may not be accelerated under this Section 13 if and to the
extent (i) such
8
<PAGE>
option is, in connection with the transaction giving rise to a Change of
Control, either to be assumed by the successor or parent thereof or to be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof, or (ii) such option is to be replaced
with a cash incentive program of the successor corporation that preserves the
option spread existing at the time of the corporate transaction giving rise to
the Change of Control and provides for subsequent payment in accordance with the
same vesting schedule applicable to such option.
14. Stockholder Approval. The Plan and any options granted pursuant to
--------------------
Section 7 and options granted to Covered Employees hereunder shall become
effective only upon approval by the holders of a majority of the Company's
shares voting (in person or by proxy) at a stockholders' meeting held within 12
months of the Board's adoption of the Plan. The Committee may grant stock
options under the Plan prior to the stockholders' meeting, but until stockholder
approval of the Plan is obtained, no such option shall be exercisable. In the
event that stockholder approval is not obtained within the period provided
above, all options described in this Section 14 previously granted above, shall
terminate.
15. Rule 16b-3 Compliance. Transactions under the Plan are intended to
---------------------
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Board or
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board or the Committee.
Moreover, in the event the Plan does not include a provision required by Rule
16b-3 to be stated therein in order to qualify the grants under Section 7 hereof
as grants under a non-discretionary formula under Rule 16b-3 such provision
(other than one relating to eligibility requirements, or the price and amount of
awards) shall be deemed automatically to be incorporated by reference into the
Plan with respect to grants of options to Non-Employee Directors.
16. Applicable Law. The law of the State of California will govern all
--------------
matters relating to this Plan except to the extent it is superseded by the laws
of the United States.
9
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
---------------------------------
DIRECTORS' NON-QUALIFIED STOCK OPTION AGREEMENT
-----------------------------------------------
This agreement (the "Agreement") is made as of __________ __, 199__
(the "Grant Date") between Pericom Semiconductor Corporation (the "Company") and
_________________ ("Optionee").
WITNESSETH:
WHEREAS, the Company has adopted the Pericom Semiconductor Corporation
1995 Stock Option Plan (the "Plan"), which Plan is incorporated in this
Agreement by reference and made a part of it (capitalized terms shall have the
meaning ascribed to them in the Plan);
WHEREAS, the Plan provides for automatic option grants to non-employee
directors of the Company;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. Option Grant. The Company hereby grants to Optionee the right and
------------
option to purchase from the Company on the terms and conditions hereinafter set
forth, all or any part of an aggregate of Five Thousand (5,000) shares of the
Common Stock, no par value, of the Company (the "Stock"). The exercise price of
the Stock subject to this option shall be $_______ per share. This grant is an
Initial Grant under Section 7 of the Plan.
2. Option Period. This option shall be exercisable only during the
-------------
Option Period, and during such Option Period, the exercisability of the option
shall be subject to the limitations of paragraph 3 and the vesting provisions of
paragraph 4. The Option Period shall commence on the Grant Date and, except as
provided in paragraph 3, shall end on the Terminal Date which shall be ten years
from the Grant Date.
3. Limits on Option Period. The Option Period may end before the
-----------------------
Terminal Date, as follows:
(a) If Optionee ceases to be a director on the Company's Board of
Directors (the "Board") for any reason other than cause, disability (within the
meaning of subparagraph (c) below) or death during the Option Period, the Option
Period shall terminate three months after the date Optionee ceases to be a
director or on the Terminal Date, whichever shall first occur, and the option
shall be exercisable only to the extent exercisable under paragraph 4 on the
date Optionee ceases to be a director.
(b) If Optionee should die while serving on the Board, the Option
Period shall end one year after the date of death or on the Terminal Date,
whichever shall first occur, and this option shall be exercisable only to the
extent exercisable under paragraph 4 on the date
1
<PAGE>
of Optionee's death. In the event of Optionee's death, Optionee's executor or
administrator or the person or persons to whom Optionee's rights under this
option shall pass by will or by the applicable laws of descent and distribution
may exercise the entire unexercised portion of this option (or any lesser
amount).
(c) If Optionee ceases to be a director by reason of disability,
as defined below, the Option Period shall end one year after the date Optionee
ceases to be a director or on the Terminal Date, whichever shall first occur,
and this option shall be exercisable only to the extent exercisable under
paragraph 4 on the date Optionee ceases to be a director. For purposes of this
subparagraph (c), an individual is permanently and totally disabled if he is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months. An individual shall not be considered to be permanently
and totally disabled unless he furnishes proof of the existence thereof in such
form and manner, and at such times, as the Board may require.
(d) If Optionee is removed from the Board for cause during the
Option Period, the Option Period shall terminate on the date of such Optionee's
removal as a director and shall not thereafter be exercisable to any extent.
4. Vesting of Right to Exercise Options.
------------------------------------
(a) Subject to other limitations contained in this Agreement, the
Optionee shall have the right to exercise this Option as to all shares beginning
on the Grant Date. No partial exercise of this Option may be for less than the
lesser of (i) five percent (5%) of the total number of shares originally covered
by the Option, or (ii) the remaining shares subject to the Option. In no event
shall the Company be required to issue fractional shares.
(b) Notwithstanding the foregoing, all options granted under this
Agreement shall be subject to the provisions of Section 13(d) of the Plan
(relating to the effect of a "Change in Control" on options granted to Non-
Employee Directors).
5. Method of Exercise. Optionee may exercise the option with respect
------------------
to all or any part of the shares of Stock then subject to such exercise as
follows:
(a) By giving the Company written notice of such exercise,
specifying the number of such shares as to which this option is exercised. Such
notice shall be accompanied by an amount equal to the exercise price of such
shares, in the form of any one or combination of the following: (1) Cash
Consideration; or (2) by delivery on a form prescribed by the Committee of an
irrevocable direction to a securities broker approved by the Committee to sell
shares of Stock and deliver all or a portion of the proceeds to the Company in
payment for the Stock.
(b) If required by the Company, Optionee shall give the Company
satisfactory assurance in writing, signed by Optionee or Optionee's legal
representative, as the case may be, that such shares are being purchased for
investment and not with a view to the distribution thereof, provided that such
assurance shall be deemed inapplicable to (1) any sale of
2
<PAGE>
such shares by such Optionee made in accordance with the terms of a registration
statement covering such sale, which has heretofore been (or may hereafter be)
filed and become effective under the Securities Act of 1933, as amended, and
with respect to which no stop order suspending the effectiveness thereof has
been issued, and (2) any other sale of such shares with respect to which, in the
opinion of counsel for the Company, such assurance is not required to be given
in order to comply with the provisions of the Securities Act of 1933, as
amended.
(c) As soon as practicable after receipt of the notice required
in paragraph 5(a) and satisfaction of the conditions set forth in paragraph
5(b), the Company shall, without transfer or issue tax and without other
incidental expense to Optionee, deliver to Optionee at the office of the
Company, at 2380 Bearing Drive, San Jose, California 95131, attention of the
Corporate Secretary, or such other place as may be mutually acceptable to the
Company and Optionee, a certificate or certificates of such shares of Stock;
provided, however, that the time of such delivery may be postponed by the
Company for such period as may be required for it with reasonable diligence to
comply with applicable registration requirements under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
applicable listing requirements of any national securities exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of such shares. If Optionee fails to accept delivery of and pay for all
or any part of the number of shares specified in such notice upon tender or
delivery thereof, Optionee's right to purchase such shares may be terminated by
the Company at its election.
6. Changes in Capitalization. If there should be any change in a
-------------------------
class of Stock subject to this option, through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
(in excess of 2 percent) or other change in the capital structure of the
Company, the Company shall make appropriate adjustments in order to preserve,
but not to increase, the benefits to Optionee, including adjustments of the
number and kind of shares of such Stock subject to this option and of the price
per share. Any adjustment made pursuant to this paragraph 7 as a consequence of
a change in the capital structure of the Company shall not entitle Optionee to
acquire a number of shares of such Stock of the Company or shares of stock of
any successor company greater than the number of shares Optionee would receive
if, prior to such change, Optionee had actually held a number of shares of such
Stock equal to the number of shares subject to this option.
7. Limitations on Transfer. To the extent required by Rule 16b-3 of
-----------------------
the Exchange Act, no Option shall be transferable by an Optionee other than by
operation of law or by will or by the laws of descent or distribution; provided
that, if Rule 16b-3 is amended after the Board's adoption of the Plan to permit
greater transferability of an Option, the Option hereunder shall be transferable
to the fullest extent provided by Rule 16b-3 as so amended. In the event of any
Rule 16b-3 permitted transfer of the Option, the transferee shall be entitled to
exercise the Option in the same manner and only to the same extent as the
Optionee (or his personal representative or the person who would have acquired
the right to exercise the Option by bequest or intestate succession) would have
been entitled to exercise the Option had the Option not been transferred.
3
<PAGE>
8. No Stockholder Rights. Neither Optionee nor any person entitled
---------------------
to exercise Optionee's rights in the event of Optionee's death shall have any of
the rights of a stockholder with respect to the shares of Stock subject to this
option except to the extent the certificates for such shares shall have been
issued upon the exercise of this option.
9. Notice. Any notice required to be given under the terms of this
------
Agreement shall be addressed to the Company in care of its Corporate Secretary
at the office of the Company at 2380 Bearing Drive, San Jose, California 95131,
and any notice to be given to Optionee shall be addressed to Optionee at the
address given by Optionee beneath Optionee's signature to this Agreement, or
such other address as either party to this Agreement may hereafter designate in
writing to the other. Any such notice shall be deemed to have been duly given
when enclosed in a properly sealed envelope addressed as aforesaid, registered
or certified and deposited (postage and registration or certification fee
prepaid) in a post office or branch post office regularly maintained by the
United States.
10. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of any successor or successors of the Company. Where the context
permits, "Optionee" as used in this Agreement shall include Optionee's executor,
administrator or other legal representative or the person or persons to whom
Optionee's rights pass by will or the applicable laws of descent and
distribution.
11. Withholding. Optionee agrees to make appropriate arrangements
-----------
with the Company for satisfaction of any applicable federal, state or local
income tax withholding requirements or social security requirements.
12. Applicable Law. The interpretation, performance, and enforcement
--------------
of this Agreement shall be governed by the laws of the State of California.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first written above.
Pericom Semiconductor Corporation, ----------------------------------
a California corporation Optionee
By: Signature:
------------------------------------ -----------------------
Its: Address:
------------------------------------ -----------------------
-----------------------
4
<PAGE>
ATTACHMENT A
------------
CONSENT OF SPOUSE
I, _________________________, spouse of ______________________
____________________________, have read and approved the foregoing Agreement.
In consideration of granting to my spouse the right to purchase shares of
Pericom Semiconductor Corporation as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact with respect to the exercise of any
rights of the Agreement insofar as I may have any rights under such community
property laws or similar laws relating to marital property in effect in the
state of our residence as of the date of the signing of the foregoing Agreement.
Dated: By:
------------------- ---------------------------
5
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
---------------------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
This Agreement is made as of ____________________ (the "Grant Date"),
between Pericom Semiconductor Corporation (the "Company") and
__________________________ ("Optionee").
WITNESSETH:
WHEREAS, the Company has adopted the Pericom Semiconductor Corporation
1995 Stock Option Plan (the "Plan"), which Plan is incorporated in this
Agreement by this reference and made a part of it (capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the Plan);
and
WHEREAS, the Company regards Optionee as a valuable employee of the
Company, and has determined that it would be to the advantage and in the
interests of the Company and its shareholders to grant the options provided for
in this Agreement to Optionee as an inducement to accept employment and/or to
remain in the service of the Company or its Affiliates (as defined in the Plan)
and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. Option Grant. The Company hereby grants to Optionee the right and
------------
option to purchase from the Company on the terms and conditions hereinafter set
forth, all or any part of an aggregate of ____________ shares of the common
stock of the Company (the "Stock"). This option is granted under, and pursuant
to the terms of the Plan and the provisions of the Plan shall control to the
extent they are inconsistent with the terms of this Agreement. This option is
not intended to satisfy the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") for incentive stock options.
2. Option Price. The purchase price of the Stock subject to this
------------
option shall be $__________ per share, which price is not less than _____
percent of the per share fair market value of such Stock as of the Grant Date as
determined by the Board of Directors of the Company (the "Board") or a Committee
(the "Committee") designated by it to administer the Plan. If the Board has not
appointed a Committee, then each reference to the "Committee" shall be construed
to refer to the Board. The term "Option Price" as used in this agreement refers
to the purchase price of the Stock subject to this option.
3. Option Period. This option shall be exercisable only during the
-------------
Option Period, and during such Option Period, the exercisability of the option
shall be subject to the
<PAGE>
limitations of Section 4 and the vesting provisions of Section 5. The Option
Period shall commence on the Grant Date and except as provided in Section 4,
shall terminate ten (10) years from the Grant Date (the "Termination Date").
4. Limits on Option Period. The Option Period may end before the
-----------------------
Termination Date, as follows:
(a) If Optionee ceases to be a bona fide employee of the Company or
an Affiliate for any reason other than as a result of disability (within the
meaning of Section 4(c)) or death, the Option Period shall terminate three (3)
months after the date of such cessation of employment or on the Termination
Date, whichever shall first occur, and the option shall be exercisable only to
the extent exercisable under Section 5 on the date of Optionee's cessation of
employment.
(b) If Optionee dies while in the employ of the Company or any of
its Affiliates, the Option Period shall end one (1) year after the date of death
or on the Termination Date, whichever shall first occur, and Optionee's
executor, administrator or personal representative or the person or persons to
whom Optionee's rights under this option shall pass by will or by the applicable
laws of descent and distribution may exercise this option only to the extent
exercisable under Section 5 on the date of Optionee's death.
(c) If Optionee's employment is terminated by reason of disability
(within the meaning of Section 22(e)(3) of the Code), the Option Period shall
end one (1) year after the date of Optionee's cessation of employment or on the
Termination Date, whichever shall first occur, and the option shall be
exercisable only to the extent exercisable under Section 5 on the date of
Optionee's cessation of employment.
(d) If Optionee is on a leave of absence from the Company or an
Affiliate due to disability, or for the purpose of serving the government of the
country in which the principal place of employment of Optionee is located,
either in a military or civilian capacity, or for such other purpose or reason
as the Committee may approve, Optionee shall not be deemed during the period of
such absence, by virtue of such absence alone, to have terminated employment
with the Company or an Affiliate except as the Committee may otherwise expressly
provide.
5. Vesting of Right to Exercise Options.
------------------------------------
(a) Subject to other limitations contained in this Agreement, the
Optionee shall have the right to exercise this Option in accordance with the
following schedule: (i) As to 25% of the number of shares covered by this
Option, at any time after the first anniversary of the vesting commencement date
of _______________ __, ____ (the "Vesting Commencement Date"); (ii) As to the
remaining 75% of the number of shares covered by this Option, an additional
2.083% of the total shares each month commencing after the first
2
<PAGE>
anniversary of the Vesting Commencement Date so that this Option is fully
exercisable as to all shares subject hereto four years from the Vesting
Commencement Date. No partial exercise of this Option may be for less than the
lesser of (i) five percent (5%) of the total number of shares originally covered
by the Option, or (ii) the remaining shares subject to the Option. In no event
shall the Company be required to issue fractional shares.
(b) Notwithstanding the foregoing, all options granted under this
Agreement shall be fully vested, nonforfeitable and become exercisable
immediately prior to the specified effective date of a Change in Control.
However, an outstanding option may not be accelerated under this Section 5(c) if
and to the extent (i) such option is, in connection with the transaction giving
rise to a Change of Control, either to be assumed by the successor or parent
thereof or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof, or (ii) such
option is to be replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time of the
corporate transaction giving rise to the Change of Control and provides for
subsequent payment in accordance with the same vesting schedule applicable to
such option. In the event of a Change in Control described in clauses (i), (ii)
and (v) of Section 13(a) of the Plan, the Option shall remain exercisable for
the remaining term of the Option. In the event of a Change in Control described
in clauses (iii) or (iv) of Section 13(a) of the Plan, the Option shall
terminate as of the effective date of the merger, disposition of assets,
liquidation or dissolution described therein. In no event shall this Option be
exercised after the Termination Date.
6. Method of Exercise. Optionee may exercise the option with
------------------
respect to all or any part of the shares of Stock then subject to such exercise
as follows:
(a) By giving the Company written notice of such exercise,
specifying the number of such shares as to which the option is exercised. Such
notice shall be accompanied by an amount equal to the Option Price of such
shares, in the form of any one or combination of the following: (i) cash, by
Optionee's personal check, a certified check, bank draft, or postal or express
money order payable to the order of the Company in lawful money of the United
States; (ii) shares of Stock owned by Optionee or with shares of Stock withheld
from the shares otherwise deliverable to Optionee upon exercise of the option;
(iii) by delivery on a form proscribed by the Committee of an irrevocable
direction to a securities broker approved by the Committee to sell shares and
deliver all or a portion of the proceeds to the Company in payment for the
Stock; (iv) a promissory note of the Optionee, or (v) in any combination of the
foregoing. Any Stock used to exercise options shall be valued at its fair market
value on the date of the exercise of the option and shall be held for the
requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes. The shares of Stock shall be valued in accordance
with procedures established by the Committee. Any promissory note used to
exercise this option shall be a full recourse, interest-bearing obligation
containing such terms as the Committee shall determine. If a promissory note is
used, the
3
<PAGE>
Optionee agrees to execute such further documents as the Committee may deem
necessary or appropriate in connection with issuing the promissory note,
perfecting a security interest in the Stock purchased with the promissory note,
and any related terms or conditions that the Committee may propose. Such
further documents may include, not by way of limitation, a security agreement,
an escrow agreement, a voting trust agreement and an assignment separate from
the certificate.
(b) Optionee (and Optionee's spouse, if any) shall be required, as
a condition precedent to acquiring Stock through exercise of the option, to
execute one or more agreements relating to obligations in connection with
ownership of the Stock or restrictions on transfer of the Stock no less
restrictive than the obligations and restrictions to which the other
shareholders of the Company are subject at the time of such exercise.
(c) If required by the Committee, Optionee shall give the Company
satisfactory assurance in writing, signed by Optionee or his legal
representative, as the case may be, that such shares are being purchased for
investment and not with a view to the distribution thereof, provided that such
assurance shall be deemed inapplicable to (i) any sale of such shares by such
Optionee made in accordance with the terms of a registration statement covering
such sale, which may hereafter be filed and become effective under the
Securities Act of 1933, as amended, and with respect to which no stop order
suspending the effectiveness thereof has been issued, and (ii) any other sale of
such shares with respect to which in the opinion of counsel for the Company,
such assurance is not required to be given in order to comply with the
provisions of the Securities Act of 1933, as amended.
(d) As soon as practicable after receipt of the notice required in
Section 6(a) and satisfaction of the conditions set forth in Sections 6(b) and
6(c), the Company shall, without transfer or issue tax and without other
incidental expense to Optionee, deliver to Optionee at the office of the
Company, at 2380 Bearing Drive, San Jose, California 95131, attention of the
Corporate Secretary, or such other place as may be mutually acceptable to the
Company and Optionee, a certificate or certificates of such shares of Stock;
provided, however, that the time of such delivery may be postponed by the
Company for such period as may be required for it with reasonable diligence to
comply with applicable registration requirements under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
applicable listing requirements of any national securities exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of such shares.
7. Adjustments. If there should be any change in a class of Stock
-----------
subject to this option, through merger, consolidation, reorganization,
recapitalization, reincorporation, stock split, stock dividend (in excess of 2
percent) or other change in the capital structure of the Company without
consideration, the Company shall make appropriate adjustments in order to
preserve, but not to increase, the benefits to Optionee, including adjustments
of the number and kind of shares of such Stock subject to this option and of the
price per share. Any
4
<PAGE>
adjustment made pursuant to this Section 7 as a consequence of a change in the
corporate structure of the Company shall not entitle Optionee to acquire a
number of shares of such Stock of the Company or shares of stock of any
successor company greater than the number of shares Optionee would receive if,
prior to such change, Optionee had actually held a number of shares of such
Stock equal to the number of shares subject to this option.
8. Limitations on Transfer. Except as otherwise provided in the
-----------------------
Plan, this option shall, during Optionee's lifetime, be exercisable only by
Optionee, and neither this option nor any right hereunder shall be transferable
by Optionee by operation of law or otherwise other than by will or the laws of
descent and distribution. In the event of any attempt by Optionee to alienate,
assign, pledge, hypothecate, or otherwise dispose of this option or of any right
hereunder, except as provided for in this Agreement, or in the event of the levy
of any attachment, execution, or similar process upon the rights or interest
hereby conferred, the Company at its election may terminate this option by
notice to Optionee and this option shall thereupon become null and void.
9. No Shareholder Rights. Neither Optionee nor any person entitled
---------------------
to exercise Optionee's rights in the event of his death shall have any of the
rights of a shareholder with respect to the shares of Stock subject to this
option except to the extent the certificates for such shares shall have been
issued upon the exercise of this option.
10. No Effect on Terms of Employment. SUBJECT TO THE TERMS OF ANY
--------------------------------
WRITTEN EMPLOYMENT CONTRACT TO THE CONTRARY, THE COMPANY (OR ITS AFFILIATE WHICH
EMPLOYS OPTIONEE) SHALL HAVE THE RIGHT TO TERMINATE OR CHANGE THE TERMS OF
EMPLOYMENT OF OPTIONEE AT ANY TIME AND FOR ANY REASON WHATSOEVER, WITH OR
WITHOUT CAUSE.
11. Notice. Any notice required to be given under the terms of this
------
Agreement shall be addressed to the Company in care of its Corporate Secretary
at the Office of the Company at 2380 Bearing Drive, San Jose, California 95131,
and any notice to be given to Optionee shall be addressed to him at the address
given by him beneath his signature to this Agreement, or such other address as
either party to this Agreement may hereafter designate in writing to the other.
Any such notice shall be deemed to have been duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, registered or
certified and deposited (postage or registration or certification fee prepaid)
in a post office or branch post office regularly maintained by the United
States.
12. Committee Decisions Conclusive. All decisions of the Committee
------------------------------
upon any question arising under the Plan or under this Agreement shall be
conclusive.
13. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of any successor or successors of the Company. Where the context
permits, "Optionee" as used in this Agreement shall include Optionee's executor,
administrator or personal
5
<PAGE>
representative or the person or persons to whom Optionee's rights pass by will
or the applicable laws of descent and distribution.
14. Applicable Law. The interpretation, performance and enforcement
--------------
of this Agreement shall be governed by the laws of the State of California.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the day and year first above written.
Pericom Semiconductor Corporation,
a California corporation
By:________________________________
Its:_______________________________
___________________________________
Optionee
Address:___________________________
___________________________________
6
<PAGE>
ATTACHMENT A
------------
CONSENT OF SPOUSE
I, _________________________, spouse of ______________________
____________________________, have read and approved the foregoing Agreement.
In consideration of granting to my spouse the right to purchase shares of
Pericom Semiconductor Corporation as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact with respect to the exercise of any
rights of the Agreement insofar as I may have any rights under such community
property laws or similar laws relating to marital property in effect in the
state of our residence as of the date of the signing of the foregoing Agreement.
Dated:_____________________ By:_______________________________
7
<PAGE>
PERICOM SEMICONDUCTOR CORPORATION
---------------------------------
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
This Agreement is made as of _______________, 199_ (the "Grant Date"),
between Pericom Semiconductor Corporation (the "Company") and
__________________________ ("Optionee").
WITNESSETH:
WHEREAS, the Company has adopted the Pericom Semiconductor Corporation
1995 Stock Option Plan (the "Plan"), which Plan is incorporated in this
Agreement by this reference and made a part of it (capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the Plan);
and
WHEREAS, the Company regards Optionee as a valuable employee of the
Company, and has determined that it would be to the advantage and in the
interests of the Company and its shareholders to grant the options provided for
in this Agreement to Optionee as an inducement to accept employment and/or to
remain in the service of the Company or its Affiliates (as defined in the Plan)
and as an incentive for increased efforts during such service;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties to this Agreement hereby agree as follows:
1. Option Grant. The Company hereby grants to Optionee the right and
------------
option to purchase from the Company on the terms and conditions hereinafter set
forth, all or any part of an aggregate of ____________ shares of the common
stock of the Company (the "Stock"). This option is granted under, and pursuant
to the terms of the Plan and the provisions of the Plan shall control to the
extent they are inconsistent with the terms of this Agreement. This option is
intended to satisfy the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and qualify as an incentive stock option.
Should all or a portion of the option granted hereunder fail to qualify as an
incentive stock option for any reason, the nonqualifying portion shall convert
automatically to a nonqualified stock option with the same terms.
2. Option Price. The purchase price of the Stock subject to this
------------
option shall be $__________ per share, which price is not less than the per
share fair market value of such Stock as of the Grant Date as determined by the
Board of Directors of the Company (the "Board") or a Committee (the "Committee")
designated by it to administer the Plan, or, if Optionee possesses more than ten
percent of the combined voting power of the Company or any of its Affiliates,
not less than 110 percent of the per share fair market value of the Stock as of
the Grant Date as determined by the Committee. If the Board has not appointed a
Committee, then each reference to the "Committee" shall be construed to refer to
the Board. The term "Option Price" as used in this agreement refers to the
purchase price of the Stock subject to this option.
1
<PAGE>
3. Option Period. This option shall be exercisable only during the
-------------
Option Period, and during such Option Period, the exercisability of the option
shall be subject to the limitations of Section 4 and the vesting provisions of
Section 5. The Option Period shall commence on the Grant Date and except as
provided in Section 4, shall terminate ten (10) years from the Grant Date (the
"Termination Date"); provided, however, that the Option Period for a person
possessing more than ten percent of the combined voting power of the Company or
an Affiliate shall terminate five (5) years from the Grant Date, and such date
shall be the Termination Date for the Option.
4. Limits on Option Period. The Option Period may end before the
-----------------------
Termination Date, as follows:
(a) If Optionee ceases to be a bona fide employee of the Company or
an Affiliate for any reason other than as a result of disability (within the
meaning of Section 4(c)) or death, the Option Period shall terminate three (3)
months after the date of such cessation of employment or on the Termination
Date, whichever shall first occur, and the option shall be exercisable only to
the extent exercisable under Section 5 on the date of Optionee's cessation of
employment.
(b) If Optionee dies while in the employ of the Company or any of
its Affiliates, the Option Period shall end one (1) year after the date of death
or on the Termination Date, whichever shall first occur, and Optionee's
executor, administrator or personal representative or the person or persons to
whom Optionee's rights under this option shall pass by will or by the applicable
laws of descent and distribution may exercise this option only to the extent
exercisable under Section 5 on the date of Optionee's death.
(c) If Optionee's employment is terminated by reason of disability
(within the meaning of Section 22(e)(3) of the Code), the Option Period shall
end one (1) year after the date of Optionee's cessation of employment or on the
Termination Date, whichever shall first occur, and the option shall be
exercisable only to the extent exercisable under Section 5 on the date of
Optionee's cessation of employment.
(d) If Optionee is on a leave of absence from the Company or an
Affiliate due to disability, or for the purpose of serving the government of the
country in which the principal place of employment of Optionee is located,
either in a military or civilian capacity, or for such other purpose or reason
as the Committee may approve, Optionee shall not be deemed during the period of
such absence, by virtue of such absence alone, to have terminated employment
with the Company or an Affiliate except as the Committee may otherwise expressly
provide.
5. Vesting of Right to Exercise Options.
------------------------------------
(a) Subject to other limitations contained in this Agreement, the
Optionee shall have the right to exercise this Option as to 2.083% of the total
shares each month commencing after the vesting commencement date of
_______________ __, ____ (the "Vesting Commencement Date") so that this Option
is fully exercisable as to all shares subject hereto four
2
<PAGE>
years from the Vesting Commencement Date. No partial exercise of this Option may
be for less than the lesser of (i) five percent (5%) of the total number of
shares originally covered by the Option, or (ii) the remaining shares subject to
the Option. In no event shall the Company be required to issue fractional
shares.
(b) The aggregate fair market value (determined as of the time such
option is granted) of the Stock with respect to which incentive stock options
are exercisable for the first time in any calendar year (under the Plan and any
other incentive stock option plans of the Company or its Affiliates) shall not
exceed $100,000.
(c) Notwithstanding the foregoing, all options granted under this
Agreement shall be fully vested, nonforfeitable and become exercisable
immediately prior to the specified effective date of a Change in Control.
However, an outstanding option may not be accelerated under this Section 5(c) if
and to the extent (i) such option is, in connection with the transaction giving
rise to a Change of Control, either to be assumed by the successor or parent
thereof or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof, or (ii) such
option is to be replaced with a cash incentive program of the successor
corporation that preserves the option spread existing at the time of the
corporate transaction giving rise to the Change of Control and provides for
subsequent payment in accordance with the same vesting schedule applicable to
such option. In the event of a Change in Control described in clauses (i), (ii)
and (v) of Section 13(a) of the Plan, the Option shall remain exercisable for
the remaining term of the Option. In the event of a Change in Control described
in clauses (iii) or (iv) of Section 13(a) of the Plan, the Option shall
terminate as of the effective date of the merger, disposition of assets,
liquidation or dissolution described therein. In no event shall this Option be
exercised after the Termination Date.
6. Method of Exercise. Optionee may exercise the option with respect
------------------
to all or any part of the shares of Stock then subject to such exercise as
follows:
(a) By giving the Company written notice of such exercise,
specifying the number of such shares as to which the option is exercised. Such
notice shall be accompanied by an amount equal to the Option Price of such
shares, in the form of any one or combination of the following: (i) cash, by
Optionee's personal check, a certified check, bank draft, or postal or express
money order payable to the order of the Company in lawful money of the United
States; (ii) shares of Stock owned by Optionee or with shares of Stock withheld
from the shares otherwise deliverable to Optionee upon exercise of the option;
(iii) by delivery on a form proscribed by the Committee of an irrevocable
direction to a securities broker approved by the Committee to sell shares and
deliver all or a portion of the proceeds to the Company in payment for the
Stock; (iv) a promissory note of the Optionee, or (v) in any combination of the
foregoing. Any Stock used to exercise options shall be valued at its fair market
value on the date of the exercise of the option and shall be held for the
requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes. The shares of Stock shall be valued in accordance
with procedures established by the Committee. Any promissory note used to
exercise this option shall be a full recourse, interest-bearing obligation
containing such terms as the Committee shall determine. If a promissory note is
used, the Optionee agrees to execute such
3
<PAGE>
further documents as the Committee may deem necessary or appropriate in
connection with issuing the promissory note, perfecting a security interest in
the Stock purchased with the promissory note, and any related terms or
conditions that the Committee may propose. Such further documents may include,
not by way of limitation, a security agreement, an escrow agreement, a voting
trust agreement and an assignment separate from the certificate.
(b) Optionee (and Optionee's spouse, if any) shall be required, as
a condition precedent to acquiring Stock through exercise of the option, to
execute one or more agreements relating to obligations in connection with
ownership of the Stock or restrictions on transfer of the Stock no less
restrictive than the obligations and restrictions to which the other
shareholders of the Company are subject at the time of such exercise.
(c) If required by the Committee, Optionee shall give the Company
satisfactory assurance in writing, signed by Optionee or his legal
representative, as the case may be, that such shares are being purchased for
investment and not with a view to the distribution thereof, provided that such
assurance shall be deemed inapplicable to (i) any sale of such shares by such
Optionee made in accordance with the terms of a registration statement covering
such sale, which may hereafter be filed and become effective under the
Securities Act of 1933, as amended, and with respect to which no stop order
suspending the effectiveness thereof has been issued, and (ii) any other sale of
such shares with respect to which in the opinion of counsel for the Company,
such assurance is not required to be given in order to comply with the
provisions of the Securities Act of 1933, as amended.
(d) As soon as practicable after receipt of the notice required in
Section 6(a) and satisfaction of the conditions set forth in Sections 6(b) and
6(c), the Company shall, without transfer or issue tax and without other
incidental expense to Optionee, deliver to Optionee at the office of the
Company, at 2380 Bearing Drive, San Jose, California 95131, attention of the
Corporate Secretary, or such other place as may be mutually acceptable to the
Company and Optionee, a certificate or certificates of such shares of Stock;
provided, however, that the time of such delivery may be postponed by the
Company for such period as may be required for it with reasonable diligence to
comply with applicable registration requirements under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
applicable listing requirements of any national securities exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of such shares.
7. Adjustments. If there should be any change in a class of Stock
-----------
subject to this option, through merger, consolidation, reorganization,
recapitalization, reincorporation, stock split, stock dividend (in excess of 2
percent) or other change in the capital structure of the Company without
consideration, the Company shall make appropriate adjustments in order to
preserve, but not to increase, the benefits to Optionee, including adjustments
of the number and kind of shares of such Stock subject to this option and of the
price per share. Any adjustment made pursuant to this Section 7 as a consequence
of a change in the corporate structure of the Company shall not entitle Optionee
to acquire a number of shares of such Stock of the Company or shares of stock of
any successor company greater than the number of shares Optionee would
4
<PAGE>
receive if, prior to such change, Optionee had actually held a number of shares
of such Stock equal to the number of shares subject to this option.
8. Limitations on Transfer. Except as otherwise provided in the
-----------------------
Plan, this option shall, during Optionee's lifetime, be exercisable only by
Optionee, and neither this option nor any right hereunder shall be transferable
by Optionee by operation of law or otherwise other than by will or the laws of
descent and distribution. In the event of any attempt by Optionee to alienate,
assign, pledge, hypothecate, or otherwise dispose of this option or of any right
hereunder, except as provided for in this Agreement, or in the event of the levy
of any attachment, execution, or similar process upon the rights or interest
hereby conferred, the Company at its election may terminate this option by
notice to Optionee and this option shall thereupon become null and void.
9. No Shareholder Rights. Neither Optionee nor any person entitled
---------------------
to exercise Optionee's rights in the event of his death shall have any of the
rights of a shareholder with respect to the shares of Stock subject to this
option except to the extent the certificates for such shares shall have been
issued upon the exercise of this option.
10. No Effect on Terms of Employment. SUBJECT TO THE TERMS OF ANY
--------------------------------
WRITTEN EMPLOYMENT CONTRACT TO THE CONTRARY, THE COMPANY (OR ITS AFFILIATE WHICH
EMPLOYS OPTIONEE) SHALL HAVE THE RIGHT TO TERMINATE OR CHANGE THE TERMS OF
EMPLOYMENT OF OPTIONEE AT ANY TIME AND FOR ANY REASON WHATSOEVER, WITH OR
WITHOUT CAUSE.
11. Notice. Any notice required to be given under the terms of this
------
Agreement shall be addressed to the Company in care of its Corporate Secretary
at the Office of the Company at 2380 Bearing Drive, San Jose, California 95131,
and any notice to be given to Optionee shall be addressed to him at the address
given by him beneath his signature to this Agreement, or such other address as
either party to this Agreement may hereafter designate in writing to the other.
Any such notice shall be deemed to have been duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, registered or
certified and deposited (postage or registration or certification fee prepaid)
in a post office or branch post office regularly maintained by the United
States.
12. Committee Decisions Conclusive. All decisions of the Committee
------------------------------
upon any question arising under the Plan or under this Agreement shall be
conclusive.
13. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of any successor or successors of the Company. Where the context
permits, "Optionee" as used in this Agreement shall include Optionee's executor,
administrator or personal representative or the person or persons to whom
Optionee's rights pass by will or the applicable laws of descent and
distribution.
14. Early Dispositions. Optionee agrees, as partial consideration for
------------------
the designation of this option as an incentive stock option under Section 422 of
the Code, to notify the Company in writing within thirty (30) days of any
disposition of any shares acquired by
5
<PAGE>
exercise of this option if such disposition occurs within two (2) years from the
Grant Date or within one (1) year from the date Optionee purchased such shares
by exercise of this option. If the Company is required to withhold an amount for
the purpose of any income and employment taxes as a result of an early
disposition, Optionee acknowledges that he or she will be required to satisfy
the amount of such withholding in a manner that the Company prescribes.
15. Applicable Law. The interpretation, performance and enforcement of
--------------
this Agreement shall be governed by the laws of the State of California.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the day and year first above written.
Pericom Semiconductor Corporation,
a California corporation
By:__________________________________
Its:_________________________________
_____________________________________
Optionee
Address:_____________________________
_____________________________________
6
<PAGE>
ATTACHMENT A
------------
CONSENT OF SPOUSE
I, _________________________, spouse of ______________________
____________________________, have read and approved the foregoing Agreement.
In consideration of granting to my spouse the right to purchase shares of
Pericom Semiconductor Corporation as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact with respect to the exercise of any
rights of the Agreement insofar as I may have any rights under such community
property laws or similar laws relating to marital property in effect in the
state of our residence as of the date of the signing of the foregoing Agreement.
Dated:_______________________ By:_________________________________
7
<PAGE>
EXHIBIT 10.3
PERICOM SEMICONDUCTOR CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 1997 Employee Stock
Purchase Plan of Pericom Semiconductor Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Parents or Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll deductions. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Accrual Period" means a period of approximately six months,
--------------
commencing on February 1 and August 1 of each year and terminating on the next
following July 31 or January 31, respectively; provided, however, that the
first Accrual Period shall commence on the Effective Date and shall end on
August 31, 1998.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Change in Control" means a change in ownership or control of the
-----------------
Company effected through the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Common Stock" means the common stock of the Company.
------------
(f) "Company" means Pericom Semiconductor Corporation, a California
-------
corporation.
(g) "Compensation" means an Employee's base salary from the Company or
------------
one or more Designated Parents or Subsidiaries, including such amounts of base
salary as are deferred by the Employee (i) under a qualified cash or deferred
arrangement described in Section 401(k) of the Code, or (ii) to a plan qualified
under Section 125 of the Code. Compensation does not include overtime, bonuses,
annual awards, other incentive payments, reimbursements or other expense
allowances, fringe benefits (cash or noncash), moving expenses, deferred
1
<PAGE>
compensation, contributions (other than contributions described in the first
sentence) made on the Employee's behalf by the Company or one or more Designated
Parents or Subsidiaries under any employee benefit or welfare plan now or
hereafter established, and any other payments not specifically referenced in the
first sentence.
(h) "Corporate Transaction" means any of the following stockholder-
---------------------
approved transactions to which the Company is a party:
(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital
stock of the Company's subsidiary corporations) in connection with
complete liquidation or dissolution of the Company; or
(3) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger; provided
that if such merger is preceded by a Change in Control within six (6)
months of the merger, then a Corporate Transaction will be deemed to
have occurred if securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's outstanding
securities are transferred pursuant to the merger to a person or
persons different from those who held such securities immediately
prior to such Change in Control.
(i) "Designated Parents or Subsidiaries" means the Parents or
----------------------------------
Subsidiaries which have been designated by the Plan Administrator from time to
time as eligible to participate in the Plan.
(j) "Effective Date" means the effective date of the Registration
--------------
Statement relating to the Company's initial public offering of its Common Stock.
However, should any Designated Parent or Subsidiary become a participating
company in the Plan after such date, then such entity shall designate a separate
Effective Date with respect to its employee-participants.
(k) "Employee" means any individual, including an officer or director,
--------
who is an employee of the Company or a Designated Parent or Subsidiary for
purposes of Section 423 of the Code. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual's employer.
Where the period of leave exceeds ninety (90) days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the ninety-first (91st) day of
such leave, for purposes of determining eligibility to participate in the Plan.
2
<PAGE>
(l) "Enrollment Date" means the first day of each Purchase Period.
---------------
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(n) "Exercise Date" means the last day of each Accrual Period.
-------------
(o) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(1) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a share of Common
Stock for the last market trading day prior to the time of the
determination (or, if no closing price was reported on that date, on
the last trading date on which a closing price was reported) on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock or the Nasdaq National Market, whichever
is applicable or (B) if the Common Stock is not traded on any such
exchange or national market system, the average of the closing bid and
asked prices of a share of Common Stock on the Nasdaq Small Cap Market
for the day prior to the time of the determination (or, if no such
prices were reported on that date, on the last date on which such
prices were reported), in each case, as reported in The Wall Street
Journal or such other source as the Plan Administrator deems reliable;
or
(2) In the absence of an established market of the type described
in (1), above, for the Common Stock, and subject to (3), below, the
Fair Market Value thereof shall be determined by the Plan
Administrator in good faith; or
(3) On the Effective Date, the Fair Market Value shall be the
price at which the Board, or if applicable, the Pricing Committee of
the Board, and the underwriters agree to offer the Common Stock to the
public in the initial public offering of the Common Stock, net of
discounts and underwriting commissions.
(p) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(q) "Participant" means an Employee of the Company or Designated
-----------
Parent or Subsidiary who is actively participating in the Plan.
(r) "Plan" means this Employee Stock Purchase Plan.
----
(s) "Plan Administrator" means either the Board or a committee of the
------------------
Board that is responsible for the administration of the Plan.
(t) "Purchase Period" means a purchase period established pursuant to
---------------
Section 4 hereof.
3
<PAGE>
(u) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(v) "Reserves" means the number of shares of Common Stock covered by
--------
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Eligibility.
-----------
(a) General. Any individual who is an Employee on a given Enrollment
-------
Date shall be eligible to participate in the Plan for the Purchase Period
commencing with such Enrollment Date.
(b) Limitations on Grant and Accrual. Any provisions of the Plan to
--------------------------------
the contrary notwithstanding, no Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Employee (taking into account
stock owned by any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
Parent or Subsidiary, or (ii) which permits his/her rights to purchase stock
under all employee stock purchase plans of the Company and its Parents or
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. The determination of the accrual of the right to
purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.
(c) Other Limits on Eligibility. Notwithstanding Subsection (a),
---------------------------
above, the following Employees shall not be eligible to participate in the Plan
for any relevant Purchase Period: (i) Employees whose customary employment is 20
hours or less per week; (ii) Employees whose customary employment is for not
more than 5 months in any calendar year; and (iii) Employees who are subject to
rules or laws of a foreign jurisdiction that prohibit or make impractical the
participation of such Employees in the Plan.
4. Purchase Periods.
----------------
(a) The Plan shall be implemented through overlapping or consecutive
Purchase Periods until such time as (i) the maximum number of shares of Common
Stock available for issuance under the Plan shall have been purchased or (ii)
the Plan shall have been sooner terminated in accordance with Section 19 hereof.
The maximum duration of a Purchase Period shall be twenty-seven (27) months.
Initially, the Plan shall be implemented through
4
<PAGE>
overlapping Purchase Periods of twenty-four (24) months' duration commencing
each February 1 and August 1 following the Effective Date (except that the
initial Purchase Period shall commence on the Effective Date and shall end on
January 31, 2000). The Plan Administrator shall have the authority to change
the length of any Purchase Period and the length of Accrual Periods within any
such Purchase Period subsequent to the initial Purchase Period by announcement
at least thirty (30) days prior to the commencement of the Purchase Period and
to determine whether subsequent Purchase Periods shall be consecutive or
overlapping.
(b) A Participant shall be granted a separate option for each Purchase
Period in which he/she participates. The option shall be granted on the
Enrollment Date and shall be automatically exercised in successive installments
on the Exercise Dates ending within the Purchase Period.
(c) An Employee may participate in only one Purchase Period at a time.
Accordingly, except as provided in Section 4(d), an Employee who wishes to join
a new Purchase Period must withdraw from the current Purchase Period in which
he/she is participating and must also enroll in the new Purchase Period prior to
the Enrollment Date for that Purchase Period.
(d) If on the first day of any Accrual Period in a Purchase Period in
which a Participant is participating, the Fair Market Value of the Common Stock
is less than the Fair Market Value of the Common Stock on the Enrollment Date of
the Purchase Period (after taking into account any adjustment during the
Purchase Period pursuant to Section 18(a)), the Purchase Period shall be
terminated automatically and the Participant shall be enrolled automatically in
the new Purchase Period which has its first Accrual Period commencing on that
date, provided the Participant is eligible to participate in the Plan on that
date and has not elected to terminate participation in the Plan.
(e) Except as specifically provided herein, the acquisition of Common
Stock through participation in the Plan for any Purchase Period shall neither
limit nor require the acquisition of Common Stock by a Participant in any
subsequent Purchase Period.
5. Participation.
-------------
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the designated payroll office of
the Company at least ten (10) business days prior to the Enrollment Date for the
Purchase Period in which such participation will commence, unless a later time
for filing the subscription agreement is set by the Plan Administrator for all
eligible Employees with respect to a given Purchase Period.
(b) Payroll deductions for a Participant shall commence with the first
payroll period following the Enrollment Date and shall end on the last complete
payroll period during the Purchase Period, unless sooner terminated by the
Participant as provided in Section 10.
5
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a Participant files his/her subscription agreement,
he/she shall elect to have payroll deductions made during the Purchase Period in
an amount not exceeding ten percent (10%) of the Compensation which he/she
receives during the Purchase Period.
(b) All payroll deductions made for a Participant shall be credited to
his/her account under the Plan and will be withheld in whole percentages only.
A Participant may not make any additional payments into such account.
(c) A Participant may discontinue his/her participation in the Plan as
provided in Section 10, or may decrease the rate of his/her payroll deductions
during the Purchase Period by completing and filing with the Company a new
subscription agreement authorizing a decrease in the payroll deduction rate.
The decrease in rate shall be effective with the first full payroll period
commencing ten (10) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A Participant may increase the rate of his/her
payroll deductions for a future Purchase Period by filing with the Company a new
subscription agreement authorizing an increase in the payroll deduction rate
within ten (10) business days (unless the Company elects to process a given
change in participation more quickly) before the commencement of the upcoming
Purchase Period. A Participant's subscription agreement shall remain in effect
for successive Purchase Periods unless terminated as provided in Section 10.
The Plan Administrator shall be authorized to limit the number of payroll
deduction rate changes during any Purchase Period.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a Participant's
payroll deductions may be decreased to 0% at such time during any Accrual Period
which is scheduled to end during the current calendar year (the "Current Accrual
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Accrual Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Accrual Period equal $21,250. Payroll deductions shall recommence at
the rate provided in such Participant's subscription agreement at the beginning
of the first Accrual Period which is scheduled to end in the following calendar
year, unless terminated by the Participant as provided in Section 10.
7. Grant of Option. On the Enrollment Date, each Participant in
---------------
such Purchase Period shall be granted an option to purchase on each Exercise
Date of such Purchase Period (at the applicable Purchase Price) up to a number
of shares of the Common Stock determined by dividing such Participant's payroll
deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase Price;
provided (i) that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof, and (ii) the maximum number of shares of Common
Stock a Participant shall be permitted to purchase in any Accrual Period shall
be 3,500 shares, subject to adjustment as provided in Section 18 hereof.
Exercise of the option shall occur as provided in Section 8, unless
6
<PAGE>
the Participant has withdrawn pursuant to Section 10, and the option, to the
extent not exercised, shall expire on the last day of the Purchase Period.
8. Exercise of Option. Unless a Participant withdraws from the Plan
------------------
as provided in Section 10, below, his/her option for the purchase of shares will
be exercised automatically on each Exercise Date, and the maximum number of full
shares subject to the option shall be purchased for such Participant at the
applicable Purchase Price with the accumulated payroll deductions in his/her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be carried over to the next Accrual Period or Purchase Period,
whichever applies, or returned to the Participant, if the Participant withdraws
from the Plan. Any amount remaining in a Participant's account following the
purchase of shares on the Exercise Date which exceeds the cost of one full share
of Common Stock on the Exercise Date shall be returned to the Participant and
shall not be carried over to the next Purchase Period. During a Participant's
lifetime, a Participant's option to purchase shares hereunder is exercisable
only by him/her.
9. Delivery. Upon receipt of a request from a Participant after
--------
each Exercise Date on which a purchase of shares occurs, the Company shall
arrange the delivery to such Participant, as promptly as practicable, of a
certificate representing the shares purchased upon exercise of his/her option.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his/her account and not yet used to exercise his/her
option under the Plan at any time by giving written notice to the Company in the
form of Exhibit B to this Plan. All of the Participant's payroll deductions
credited to his/her account will be paid to such Participant as promptly as
practicable after receipt of notice of withdrawal, such Participant's option for
the Purchase Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Purchase Period.
If a Participant withdraws from a Purchase Period, payroll deductions will not
resume at the beginning of the succeeding Purchase Period unless the Participant
delivers to the Company a new subscription agreement.
(b) Upon a Participant's ceasing to be an Employee for any reason or
upon termination of a Participant's employment relationship (as described in
Section 2(j)), the payroll deductions credited to such Participant's account
during the Purchase Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under Section 14, and such Participant's option will be
automatically terminated.
11. Interest. No interest shall accrue on the payroll deductions
--------
credited to a Participant's account under the Plan.
7
<PAGE>
12. Stock.
-----
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be 300,000 shares, subject to adjustment
upon changes in capitalization of the Company as provided in Section 18. If on
a given Exercise Date the number of shares with respect to which options are to
be exercised exceeds the number of shares then available under the Plan, the
Plan Administrator shall make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable and as it
shall determine to be equitable.
(b) A Participant will have no interest or voting right in shares
covered by his/her option until such shares are actually purchased on the
Participant's behalf in accordance with the applicable provisions of the Plan.
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his/her spouse.
13. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all persons.
14. Designation of Beneficiary.
--------------------------
(a) Each Participant will file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of such Participant's death. If a Participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the Participant
(and his/her spouse, if any) at any time by written notice. In the event of the
death of a Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant's death, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the Participant, or if no such executor or administrator has
been appointed (to the knowledge of the Plan Administrator), the Plan
Administrator, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Plan Administrator, then to
such other person as the Plan Administrator may designate.
15. Transferability. Neither payroll deductions credited to a
---------------
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the Participant. Any
8
<PAGE>
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Plan Administrator may treat such act as an
election to withdraw funds from a Purchase Period in accordance with Section 10.
16. Use of Funds. All payroll deductions received or held by the
------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
-------
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization; Corporate
-----------------------------------------------------
Transactions.
- ------------
(a) Adjustments Upon Changes in Capitalization. Subject to any
------------------------------------------
required action by the stockholders of the Company, the Reserves, as well as the
Purchase Price, 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 similar event resulting in an increase or decrease in
the number of issued shares of Common Stock. Such adjustment shall be made by
the Plan Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue 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. The Plan Administrator may, if it so determines in the exercise
of its sole discretion, make provision for adjusting the Reserves, as well as
the price per share of Common Stock covered by each outstanding option, in the
event the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock.
(b) Corporate Transactions. In the event of a proposed Corporate
----------------------
Transaction, each option under the Plan shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Plan Administrator determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten the Purchase Period then in progress by setting a new Exercise Date
(the "New Exercise Date"). If the Plan Administrator shortens the Purchase
Period then in progress in lieu of assumption or substitution in the event of a
Corporate Transaction, the Plan Administrator shall notify each Participant in
writing, at least ten (10) days prior to the New Exercise Date, that the
Exercise Date for his/her option has been changed to the New Exercise Date and
that his/her option will be exercised automatically on the New Exercise Date,
unless prior to such date he/she has withdrawn from the Purchase Period as
provided in Section 10. For purposes of this Subsection, an option granted
under the Plan shall be deemed to be assumed if, following the Corporate
Transaction, the option confers the right to purchase, for each share of Common
Stock subject to the option immediately prior to the Corporate Transaction, the
9
<PAGE>
consideration (whether stock, cash or other securities or property) received in
the Corporate Transaction by holders of Common Stock for each share of Common
Stock held on the effective date of the Corporate Transaction (and if such
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the Corporate
Transaction was not solely common stock of the successor corporation or its
Parent, the Plan Administrator may, with the consent of the successor
corporation and the Participant, provide for the consideration to be received
upon exercise of the option 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 Corporate Transaction.
19. Amendment or Termination.
------------------------
(a) The Plan Administrator may at any time and for any reason
terminate or amend the Plan. Except as provided in Section 18, no such
termination can affect options previously granted, provided that a Purchase
Period may be terminated by the Plan Administrator on any Exercise Date if the
Plan Administrator determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section
18, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any Participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law or regulation), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the Plan
Administrator shall be entitled to change the Purchase Periods, limit the
frequency and/or number of changes in the amount withheld during Purchase
Periods, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions, permit payroll withholding in excess of the amount designated by
a Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
Participant properly correspond with amounts withheld from the Participant's
Compensation, and establish such other limitations or procedures as the Plan
Administrator determines in its sole discretion advisable and which are
consistent with the Plan.
20. Notices. All notices or other communications by a Participant to
-------
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Plan Administrator at the
location, or by the person, designated by the Plan Administrator for the receipt
thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign,
10
<PAGE>
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, 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 Participant 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 applicable provisions of law. In addition, no options shall be
exercised or shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.
22. Term of Plan. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 19.
23. Stockholder Approval. Continuance of the Plan shall be subject
--------------------
to approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. If such stockholder approval is obtained
at a duly held stockholders' meeting, the Plan must be approved by a majority of
the votes cast at such stockholders' meeting at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the Plan. If such stockholder approval is
obtained by written consent, it must be obtained by the written consent of the
holders of a majority of all outstanding voting stock of the Company. However,
approval at a meeting or by written consent may be obtained by a lesser degree
of stockholder approval if the Plan Administrator determines, in its discretion
after consultation with the Company's legal counsel, that such a lesser degree
of stockholder approval will comply with all applicable laws and will not
adversely affect the qualification of the Plan under Section 423 of the Code.
24. No Employment Rights. The Plan does not, directly or indirectly,
--------------------
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company or
a Designated Parent or Subsidiary, and it shall not be deemed to interfere in
any way with such employer's right to terminate, or otherwise modify, an
employee's employment at any time.
25. Effect of Plan. The provisions of the Plan shall, in accordance
--------------
with its terms, be binding upon, and inure to the benefit of, all successors of
each Participant, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.
26. Applicable Law. The laws of the State of California (excluding
--------------
that body of law pertaining to its conflicts of law) will govern all matters
relating to this Plan except to the extent it is superseded by the laws of the
United States.
11
<PAGE>
EXHIBIT A
---------
PERICOM SEMICONDUCTOR CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
___ Original Application Enrollment Date:_____________
___ Change in Payroll Deduction Rate
___ Change of Beneficiary(ies)
1. I,________________________, hereby elect to participate in the
Pericom Semiconductor Corporation 1997 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribe to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the
amount of ______% of my Compensation on each payday (not to exceed 10%) during
the Purchase Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that the payroll deductions shall be accumulated for
the purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I understand
that if I do not withdraw from a Purchase Period, any accumulated payroll
deductions will be used to automatically exercise my option.
4. I have received a copy of the complete "Pericom Semiconductor
Corporation 1997 Employee Stock Purchase Plan." I understand that my
participation in the Employee Stock Purchase Plan is in all respects subject to
the terms of the Plan. I understand that the grant of the option by the Company
under this Subscription Agreement is subject to obtaining stockholder approval
of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan
should be issued in the name(s) of:
_________________________________
_________________________________
6. I understand that if I dispose of any shares received by me
pursuant to the Employee Stock Purchase Plan within two (2) years after the
Enrollment Date (the first day of the Purchase Period during which I purchased
such shares) or within one (1) year after the Exercise Date (the date I
purchased such shares), I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
equal to the excess of the fair market value of the shares on the date such
shares were purchased for me over
12
<PAGE>
the price which I paid for the shares. I hereby agree to notify the Company in
---------------------------------------
writing within 30 days after the date of any such disposition and I will make
- -----------------------------------------------------------------------------
adequate provision for foreign, federal, state or other tax withholding
- -----------------------------------------------------------------------
obligations, if any which arise upon the disposition of the Common Stock. The
- ------------------------------------------------------------------------
Company may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and 1-year
holding periods described above, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Purchase Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as long-term capital gain. I also
understand that the foregoing income tax consequences are based on current
federal income tax law and that the Company is not responsible for advising me
of any changes in the applicable tax rules.
7. I hereby agree to be bound by the terms of the Employee Stock
Purchase Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan.
NAME: (Please print) _________________________________________________
(First) (Middle) (Last)
Relationship: _________________________________________________
Address: _________________________________________________
_________________________________________________
_________________________________________________
Employee's Social
Security Number: _________________________________________________
Employee's Home Address: _________________________________________________
_________________________________________________
_________________________________________________
13
<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE PURCHASE PERIODS UNLESS TERMINATED BY ME
Employee's Signature: ____________________________________________________
Dated: ____________________________________________________
Signature of spouse
if beneficiary is other
than spouse: ____________________________________________________
Dated: ____________________________________________________
14
<PAGE>
EXHIBIT B
PERICOM SEMICONDUCTOR CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NOTICE OF WITHDRAWAL
The undersigned Participant in the Purchase Period of the Pericom
Semiconductor Corporation 1997 Employee Stock Purchase Plan which began on
_________________, 19___, hereby notifies the Company that he or she hereby
withdraws from the Purchase Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his/her account with respect to such Purchase Period. The
undersigned understands and agrees that his/her option for such Purchase Period
will be automatically terminated. The undersigned understands further that no
further payroll deductions will be made for the purchase of shares in the
current Purchase Period and the undersigned shall be eligible to participate in
succeeding Purchase Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address
of Participant: ________________________________________________
________________________________________________
________________________________________________
Signature: ________________________________________________
Date: ________________________________________________
15
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE is dated for reference purposes only as
February 5, 1996, and is part of that Lease dated January 29, 1993 together with
the Summary of Basic Lease Terms, the First Addendum To Lease, and the
Acceptance Agreement dated January 28, 1994 thereto (collectively, the "Lease")
by and between ORCHARD INVESTMENT COMPANY NUMBER 510 a California general
partnership ("Landlord"), and PERICOM SEMICONDUCTOR CORPORATION a California
corporation ("Tenant"), and is made with reference to the following facts:
A. The Premises currently leased by Tenant pursuant to the Lease consists
of 19,786 rentable square feet commonly known as 2380 Bering Drive, City of San
Jose, California.
B. The Lease Term for said Premises currently expires on January 31, 1999.
C. Tenant and Landlord have agreed to expand the square footage of said
Premises by 7,000 rentable square feet as shown on "Exhibit A" attached hereto
and incorporated herein by reference as the "Expansion Space".
D. Tenant and Landlord have agreed to extend the Term of the Lease.
NOW, THEREFORE, Landlord and Tenant hereby agree that the Summary of Basic
Lease Terms is amended as follows:
1. Premises: Section D is hereby amended to provide for the
--------
Expansion Space of 7,000 square feet at 2350 Bering Drive ("2350 Bering"), plus
Tenant's original space consisting of 19,786 square feet at 2380 Bering Drive
("2380 Bering"), for a total of 26,786 square feet in San Jose, California.
2. Building: Section F is hereby amended to read that the Building at
--------
2380- 2390 Bering Drive ("Building C") containing the 2380 Bering portion of
the Premises consists of a total of 27,488 square feet, and the building at
2340-2350 Bering Drive ("Building E") containing the 2350 Bering portion of the
Premises consist of a total of 24,888 square feet.
3. Tenant's Share: Section G is hereby amended to mean seventy one
--------------
and 98/100 percent (71.98%) for the 2380 Bering portion of the Premises, and
twenty seven and 04% (27.04%) for the 2350 Bering portion of the Premises.
4. Tenant's Allocated Parking Stalls: Section H is hereby amended to
---------------------------------
mean 103 stalls of which Tenant may use two (2) stalls for the installation of
its generator and one (1) stall for the new door access at the 2350 Bering
portion of the Premises.
5. Lease Term: Section J is hereby amended to provide that the Lease
----------
Term shall be for a period of five (5) years after the Commencement Date (plus
the partial month following the Commencement Date if such date is not the first
day of a month.).
6. Base Monthly Rent: Commencing on the Commencement Date Section K
-----------------
is hereby amended to provide for the Base Monthly Rent as follows:
A. For the 2380 Bering portion of the Premises:
From the Commencement Date
through January 31, 1997 $14,839.50 per month
From February 1, 1997
through January 31, 1999 $16,224.52 per month
From February 1, 1999
through Month 60 $16,818.10 per month
<PAGE>
Page Two
B. For the 2350 Bering
portion of the Premises.
Months 1 - 30: $5,950.00 per month
months 31 - 60: $6,650.00 per month
7. Security Deposit: Section M is hereby amended to provide for an
----------------
increase in the Security Deposit of $7,244.00 which Tenant has provided Landlord
upon signature hereon, for a total of $23,468.52.
8. Retained Real Estate Brokers: Section S is amended to provide
----------------------------
that Tenant warrants that it has not been represented by or had any dealings
with any real estate broker, salesman, or agent in regard to the transaction
represented by this Amendment, or incurred any obligations for the payment of
brokerage commissions or finder's fees which would be earned or become due and
payable by reason of the execution of this Lease Amendment and/or the underlying
transaction, and no brokerage commissions or finder's fees are due in regard to
the transaction. Tenant will hold Landlord harmless and indemnify Landlord
against any claim loss, or damage, including reasonable attorney's fees, in
regard to a brokerage commission or finder's fee claim by a broker or finder
under contract with or working with Tenant.
9. Commencement Date: The Commencement Date of the Lease Term shall
-----------------
be upon Substantial Completion of the interior improvements as defined in
paragraph 2D of Exhibit B to this Amendment.
10. Construction of Improvements: Prior to the Commencement Date,
----------------------------
Landlord shall construct certain improvements that shall become part of the
Expansion Space in accordance with the terms of Exhibit B and C to this
Amendment.
11. Tenant Improvement Allowance: The term "Tenant Improvement
----------------------------
Allowance" shall mean the maximum amount Landlord is required to spend toward
the payment of Interior Improvement Costs for all Interior Improvements
constructed in the Expansion Space which amount is $70,000.00 (i.e. $10.00 per
square foot for Tenant's Gross Leasable Area within the entire Expansion Space).
12. HVAC Warranty: Landlord shall provide the HVAC system within the
-------------
Expansion Space in good working condition as of the Commencement Date.
Additionally, subject to Tenants obligation to maintain the HVAC system as
provided for in Article 6 of the Lease, Landlord shall pay for the cost of
repair or replacement of any HVAC component within the Expansion Space during
the first three (3) months after the Commencement Date.
13. Except as expressly set forth in this Amendment, all terms and
conditions of the Lease remain in full force and effect.
<PAGE>
Page Three
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment
to be effective as of the date first set forth above.
LANDLORD: TENANT:
ORCHARD INVESTMENT COMPANY PERICOM SEMICONDUCTOR CORP.
NUMBER 510 a California Corporation
a California general partnership
By: NELO, a California general partnership By: /s/ Patrick B. Brennan
-------------------------
By: New England Mutual Patrick B. Brennan VP Finance
Life Insurance Company -----------------------------
a Massachusetts corporation, [Print Name and Title]
a general partner
By: Copley Real Estate Advisors, Inc.
asset manager and advisor
hereunto duly authorized
By: /s/ Thomas J. Lunny
--------------------------
Date: 2/8/96 Date: 2/6/96
------ ------
<PAGE>
[LOGO OF ORCHARD PROPERTIES]
[MAP OF BUILDING E EXPANSION SPACE]
EXHIBIT A
<PAGE>
EXHIBIT B
INTERIOR IMPROVEMENT AGREEMENT
------------------------------
THIS IMPROVEMENT AGREEMENT is made part of that Lease dated February 5,
1996, (the "Lease") by and between ORCHARD INVESTMENT COMPANY NUMBER 510,
("Landlord"), and PERICOM SEMICONDUCTOR CORPORATION, ("Tenant"). Landlord and
Tenant agree that the following terms are part of the Lease:
1. Purpose of Improvement Agreement: The purpose of this Improvement
--------------------------------
Agreement is to set forth the rights and obligations of Landlord and Tenant
with respect to the construction of Interior Improvements within the Expansion
Space prior to the Commencement Date.
2. Definitions: As used in this Interior Improvement Agreement, the
-----------
following terms shall have the following meanings, and terms which are not
defined below, but which are defined in the Lease and which are used in this
Interior Improvement Agreement, shall have the meanings ascribed to them by the
Lease:
A. Approved Specifications: The term "Approved Specifications" shall
-----------------------
mean those specifications for the Interior Improvements to be constructed by
Landlord which are described by Exhibit "C" to the Lease.
-----------
B. Interior Improvements: The term "Interior Improvements" shall mean
---------------------
all interior improvements to be constructed by Landlord in accordance with the
Approved Specifications (e.g., HVAC equipment and distribution, transformer and
power distribution, partitions, floor, wall, and window covering, lighting
fixtures).
C. Interior Improvement Costs: The term "Interior Improvement Costs"
--------------------------
shall mean the following: (i) the total amount due pursuant to the general
construction contract entered into by Landlord to construct the Interior
Improvements; (ii) the cost of all governmental approvals required as a
condition to the construction of the Interior Improvements (including all
construction taxes imposed by the City of San Jose) in connection with the
issuance of a building permit for the Interior Improvements; (iii) all utility
connection or use fees; (iv) fees of architects or engineers for services
rendered in connection with the design and construction of the Interior
Improvements; and (v) the cost of payment and performance bonds obtained by
Landlord or Prime Contractor to assure completion of the Interior Improvement.
The parties acknowledge that the City of San Jose imposes certain taxes as a
condition to the issuance of building permits in certain circumstances,
including the "Building and Structure Construction Tax" imposed by Chapter 4.46
of the City of San Jose Municipal Code (the "BSC Tax") and the "Commercial-
Residential-Mobile Home Park Building Tax" imposed by Chapter 4.47 of the City
of San Jose Municipal Code (the "CRM Tax"). The parties further acknowledge that
the rate for these two taxes is higher for a structure designed or intended to
be used for "industrial purposes". However, the parties acknowledge and agree
that (i) an additional BSC Tax will be due upon the issuance of a building
permit for all Interior Improvements if the City of San Jose determines that the
Interior Improvements are intended for "industrial purposes" or (ii) a BSC Tax
and a CRM Tax based on the value of the Interior Improvements, plus an
additional BSC Tax and a CRM Tax based on the value of the shell, will be due if
the City of San Jose determines that the Building is intended for "commercial
purposes", and (iii) any of such taxes that must be paid in order to obtain
building permits for the Interior Improvements shall be "Interior Improvement
Costs".
D. Substantial Completion and Substantially Complete: The terms
--------------------------------------------------
"Substantial Completion" and "Substantially Complete" shall each mean the date
when all of the following have occurred with respect to the Interior
Improvements in question: (i) the construction of the Interior Improvements in
question has been substantially completed in accordance with the requirements of
this Lease; (ii) the architect responsible for preparing the plans shall have
executed a certificate or statement representing that the Interior Improvements
in question have been substantially completed in accordance with the plans and
specifications therefor; and (iii) the Building Department of the City of San
Jose has completed its final inspection of such improvements and has "signed
off" the building inspection card approving such work as complete.
<PAGE>
Page Two
3. Schedule of Performance: Set forth in this paragraph is a schedule of
-----------------------
certain critical dates relating to Landlord's and Tenant's respective
obligations regarding the construction of the Interior Improvements (the
"Schedule of Performance"). Landlord and Tenant shall each be obligated to use
reasonable efforts to perform their respective obligations within the time
periods set forth in the Schedule of Performance and elsewhere in this Interior
Improvement Agreement. The Schedule of Performance is as follows:
<TABLE>
<CAPTION>
Action Responsible
Items Due Date Party
------------ --------------------------------- -----------
<C> <S> <C> <C>
A. Delivery to Prior to Lease Tenant
Landlord of Execution
Tenant's
Interior
Requirements
B. Delivery to Within five (5) business days Landlord
Tenant of after delivery to Landlord of
Preliminary conceptual plans for the Interior
Interior Improvements.
Improvement
Plans
C. Approval by Within three (3) business Tenant
Tenant of days after Tenant receives
Preliminary Preliminary interior Plans.
Interior
Plans
D. Delivery to Within ten (10) business Landlord
Tenant of days after approval of the
Final Preliminary Interior Plans
Interior
Plans
E. Approval by Within two (2) days after Tenant Tenant
Tenant of receives Final Interior Plans
Final
Interior
Plans
F. Commence- Within five (5) days after Landlord
ment of issuance of all necessary
construction governmental approvals
of Interior
Improvement
G. Substantial Within thirty (30) days after Landlord
Completion issuance of building permit for
of Interior tile Interior Improvements
Improvements
</TABLE>
4. Construction of Interior Improvements: Landlord shall, at its sole
-------------------------------------
cost and expense, construct the Interior Improvements in accordance with the
following:
<PAGE>
Page Three
A. Development and Approval of Preliminary Interior Plans: On or
------------------------------------------------------
before the due date specified in the Schedule of Performance, Tenant shall
deliver to Landlord a proposed floor plan identifying its requirements for the
Interior Improvements that is consistent with the Approved Specifications
("Tenant's Interior Requirements"). On or before the due date specified in the
Schedule of Performance, Landlord shall and deliver to Tenant for its review and
approval preliminary plans for the Interior Improvements which are consistent
with and conform to Tenant's Interior Requirements and the Approved
Specifications (the "Preliminary Interior Plans"). On or before the due date
specified in the Schedule of Performance, Tenant shall either approve such plans
or notify Landlord in writing of its specific objections to the Preliminary
Interior Plans. If Tenant so objects, Landlord shall revise the Preliminary
Interior Plans to address such objections in a manner consistent with the
parameters for the Interior improvements set forth in this improvement Agreement
and the Approved Specifications and shall resubmit such revised Preliminary
Interior Plans as soon as reasonably practicable to Tenant for its approval.
When such revised Preliminary Interior Plans are resubmitted to Tenant, it shall
either approve such plans or notify Landlord of any further objections in
writing within two (2) business days after receipt thereof. If Tenant has
further objections to the revised Preliminary Interior Plans, the parties shall
meet and confer to develop Preliminary Interior Plans that are acceptable to
both Landlord and Tenant within five(5) business days after Tenant has notified
Landlord of its second set of objections. In the event Tenant and Landlord do
not resolve all of Tenant's objections within such five (5) business day period,
Landlord and Tenant shall immediately cause Landlord's architect to meet and
confer with Tenant's architect or construction consultant, who shall apply the
standards set forth in this Improvement Agreement to resolve Tenant's objections
and incorporate such resolution into the Preliminary Interior Plans, which
process Landlord and Tenant shall cause to be completed within five (5) business
days after the conclusion of the five (5) business day period referred to in the
immediately preceding sentence.
B. Development and Approval of Final Interior Plans: Once the
------------------------------------------------
Preliminary Interior Plans have been approved by Landlord and Tenant (including
all changes made to resolve Tenant's objections approved by Landlord's architect
and Tenant's architect or construction consultant pursuant to subparagraph 4A),
Landlord shall complete and submit to Tenant for its approval final working
drawings for the Interior Improvements by the due date specified in the Schedule
of performance. Tenant shall approve the final plans for the Interior
Improvements or notify Landlord in writing of its specific objections by the due
date specified in the Schedule of Performance. If Tenant so objects, the
parties shall confer and reach agreement upon final working drawings for the
Interior Improvements within five (5) business days after Tenant has notified
Landlord of its objections. In the event Tenant and Landlord do not resolve all
of Tenant's objections within such five (5) business day period, Landlord and
Tenant shall immediately cause Landlord's architect to meet and confer with
Tenant's architect or construction consultant, who shall apply the standards set
forth in the Improvement Agreement to resolve Tenant's objections and
incorporate such resolution into the Final Interior Plans, which process
Landlord and Tenant shall cause to be completed within five (5) business days
after the conclusion of the five (5) business day period referred to in the
immediately preceding sentence. The final working drawings so approved by
Landlord and Tenant (including all changes made to resolve Tenant's objections
approved by Landlord's architect and Tenant's architect or construction
consultant) are referred to herein as the "Final Interior Plans".
C. Building Permit: As soon as the Final Interior Plans have been
---------------
approved by Landlord and Tenant, Landlord shall apply for a building permit for
the Interior Improvements, and shall diligently prosecute to completion such
approval process.
D. Construction Contract: Landlord and Tenant shall cooperate to
---------------------
cause the Interior Improvements to be constructed by a general contractor who is
engaged by Landlord in accordance with whichever of the procedures set forth in
either subparagraph 4D (1) or 4D (2) hereof that is approved by Landlord and
Tenant; provided, however, that if Landlord and Tenant do not agree on which
method to use for selecting the general contractor and awarding the construction
contact within five (5) days after either party requests the other to approve
one of the two methods set forth herein, then the general contractor shall be
selected and the general construction contract awarded in accordance within the
provisions of subparagraph 4D (1) hereof.
<PAGE>
Page Four
(1) The job of constructing the Interior Improvements shall be offered
for "competitive bid", on a fixed price basis, to three (3) general contractors
selected by Landlord and approved by Tenant. The construction contract shall be
awarded to the bidder submitting the lowest bid for the job. Landlord shall
submit to Tenant a list of general contractors acceptable to Landlord to whom
the job may be bid, and Tenant shall notify Landlord within three (3) business
clays after receipt of such list of its objection to any proposed contractor.
days failure to object within such period of time shall be deemed to be its
approval of all bidders on the list so submitted by Landlord. If the lowest bid
resulting from such competitive bidding process indicates that the Interior
Improvement Costs will exceed $70,000.00 Dollars ($10.00 per gross leasable
square foot of the Expansion Space), Landlord shall promptly notify Tenant, in
writing, to that effect, and Tenant shall have the right to propose
modifications to the Final Interior Plans within five (5) business days after
Tenant's receipt of Landlord's notice, subject to Landlord's approval of such
changes, for the purpose of reducing the Interior Improvement costs. Such
revision of the final Interior Plans shall be completed as expeditiously as
possible; provided, however, that (i) the job shall nonetheless be awarded to
the low bidder whose price shall be adjusted based upon the changes requested by
Tenant and approved by Landlord made to the Final Interior Plans; and (ii) if
Tenant should choose to exercise its right to modify the final Interior Plans
for the purpose of reducing the Interior Improvement costs, any delay resulting
from the failure by Tenant to timely exercise its right to do so shall be a
delay caused by Tenant for purposes of paragraph 7 hereof.
(2) The Interior Improvements may be constructed pursuant to a "cost
plus" construction contract awarded to a general contractor selected by Landlord
and approved by Tenant. Landlord shall submit to Tenant Landlord's
recommendation of the general contractor and the terms of the "cost plus"
construction contract for the Interior Improvements for Tenant's approval, which
shall be deemed given if objection is not made by Tenant within two (2) business
days after receipt of such proposal from Landlord. If this method of awarding
the construction contract is selected, the general construction contract shall
provide that all major subcontractors for the Interior Improvements shall be
chosen by a competitive bid process where (i) Tenant shall have the right to
approve subcontractors who bid on specific parts of the job, and (ii) Tenant
shall have the right to cause a major subcontract to rebid if Tenant does not
approve the low bid, if such low bid would cause the total Interior Improvement
Costs to exceed $70,000.00 Dollars ($10.00 per square foot of gross leasable
area within buildings that are part of the Expansion Space), and requests that
changes be made to the Final Interior Plans (subject to Landlord's approval) for
the purpose of lowering the total Interior Improvement Costs to a level that
does not exceed $70,000.00 Dollars ($10.00 per square foot of gross leasable
area within the buildings that are part of the Expansion Space). Delays caused
by any modifications to the Final Interior Plans and rebidding requested by
Tenant shall be deemed delays caused by Tenant for purposes of paragraph 7
hereof.
(3) Landlord and Tenant shall use their best efforts to approve the
general contractor and all subcontractors so that the construction contract may
be executed as soon as possible.
E. Commencement of Interior Improvements: On or before the due date
-------------------------------------
specified in the Schedule of Performance, Landlord shall commence construction
for the Interior Improvements and shall diligently prosecute such construction
to completion, using all reasonable efforts to achieve Substantial Completion of
the Interior Improvements by the due date specified in the Schedule of
performance.
5. Payment of Interior Improvement Costs: Landlord and Tenant shall have
-------------------------------------
the following obligations with respect to the payment of Interior Improvement
Costs:
<PAGE>
Page Five
A. Landlord shall be obligated to pay an amount equal to the Tenant
Improvement Allowance as provided for in Paragraph 11 of the First Amendment To
Lease for the Payment of Interior Improvement costs. If the total of Interior
Improvement Costs exceeds the amount of Landlord's required contribution, Tenant
shall be obligated to pay the entire amount of such excess. If Tenant becomes
obligated to contribute toward paying Interior Improvement Costs pursuant to
this subparagraph 5A, then Landlord shall estimate the amount of such excess
prior to commencing construction of the Interior Improvements and Tenant shall
pay to Landlord a proportionate share of each progress payment due to the
general contractor which bears the same relationship to the total amount of the
progress payment in question as the amount Tenant is obligated to contribute to
the payment of Interior Improvement Costs bears to the total estimated Interior
Improvement Costs. Tenant shall pay Tenant's share of any progress payment to
Landlord within five (5) business days after receipt of a statement therefor
from landlord. At the time the final accounting is rendered by Landlord pursuant
to subparagraph 5C hereof, there shall be an adjustment between Landlord and
Tenant such that each shall only be required to contribute to the payment of
Interior Improvement Costs in accordance with the obligations set forth in this
subparagraph 5A, which adjustment shall be made within five (5) days after
Landlord notifies Tenant of the required adjustment. If Tenant is required to
make a payment to Landlord, Tenant shall make such payment even if Tenant elects
to audit the statement submitted by Landlord pursuant to subparagraph 5C. In
the event Tenant's audit discloses that an overpayment or underpayment was made
by Tenant, there shall be an adjustment between Landlord and Tenant as soon as
reasonably practicable such that each shall only be required to contribute to
the payment of costs in accordance with the obligations set forth in this
subparagraph 5A.
B. If Tenant fails to pay any amount when due pursuant to this
paragraph 5, then (i) Landlord may (but without the obligation to do so) advance
such funds on Tenant's behalf, and Tenant shall be obligated to reimburse
Landlord for the amount of funds so advanced on its behalf, and (ii) Tenant
shall be liable for the payment of a late charge and interest in the same manner
as if Tenant had failed to pay Base Monthly Rent when due as described in
paragraph 3.4 of the Lease. Any amounts paid to Landlord by Tenant pursuant to
this subparagraph shall be held by Landlord as Tenant's agent, for disbursal to
the general contractor in payment for work costing in excess of Landlord's
required contribution.
C. When the Interior Improvements are Substantially Completed,
Landlord shall submit to Tenant a final and detailed accounting of all Interior
Improvement Costs paid by Landlord, certified as true and correct by Landlord's
financial officers. Tenant shall have the right to audit the books, records, and
supporting documents of Landlord to the extent necessary to determine the
accuracy of such accounting during normal business hours after giving Landlord
at least two (2) days prior written notice. Tenant shall bear the cost of such
audit, unless such audit discloses that Landlord has overstated the total of
such costs by more than two percent (2%) of the actual amount of such costs, in
which event Landlord shall pay the cost of Tenant's audit. Any such audit must
be conducted, if at all, within ninety (90) days after Landlord delivers such
accounting to Tenant.
6. Changes to Approved Plans: Once the Final Interior Plans have been
-------------------------
approved by Landlord and Tenant, neither shall have the right to order extra
work or change orders with respect to the construction of the Interior
Improvements without the prior written consent of the other. All extra work or
change orders requested by either Landlord or Tenant shall be made in writing,
shall specify any added or reduced cost and/or construction time resulting
therefrom, and shall become effective and a part of the Final Interior Plans
once approved in writing by both parties. If a change order requested by Tenant
results in an increase in the cost of constructing the Interior Improvements,
Tenant shall pay the amount of such increase caused by the change order
requested by Tenant at the time the change order is approved by both Landlord
and Tenant if and to the extent such change order causes the Interior
Improvement Costs to exceed Landlord's required contribution thereto described
in subparagraph 5A. If a change order results in an increase in the amount of
construction time needed by Landlord to complete the Interior Improvements,
paragraph 7 hereof may apply.
<PAGE>
Page Six
7. Delay in Completion Caused by Tenant: The parties hereto acknowledge
------------------------------------
that the date on which Tenant's obligation to pay the Base Monthly Rent and the
Additional Rent would otherwise commence may be delayed because of (i) Tenant's
failure to submit necessary information to Landlord when required, (ii) Tenant's
failure to promptly review and approve the plans for the Interior Improvements
in accordance with the Schedule for Performance, (iii) any act by Tenant which
interferes with or delays the completion of the plans for the Interior
Improvements or Landlord's construction work, (iv) change orders requested by
Tenant and approved by Landlord, or (v) special materials or equipment ordered
or specified by Tenant that cannot be obtained by Landlord at normal cost within
a reasonable period of time because of limited availability. It is the intent of
the parties hereto that the commencement of Tenant's obligation to pay the Base
Monthly Rent and all Additional Rent not be delayed by any of such causes or by
any other act of Tenant, and in the event it is so delayed, Tenant's obligation
to pay the base Monthly Rent and all Additional Rent shall commence as of the
date it would otherwise have commenced absent delay caused by Tenant, provided
that within a reasonable period of time after learning of the occurrence of the
cause of any such delay, Landlord notifies Tenant in writing of the fact that
such delay has occurred and the known or anticipated extent of any such delay.
8. Delivery of Possession, Punch List, and Acceptance Agreement: As soon
------------------------------------------------------------
as the Interior Improvements are Substantially Completed, Landlord and Tenant
shall together walk through the Expansion Space and inspect all Interior
Improvements so completed, using reasonable efforts to discover all uncompleted
or defective construction in the Interior Improvements. After such inspection
has been completed, each party shall sign an acceptance agreement in the form
attached to the Lease as Exhibit "D", which shall (i) include a list of all
-----------
"punch list" items which the parties agree are to be corrected by Landlord and
(ii) shall state the Commencement Date and the initial Base Monthly Rent. As
soon as such inspection has been completed and such acceptance agreement
executed, Landlord shall deliver possession of the Expansion Space to Tenant.
Landlord shall use reasonable efforts to complete and/or repair such "punch
list" items within thirty (30) days after executing the acceptance agreement.
Landlord shall have no obligation to deliver possession of the Expansion Space
to Tenant until such procedures regarding the preparation of a punch list and
the execution of the acceptance agreement have been completed. Tenant's taking
possession of any part of the Expansion Space shall be deemed to be an
acceptance by Tenant of Landlord's work of improvement in such part as complete
and in accordance with the terms of the Lease except for the punch list items
noted and latent defects that could not reasonably have been discovered by
Tenant during its inspection of the Interior Improvements prior to completion of
the acceptance agreement. Notwithstanding anything contained herein, Tenant's
obligation to pay the Base Monthly Rent and Additional Rent shall commence as
provided in the Lease, regardless of whether Tenant completes such inspection or
executes such acceptance agreement.
9. Standard of Construction and Warranty: Landlord here by warrants that
-------------------------------------
the Interior Improvements shall be constructed substantially in accordance with
the Final Interior Plans (as modified by change orders approved by Landlord and
Tenant), all Private Restrictions and all Laws, in a good and workmanlike
manner, and all materials and equipment furnished shall conform to such final
plans and shall be new and otherwise of good quality. The foregoing warranty
shall be subject to, and limited by, the following:
A. Once Landlord is notified in writing of any breach of the above-
described warranty, Landlord shall promptly commence the cure of such breach and
complete such cure with diligence at Landlord's sole cost and expense.
B. Landlord's liability pursuant to such warranty shall be limited to
the cost of correcting the defect or other matter in question. In no event shall
Landlord be liable to Tenant for any damages or liability incurred by Tenant as
a result of such defect or other matter, including without limitation damages
resulting from any loss of business by Tenant or other consequential damages.
<PAGE>
Page Seven
C. Notwithstanding anything contained herein, Landlord shall not be
liable for any defect in design, construction, or equipment furnished which is
discovered and of which Landlord receives written notice from Tenant after the
first (1st) anniversary of the recordation of a notice of completion for the
work of improvement affected by the defect.
D. With respect to defects for which Landlord is not responsible
pursuant to subparagraph 9C, Tenant shall have the benefit of any construction
or equipment warranties existing in favor of Landlord that would assist Tenant
in correcting such defect and in discharging its obligations regarding the
repair and maintenance of the Expansion Space. Upon request by Tenant, Landlord
shall inform Tenant of all written construction and equipment warranties
existing in favor of Landlord which affect the Interior Improvements. Landlord
shall cooperate with Tenant in enforcing such warranties and in bringing any
suit that may be necessary to enforce liability with regard to any defect for
which Landlord is not responsible pursuant to this paragraph so long as Tenant
pays all costs reasonably incurred by Landlord in so acting.
E. Landlord makes no other express or implied warranty with respect
to the design, construction or operation of the Interior Improvements except as
set that forth in this paragraph.
10. Condition to Landlord's Performance: Landlord's obligations under the
-----------------------------------
Lease are subject to the satisfaction or waiver of the condition that Landlord
obtain all building permits and other governmental approvals required in order
to commence construction of the Interior Improvements by the due dates specified
in the Schedule of Performance. If such condition is not satisfied or waived
within the applicable time period, Landlord shall have the option of terminating
the Lease; provided, however, that Landlord shall have the option to extend the
time period for the satisfaction of such condition for a period of up to sixty
(60) days to enable Landlord to continue its efforts to cause such condition to
be satisfied. If any such option to extend the time for satisfaction of this
condition is exercised, (i) Landlord shall continue to use reasonable efforts to
cause the condition to be satisfied; (ii) all other time periods contained in
the Schedule of Performance which are impacted by such extension shall be
appropriately adjusted; and (iii) such extension shall not constitute a delay
caused by Tenant pursuant to paragraph 7 hereof, nor shall Landlord in any way
be penalized for exercising such option to obtain additional time to cause the
condition to be satisfied. If Landlord becomes entitled to and elects to so
terminate the Lease, the Lease shall terminate on the date notice is so given to
Tenant. Landlord shall be under an obligation of good faith to use all
reasonable efforts to cause the condition to be satisfied.
11. Tenant's Right to Install Trade Fixtures: When the construction of the
----------------------------------------
Interior Improvements has proceeded to the point where Tenant's work of
installing its fixtures and equipment in the Premises can be commenced in
accordance with good construction practices, Landlord also shall notify Tenant
to that effect and shall permit Tenant, and its authorized representatives and
contractors, to have access to the Premises for the purpose of installing
Tenant's trade fixtures and equipment. Any such installation work by Tenant, or
its authorized representatives and contractors, shall be undertaken at their
sole risk, free from rent, and upon the following conditions:
A. If the entry into the Premises by Tenant, or its representatives
or contractors, interferes with or delays Landlord's construction work, after
twenty-four (24) hours notice of such fact to Tenant (i) Tenant shall cause the
party responsible for such interference or delay to leave the Premises, or (ii)
Tenant shall cause to be taken such steps as may be reasonably necessary in the
Prime Contractor's opinion to alleviate such interference or delay;
B. Any contractor used by Tenant in connection with such entry and
installation shall be subject to Landlord's approval, which approval shall not
be unreasonably withheld, but which may be withheld if such contractor's entry
on the Premises would interfere with Landlord's work;
<PAGE>
Page Eight
C. If Tenant's entry or installation causes any strike or other
labor dispute which materially and adversely affects construction of the
Premises, upon Landlord's demand Tenant shall withdraw its contractors and
representatives from the Premises or take such other as Landlord shall deem
appropriate to remedy the situation; and
D. Tenant shall have such obligations tinder the Lease as are
specified in paragraph 2.5 of the Lease (e.g., indemnification and insurance).
12. Effect of Agreement: In the event of any inconsistency between this
-------------------
Improvement Agreement and the Lease, the terms of this Improvement Agreement
shall prevail.
LANDLORD: TENANT:
ORCHARD INVESTMENT COMPANY PERICOM SEMICONDUCTOR CORP.
NUMBER 510 a California Corporation
a California general partnership
By: NELO, a California general partnership By: /s/ Patrick B. Brennan
-----------------------------
Patrick B. Brennan VP Finance
-----------------------------
By: New England Mutual [Print Name and Title]
Life Insurance Company
a Massachusetts corporation,
a general partner
By: Copley Real Estate Advisors, Inc.
asset manager and advisor
hereunto duly authorized
By: /s/ Thomas J. Lunny
---------------------
Date: 2/8/96 Date: 2/6/96
------ ------
<PAGE>
EXHIBIT C
APPROVED SPECIFICATIONS
(To be added at a later date)
<PAGE>
EXHIBIT 10.5
PIONEER SEMICONDUCTOR CORPORATION
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement ("Agreement") is made as of June
25, 1990, by and between Pioneer Semiconductor Corporation, a California
corporation (the "Company"), and Alex C. Hui ("Purchaser").
1. Sale of Stock
-------------
Subject to the terms and conditions hereof, on the Closing Date (as
defined in subparagraph 2(a) below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, 1,700,000 shares
of the Company's Common Stock, no par value (the "Shares"), in exchange for the
purchase price of $0.00l per Share for an aggregate purchase price of $1,700.00
(the "Purchase Price") .
The term "Shares" refers to the Shares and all securities received in
replacement of the Shares, or as stock dividends or as a result of any stock
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of purchaser's ownership of the Shares.
2. Closing
-------
(a) The closing of the purchase and sale of the Shares hereunder
(the "Closing") shall be held at the principal office of the Company
simultaneously with the execution of this Agreement by the parties or on such
other date as to which they may agree (the "Closing Date").
(b) At the Closing, the Company and Purchaser will deliver to the
escrow agent (as defined below in Paragraph 4) a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the Purchase Price therefor by a check in the amount of
$1,700.00 made payable to the order of the Company.
1
<PAGE>
3. Purchase option
---------------
(a) In addition to any other limitation on transfer created by
applicable securities laws, Purchaser shall not assign, encumber or dispose of
any interest in the Shares while the Shares are subject to the Company's
Purchase Option (as defined below).
(b) The company shall have the right and option to repurchase the
Shares (the "Purchase Option") as set forth in this Paragraph 3 at a price of
$.00l per share (the "Option Price"). In the event Purchaser shall cease to be
employed by the Company (including a parent or subsidiary of the Company) for
any reason, except as provided in subparagraph (d) hereof (the "Termination"),
the Purchase Option shall come into effect. Following a Termination, the
Company shall have the right as provided in subparagraph (c) hereof, to exercise
the Purchase Option to purchase from the Purchaser or his personal
representative, as the case may be, at the Option Price any or all of the Shares
in which Purchaser has not acquired a vested interest in accordance with the
vesting provisions below:
(i) 25% vested as of June 25, 1990;
(ii) 2.1% vested on the 25th day of each month beginning
June 25, 1991 for the next thirty-six (36) months so that the Shares will be
fully vested as of June 25. 1994.
(c) Within forty-five (45) days following a Termination, the
Company shall notify Purchaser by written notice delivered or mailed as provided
in subparagraph 9(b), as to whether it wishes to purchase the Shares pursuant to
exercise of the Purchase Option. If the Company (or its assignee) elects to
purchase the Shares hereunder, it shall set a date for the closing of the
transaction at a place specified by the company not later than fifteen (15) days
from the date of such notice. At such closing, the Company (or its assignee)
shall tender payment for the Shares and the certificates representing the Shares
so purchased shall be cancelled. Purchaser hereby authorizes and directs the
Secretary or Transfer Agent of the Company to transfer the Shares as to which
the Purchase Option has been exercised from Purchaser to the Company. The Option
Price may be payable, at the option of the Company, in cancellation of all or a
portion of any outstanding indebtedness of Purchaser to the Company or in cash
(by check), or both.
2
<PAGE>
(d) In the event Purchaser's employment shall terminate as a
result of his death or permanent disability, the Purchase Option shall not apply
to the Company and shall thereafter be terminated. Purchaser shall be deemed
permanently disabled in the event he is unable, as a result of a mental or
physical condition, to perform his employment duties to the Company and a
qualified physician, acceptable to the Board of Directors of the Company,
establishes to the reasonable satisfaction of the Board of Directors that such
condition will continue for a period of not less than one (1) year.
4. Escrow
------
For purposes of facilitating the enforcement of the provisions of
Paragraph 3, Purchaser agrees, immediately upon receipt of the certificate for
his Shares, to deliver such certificates, together with stock powers executed in
blank by Purchaser and Purchaser's spouse (if required for transfer) with
respect to each such stock certificate, to the Secretary or Assistant Secretary
of the Company, or their designees, to hold in escrow, with the authority to
take all such actions and to effectuate all such transfers and/or releases as
may be necessary or appropriate to accomplish the objectives of this Agreement
in accordance with the terms hereof. Purchaser hereby acknowledges that the
appointment of the Secretary or Assistant Secretary of the Company (or their
designee) as the escrow holder hereunder with the stated authorities is a
material inducement to the Company to make this Agreement and that such
appointment is coupled with an interest and is accordingly irrevocable.
Purchaser agrees that such escrow holder shall not be liable to any party hereto
(or to any other party) for any actions or omissions unless such escrow holder
is grossly negligent relative thereto. The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time.
5. Investment Representations
--------------------------
In connection with the purchase of the Shares, Purchaser
represents to the Company the following:
(a) Purchaser is purchasing the Shares for investment for his
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
3
<PAGE>
(b) Purchaser understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser acknowledges and understands that the Shares must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Purchaser further
acknowledges and understands that, except as herein provided, the Company is
under no obligation to register the Shares. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" (acquired, directly or indirectly, from the issuer
thereof or from an affiliate of such issuer, in a non-public offering) subject
to the satisfaction of certain conditions, including, among other things: (i)
the availability, in certain cases, of certain public information about the
Company; (ii) the resale occurring not less than two years after the party has
purchased and paid for the securities to be sold; and (iii) in the case of an
affiliate, or a non-affiliate who has held the restricted securities for less
than three years, the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as such
term is defined under the Securities Exchange Act of 1934) and the amount of
securities being sold during any three-month period not exceeding the specified
limitations stated therein .
6. Legends
-------
(a) The certificate or certificates representing the Shares shall
bear the following legends:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
4
<PAGE>
(ii) Any legends required by the bylaws of the Company.
(iii) Any legends required by state blue sky laws.
7. NO EMPLOYMENT RIGHTS
--------------------
THIS AGREEMENT SHALL NOT CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF HIS EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES,
NOR SHALL IT INTERFERE IN ANY WAY WITH THE RIGHT OF PURCHASER OR THE COMPANY, OR
ANY OF ITS SUBSIDIARIES, TO TERMINATE PURCHASER'S EMPLOYMENT WITH THE COMPANY AT
ANY TIME.
8. Section 83(b) Election
----------------------
Purchaser hereby represents that he understands (a) the contents
and requirements of Section 83(b) of the Internal Revenue Code of 1986, as
amended ("Section 83(b)"), (b) the application of Section 83(b) to the purchase
of the Shares by Purchaser and (c) the nature of the election to be made by
Purchaser under Section 83(b). Purchaser further represents that he intends to
file an election pursuant to Section 83(b) with the Internal Revenue Service
within thirty (30) days following the date of this Agreement, and a copy of such
election with his federal tax return for the calendar year in which the date of
this Agreement falls. Purchaser acknowledges that his failure to file such
election in a timely manner may result in adverse tax consequences for
Purchaser.
9. Miscellaneous
-------------
(a) This Agreement may be amended by written Agreement between the
Company and Purchaser.
(b) Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed, if to the Company, at its principal place of business,
attention the President, and if to Purchaser, at his address as shown on the
stock records of the Company.
(c) The rights and benefits of this Agreement, including the right
to exercise the Purchase Option with respect to the Shares, shall inure to the
benefit of, and be enforceable by the Company's successors
5
<PAGE>
and assigns. The rights and obligations of Purchaser under this Agreement may
be assigned only with the prior written consent of the Company.
(d) Both parties agree to execute any additional documents
necessary to carry out the purposes of this Agreement.
(e) This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
PIONEER SEMICONDUCTOR
CORPORATION, a California
corporation
By: /s/????????????????????????
_______________________________
Title: President
_____________________________
PURCHASER:
/s/ALEX C. HUI
___________________________________
ALEX C. HUI
Address: 3380 Kipling Street
Palo Alto, CA 94306
6
<PAGE>
ACKNOWLEDGMENT OF SPOUSE
------------------------
I, Grace Wei-Kan Hui, spouse of Alex C. Hui, have read and
-----------------
approved the foregoing Agreement. In consideration of the grant by Pioneer
Semiconductor Corporation (the "Corporation") to my spouse of the right to
purchase shares of the Corporation's Common Stock, as set forth in the
Agreement, I hereby agree to be bound by the provisions of the Agreement insofar
as I may have any rights under such Agreement or in any shares issued pursuant
thereto under the community property laws of the State of California or similar
laws relating to marital property in effect in the state of our residence as of
the date of execution of the foregoing Agreement, and hereby appoint my spouse
as my attorney-in-fact with respect to all matters arising in connection with
the Agreement or the shares of Common Stock issued pursuant thereto.
/s/Grace Wei-Kan Hui
Dated: ________________ , 1990. _________________________ Signature
GRACE WEI-KAN HUI
________________________
Printed Name
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED, I hereby sell, assign and transfer unto
______________________________________________________________________________
_________________________________________________________________ ( __________)
shares of the Common Stock of Pioneer Semiconductor Corporation, a California
corporation (the "Corporation"), standing in my name of the books of such
corporation, represented by Certificate No. ______ herewith, and do hereby
irrevocably constitute and appoint
______________________________________________________________________________
to transfer such stock on the books of such Corporation with full power of
substitution in the premises.
/s/ALEX C. HUI
Dated: ____________ , l9__. _____________________________
ALEX C. HUI
This Assignment Separate from Certificate was executed in conjunction
with the terms of a Common Stock Purchase Agreement between the above assignor
and the Corporation, dated June 25, 1990.
<PAGE>
EXHIBIT 10.6
PIONEER SEMICONDUCTOR CORPORATION
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement ("Agreement") is made as of June
25, 1990, by and between Pioneer Semiconductor Corporation, a California
corporation (the "Company"), and Chi-Hung Hui ("Purchaser").
1. Sale of Stock
-------------
Subject to the terms and conditions hereof, on the closing Date (as
defined in subparagraph 2(a) below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, 1,400,000 shares
of the Company's Common Stock, no par value (the "Shares"), in exchange for the
purchase price of $0.001 per Share for an aggregate purchase price of $1,400.00
(the "Purchase Price").
The term "Shares" refers to the Shares and all securities received in
replacement of the Shares, or as stock dividends or as a result of any stock
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Closing
-------
(a) The closing of the purchase and sale of the Shares hereunder (the
"Closing") shall be held at the principal office of the Company simultaneously
with the execution of this Agreement by the parties or on such other date as to
which they may agree (the "Closing Date").
(b) At the Closing, the Company and Purchaser will deliver to the
escrow agent (as defined below in Paragraph 4) a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the Purchase Price therefor by a check in the amount of
$1,400.00 made payable to the order of the Company.
1
<PAGE>
3. Purchase Option
---------------
(a) In addition to any other limitation on transfer created by
applicable securities laws, Purchaser shall not assign, encumber or dispose of
any interest in the Shares while the Shares are subject to the Company's
Purchase Option (as defined below).
(b) The Company shall have the right and option to repurchase the
Shares (the "Purchase Option") as set forth in this Paragraph 3 at a price of
$.00l per share (the "Option Price"). In the event purchaser shall cease to be
employed by the Company (including a parent or subsidiary of the Company) for
any reason, except as provided in subparagraph (d) hereof (the "Termination"),
the Purchase Option shall come into effect. Following a Termination, the
Company shall have the right as provided in subparagraph (c) hereof, to exercise
the Purchase Option to purchase from the Purchaser or his personal
representative, as the case may be, at the Option Price any or all of the Shares
in which Purchaser has not acquired a vested interest in accordance with the
vesting provisions below:
(i) 25% vested as of June 25, 1990;
(ii) 2.1% vested on the 25th day of each month beginning June
25, 1991 for the next thirty-six (36) months so that the Shares will be fully
vested as of June 25, 1994.
(c) Within forty-five (45) days following a Termination, the Company
shall notify Purchaser by written notice delivered or mailed as provided in
subparagraph 9(b), as to whether it wishes to purchase the Shares pursuant to
exercise of the Purchase option. If the Company (or its assignee) elects to
purchase the Shares hereunder, it shall set a date for the closing of the
transaction at a place specified by the Company not later than fifteen (15) days
from the date of such notice. At such closing, the Company (or its assignee)
shall tender payment for the Shares and the certificates representing the Shares
so purchased shall be cancelled. Purchaser hereby authorizes and directs the
Secretary or Transfer Agent of the Company to transfer the Shares as to which
the Purchase Option has been exercised from Purchaser to the Company. The
Option Price may be payable, at the option of the Company, in cancellation of
all or a portion of any outstanding indebtedness of Purchaser to the Company or
in cash (by check), or both.
2
<PAGE>
(d) In the event Purchaser's employment shall terminate as a result
of his death or permanent disability, the Purchase Option shall not apply to the
Company and shall thereafter be terminated. Purchaser shall be deemed
permanently disabled in the event he is unable, as a result of a mental or
physical condition, to perform his employment duties to the Company and a
qualified physician, acceptable to the Board of Directors of the Company,
establishes to the reasonable satisfaction of the Board of Directors that such
condition will continue for a period of not less than one (1) year.
4. Escrow
------
For purposes of facilitating the enforcement of the provisions of
Paragraph 3, Purchaser agrees, immediately upon receipt of the certificate for
his Shares, to deliver such certificates, together with stock powers executed in
blank by Purchaser and Purchaser's spouse (if required for transfer) with
respect to each such stock certificate, to the Secretary or Assistant Secretary
of the Company, or their designees, to hold in escrow, with the authority to
take all such actions and to effectuate all such transfers and/or releases as
may be necessary or appropriate to accomplish the objectives of this Agreement
in accordance with the terms hereof. Purchaser hereby acknowledges that the
appointment of the Secretary or Assistant Secretary of the Company (or their
designee) as the escrow holder hereunder with the stated authorities is a
material inducement to the Company to make this Agreement and that such
appointment is coupled with an interest and is accordingly irrevocable.
Purchaser agrees that such escrow holder shall not be liable to any party hereto
(or to any other party) for any actions or omissions unless such escrow holder
is grossly negligent relative thereto. The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time.
5. Investment Representations
--------------------------
In connection with the purchase of the Shares, Purchaser represents
to the Company the following:
(a) Purchaser is purchasing the Shares for investment for his own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
3
<PAGE>
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser acknowledges and understands that the Shares must be
held indefinitely unless they are subsequently registered under the securities
Act or an exemption from such registration is available. Purchaser further
acknowledges and understands that, except as herein provided, the Company is
under no obligation to register the shares. Purchaser understands that the
certificate evidencing the securities will be imprinted with a legend which
prohibits the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" (acquired, directly or indirectly, from the issuer
thereof or from an affiliate of such issuer, in a non-public offering) subject
to the satisfaction of certain conditions, including, among other things: (i)
the availability, in certain cases, of certain public information about the
Company; (ii) the resale occurring not less than two years after the party has
purchased and paid for the securities to be sold; and (iii) in the case of an
affiliate, or a non-affiliate who has held the restricted securities for less
than three years, the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as such
term is defined under the securities Exchange Act of 1934) and the amount of
securities being sold during any three-month period not exceeding the specified
limitations stated therein.
6. Legends
-------
(a) The certificate or certificates representing the Shares shall
bear the following legends:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
4
<PAGE>
(ii) Any legends required by the bylaws of the Company.
(iii) Any legends required by state blue sky laws.
7. NO EMPLOYMENT RIGHTS
--------------------
THIS AGREEMENT SHALL NOT CONFER UPON PURCHASER ANY RIGHT WITH RESPECT
TO CONTINUATION OF HIS EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES, NOR
SHALL IT INTERFERE IN ANY WAY WITH THE RIGHT OF PURCHASER OR THE COMPANY, OR ANY
OF ITS SUBSIDIARIES, TO TERMINATE PURCHASER'S EMPLOYMENT WITH THE COMPANY AT ANY
TIME.
8. Section 83(b) Election
----------------------
Purchaser hereby represents that he understands (a) the contents and
requirements of Section 83(b) of the Internal Revenue Code of 1986, as amended
("Section 83(b)"), (b) the application of Section 83(b) to the purchase of the
Shares by Purchaser and (c) the nature of the election to be made by Purchaser
under Section 83(b). Purchaser further represents that he intends to file an
election pursuant to Section 83(b) with the Internal Revenue Service within
thirty (30) days following the date of this Agreement, and a copy of such
election with his federal tax return for the calendar year in which the date of
this Agreement falls. Purchaser acknowledges that his failure to file such
election in a timely manner may result in adverse tax consequences for
Purchaser.
9. Miscellaneous
-------------
(a) This Agreement may be amended by written Agreement between the
Company and Purchaser.
(b) Any notice, demand or request required or permitted to be given
under this Agreement shall be in writing and shall be deemed sufficient when
delivered personally or sent by telegram or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed, if to the Company, at its principal place of business,
attention the President, and if to Purchaser, at his address as shown on the
stock records of the Company.
(c) The rights and benefits of this Agreement, including the right to
exercise the Purchase Option with respect to the Shares, shall inure to the
benefit of, and be enforceable by the Company's successors
5
<PAGE>
and assigns. The rights and obligations of Purchaser under this Agreement may
be assigned only with the prior written consent of the Company.
(d) Both parties agree to execute any additional documents necessary
to carry out the purposes of this Agreement.
(e) This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
PIONEER SEMICONDUCTOR
CORPORATION, a California
corporation
By: /s/????????????????????
----------------------------
Title: ??????????????????????
--------------------------
PURCHASER:
/s/ Chi-Hung Hui
--------------------------------
CHI-HUNG HUI
Address: 20172 Rodrigues Ave.
Cupertino, CA 95014
6
<PAGE>
ACKNOWLEDGMENT OF SPOUSE
------------------------
I, ________________________ , spouse of Chi-Hung Hui, have read and
approved the foregoing Agreement. In consideration of the grant by Pioneer
semiconductor Corporation (the "Corporation") to my spouse of the right to
purchase shares of the Corporation's Common Stock, as set forth in the
Agreement, I hereby agree to be bound by the provisions of the Agreement insofar
as I may have any rights under such Agreement or in any shares issued pursuant
thereto under the community property laws of the State of California or similar
laws relating to marital property in effect in the state of our residence as of
the date of execution of the foregoing Agreement, and hereby appoint my spouse
as my attorney-in-fact with respect to all matters arising in connection with
the Agreement or the shares of Common Stock issued pursuant thereto.
Dated: _______________ , 1990. _________________________
Signature
_________________________
Printed Name
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED, I hereby sell, assign and transfer unto
_______________________________________________________________________________
______________________________________________ (__________) shares of the
Common Stock of Pioneer Semiconductor Corporation, a California corporation (the
"Corporation"), standing in my name of the books of such corporation,
represented by Certificate No. ______ herewith, and do hereby irrevocably
constitute and appoint
____________________________________________________________to transfer such
stock on the books of such Corporation with full power of substitution in the
premises.
Dated: ____________, l9__. _____________________________
CHI-HUNG HUI
This Assignment Separate from Certificate was executed in conjunction
with the terms of a Common Stock Purchase Agreement between the above assignor
and the Corporation, dated June 25, 1990.
<PAGE>
EXHIBIT 10.7
PIONEER SEMICONDUCTOR CORPORATION
SERIES A
PREFERRED STOCK PURCHASE AGREEMENT
Dated July 10, 1990
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. Authorization and Sale of Shares................ 1
1.1 Authorization of Shares................... 1
1.2 Sale of Shares............................ 1
2. Closing Date; Delivery.......................... 2
2.1 Closing Date.............................. 2
2.2 Delivery.................................. 2
3. Company Representations and Warranties.......... 2
3.1 Organization and Standing................. 2
3.2 Capitalization............................ 2
3.3 Authorization............................. 3
3.4 Liabilities............................... 3
3.5 Title to Properties and Assets............ 3
3.6 Patents................................... 3
3.7 Material Contracts and Obligations........ 4
3.8 Litigation................................ 4
3.9 Validity.................................. 4
3.10 Governmental Consents..................... 5
3.11 Compliance with Other Instruments......... 5
3.12 Disclosure................................ 5
3.13 Registration Rights....................... 5
4. Representations and Warranties of
Purchasers...................................... 6
4.1 Authorization............................. 6
4.2 Experience................................ 6
4.3 Investment................................ 6
4.4 Rule 144.................................. 6
4.5 No Public Market.......................... 7
4.6 Access to Data............................ 7
4.7 Restrictions on Transfers................. 7
4.8 Foreign Representations................... 7
5. California Commissioner of Corporations;
SEC............................................. 8
5.1 Corporate Securities Law.................. 8
5.2 Restrictive Legends....................... 8
6. Conditions to Purchasers' Obligations
at the Closing.................................. 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
7. Conditions to Company's Obligations......... 10
8. Sale of Additional Shares................... 11
9. Purchasers' Voting Obligations.............. 11
10. Miscellaneous............................... 12
10.1 Governing Law........................ 12
10.2 Survival............................. 12
10.3 Successors and Assigns............... 12
10.4 Entire Agreement..................... 12
10.5 Notices.............................. 12
10.6 Amendments and Waivers............... 12
10.7 Delays or Omissions.................. 13
10.8 Expenses............................. 13
10.9 Legal Fees........................... 13
10.10 Finder's Fees........................ 13
10.11 Titles and Subtitles................. 14
10.12 Counterparts......................... 14
10.13 Severability......................... 14
</TABLE>
ii
<PAGE>
PIONEER SEMICONDUCTOR CORPORATION
SERIES A
PREFERRED STOCK PURCHASE AGREEMENT
This Series A Preferred Stock Purchase Agreement (the "Agreement") is
made as of July 10, 1990 among Pioneer Semiconductor Corporation, a California
corporation (the "Company"), and those persons who are set forth on the
signature page hereof as purchasers of the Company's Series A Preferred Stock
hereunder (the "Purchasers").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
--------------------------------
1.1 Authorization of Shares. The Company will on or before the
-----------------------
Closing Date (as defined in Section 2 below) adopt and file with the Secretary
of State of the State of California the Certificate of Determination of
Preferences of Preferred Shares ("Certificate of Determination") in the form
attached hereto as Exhibit A authorizing the issuance of 12,000,000 shares of
Series A Preferred Stock with the rights, preferences and privileges set forth
therein, and will authorize the issuance pursuant to this Agreement of said
12,000,000 shares of its Series A Preferred Stock, to be sold as set forth
herein. The shares of Series A Preferred Stock to be sold hereunder and
pursuant to Section 8 hereof are sometimes referred to as the "Shares."
1.2 Sale of Shares. Subject to the terms and conditions hereof,
--------------
on the Closing Date (as defined in Section 2 below) the Company will issue and
sell to each Purchaser, and each purchaser severally agrees to purchase from the
Company, the number of shares specified opposite the name of each such purchaser
on the signature page hereto at a purchase price of $.50 per share. The
Company's agreement with each of the Purchasers hereunder is a separate
agreement and the sale and issuance of Shares to each of the Purchasers are
separate sales and issuances. The purchase price for the Shares hereunder shall
be paid by way of cash (or cash equivalent check) or by way of cancellation of
indebtedness to the extent the Company shall be indebted to a Purchaser at the
time of Closing.
1
<PAGE>
2. Closing Date; Delivery.
----------------------
2.1 Closing Date. The closing of the purchase and sale of the
------------
Shares hereunder (the "Closing") shall be held at the offices of Morrison &
Foerster, 630 Hansen Way, Palo Alto, California, 94304 at 2:00 p.m. on Tuesday,
July 10, 1990, or at such other time and place to which the Company and the
Purchasers may agree (the "Closing Date").
2.2 Delivery. Subject to the terms and conditions hereof, at the
--------
Closing the Company will deliver to each Purchaser a certificate representing
the Shares to be purchased from the Company at the Closing by such Purchaser,
dated the date of the Closing (the "Closing Date"), against payment of the
purchase price therefor by check made payable to the order of the Company or, in
the case of cancellation of indebtedness, by delivery of such evidence as the
Company shall reasonably require indicating the cancellation of such debt.
3. Company Representations and Warranties. Except as set forth in
--------------------------------------
Exhibit B attached hereto, the Company hereby represents and warrants to the
Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws.
3.2 Capitalization. The authorized capital stock of the Company
--------------
is or will be upon filing of the Certificate of Determination: 30,000,000 shares
of Common Stock, of which 4,500,000 shares are issued and outstanding; and
20,000,000 shares of Preferred Stock, of which 12,000,000 shares are designated
Series A Preferred Stock and of which no shares are issued and outstanding. All
such issued and outstanding shares have been duly authorized and validly issued
and are fully paid and nonassessable. The rights, preferences and privileges of
the Series A Preferred Stock will be as set forth in the Certificate of
Determination. The Company has reserved 12,000,000 shares of its Common Stock
for issuance upon the conversion of the Series A Preferred Stock, and 3,500,000
shares of its Common Stock for issuance to key employees, officers, directors
and consultants of the Company as may be determined from time to time by the
Company's Board of Directors. Except as set forth on Exhibit B, there are no
options, warrants, conversion privileges or other rights, or agreements with
respect to the issuance thereof, presently outstanding to purchase any of the
authorized but unissued stock of the Company. All such outstanding securities of
the Company were issued in compliance with all applicable federal and
2
<PAGE>
state securities laws. The holders of record of the presently
issued and outstanding shares of Common Stock of the Company are as set forth on
Exhibit B.
3.3 Authorization. All corporate action on the part of the
-------------
Company, its officers, directors and shareholders, necessary for the sale and
issuance of the Shares pursuant hereto (and of the shares of Common Stock
issuable upon conversion of the Shares) and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement is a valid and binding obligation of the Company enforceable in
accordance with its terms. Except as set forth in Exhibit B, the Shares are not
subject to any preemptive rights or rights of first refusal.
3.4 Liabilities. The Company has no indebtedness for borrowed
-----------
money that the Company has directly or indirectly created, incurred, assumed, or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable. The Company has no material liability, absolute or
contingent.
3.5 Title to Properties and Assets. The Company has good and
------------------------------
marketable title to its properties and assets held in each case subject to no
mortgage, pledge, lien, encumbrance or charge of any kind.
3.6 Patents. The Company has sufficient title and ownership of
-------
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted without any known conflict with or
infringement of the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, and the Company
is not a party or bound by any options, licenses or agreements with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, proprietary rights and processes of any other person or entity.
Neither the Company nor any of its employees have received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of the employees of the
Company are obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
his obligation to use his best efforts to promote the interests of the Company
or that would conflict with the Company's business as proposed to be
3
<PAGE>
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the best of the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
3.7 Material Contracts and Obligations. Set forth on Exhibit B is
----------------------------------
a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are (i)
material to the conduct and operations of its business and properties; (ii)
involve any of the officers, consultants, directors, employees or shareholders
of the Company; or (iii) obligate the Company to share, license or develop any
product or technology. Copies of such agreements and contracts and documentation
evidencing such liabilities and other obligations have been made available for
inspection by the purchasers and their counsel. All of such agreements and
contracts are valid, binding and in full force and effect in all material
respects. All present employees have executed and all other employees of the
Company have executed or will execute a "Proprietary Information and Inventions
Agreement" concerning nondisclosure of confidential information and assignment
of inventions to the Company in the form previously delivered to the Purchasers
and their special counsel.
3.8 Litigation. There are no actions, proceedings or
----------
investigations pending or, to the best of the Company's knowledge and belief,
any basis therefor or threat thereof, against or affecting the Company, that,
either in any case or in the aggregate, might result in any material adverse
change in the business, prospects, condition, affairs or operations of the
Company or in any of its properties or assets, in any material impairment of the
right or ability of the Company to carry on its business as now conducted or as
proposed to be conducted, or in any change in the current equity ownership of
the Company, and none that questions the validity of this Agreement or any
action taken or to be taken in connection herewith.
3.9 Validity. The Shares to be purchased and sold pursuant to
--------
this Agreement (and the shares of Common Stock issuable upon conversion of the
Shares), when issued, sold and delivered in accordance with the terms and for
the consideration expressed herein, shall be duly and validly issued, fully paid
and nonassessable, and will be free and clear of any liens or encumbrances
caused or created by the Company, except that the Shares may be subject to
4
<PAGE>
restrictions on transfer described in Exhibit B hereto under state and/or
federal securities laws as set forth herein or as otherwise required at the time
a transfer is proposed.
3.10 Governmental Consents. All consents, approvals, orders,
---------------------
authorizations or registrations, qualifications, designations, declarations or
filings with any U.S. federal or state governmental authority on the part of the
Company required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of the
Closing. Based in part on the representations of the Purchasers set forth in
Section 4 below, the offer, sale and issuance of the Shares in conformity with
the terms of this Agreement are exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "Securities
Act").
3.11 Compliance with Other Instruments. The Company is not in,
---------------------------------
nor will the conduct of its business as proposed to be conducted result in any,
violation, breach or default of any term of its Articles of Incorporation or
Bylaws, or in any material respect of any term or provision of any mortgage,
indenture, contract, agreement or instrument to which the Company is a party,
or, to its knowledge, of any provision of any foreign or domestic state or
federal judgment, decree, order, statute, rule or regulation applicable to or
binding upon the Company. The execution, delivery and performance of and
compliance with this Agreement, and the issuance of the Shares pursuant hereto
(and any shares of Common Stock issuable upon conversion of the Shares) will not
result in any such violation or be in conflict with or constitute a default
under any such term.
3.12 Disclosure. No representation or warranty by the Company in
----------
this Agreement or any statement or certificate furnished or to be furnished to
the Purchasers pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
3.13 Registration Rights. Except as contained in that certain
-------------------
Investors Rights Agreement, attached as Exhibit C hereto (the "Investors Rights
Agreement"), the Company is not under any obligation, including any "piggy back"
obligation, to register (as defined in the Investors Rights Agreement) any of
its presently outstanding securities or any of its securities that may hereafter
be issued.
5
<PAGE>
4. Representations and Warranties of Purchasers. Each Purchaser
--------------------------------------------
severally and not jointly represents and warrants to the Company as follows:
4.1 Authorization. All action on the part of Purchaser necessary
-------------
for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby has been taken and,
assuming due execution and delivery by the Company, when executed and delivered
by Purchaser, this Agreement will constitute a legal, valid, binding and
enforceable obligation of Purchaser.
4.2 Experience. Purchaser has substantial experience in
----------
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests.
4.3 Investment. Purchaser is acquiring the Shares (and the Common
----------
Stock issuable upon conversion thereof) for investment for its own account, not
as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof. Purchaser understands that the Shares (and the
Common Stock issuable upon conversion thereof) have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act")
by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Purchaser's
representations as expressed herein.
4.4 Rule 144. Purchaser acknowledges that the Shares (and the
--------
Common Stock issuable upon conversion thereof) must be held indefinitely unless
subsequently registered under the Securities Act or unless Purchaser avails
itself of an available exemption from such registration requirements. Purchaser
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the Shares, the availability of certain current
public information about the Company, the resale occurring not less than two
years after a party has purchased and paid for the securities to be sold, the
sale being effected through a "broker's transaction" or in transactions directly
with a "market maker" and the number of shares being sold during any three-month
period not exceeding specified limitations.
6
<PAGE>
4.5 No Public Market. Purchaser understands that no public market
----------------
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Company's
securities.
4.6 Access to Data. Purchaser has had an opportunity to discuss
--------------
the Company's business, management and financial affairs with the Company's
management and has also had an opportunity to ask questions of the Company's
officers, which questions were answered to its satisfaction.
4.7 Restrictions on Transfers. Purchaser agrees that in no event
-------------------------
will it make a transfer or disposition of any of the Shares (or any Common Stock
issued upon conversion thereof) (other than pursuant to an effective
registration statement under the Securities Act), unless and until (i) Purchaser
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
disposition, and (ii) if requested by the Company, at the expense of Purchaser
or transferee, Purchaser shall have furnished to the Company an opinion of
counsel, reasonably satisfactory to the Company, to the effect that such
transfer may be made without registration under the Securities Act.
4.8 Foreign Representations.
-----------------------
(a) Neither Purchaser nor any person for the account of whom
such Purchaser is acting, including the estate of any such person, a trust of
which any such person is a beneficiary, or a corporation, partnership, trust or
other entity organized under the laws of the United States of America, its
territories, possessions, and all areas under the jurisdiction of the United
States of America, is a citizen or resident of the United States of America (a
"U.S. Person").
(b) Purchaser will not sell, transfer or otherwise dispose of
the Shares for a period of ninety (90) days after the Closing and Purchaser
agrees that it shall thereafter transfer or otherwise dispose of the Shares only
if (i) the proposed transferee shall have executed, for the benefit of the
Company, an instrument in substantially the following form:
"The undersigned hereby represents,
warrants and agrees that neither the
undersigned nor any person for the
account of whom the undersigned is acting
is a U.S. Person. As used herein, "U.S.
Person" means a citizen or resident of
7
<PAGE>
the United States, including the estate
of any such person, a trust of which any
such person is a beneficiary, or a
corporation, partnership, trust or any
other entity organized under the laws of
the United States. As used herein,
"United States" shall include the
territories, possessions and all areas
under the jurisdiction of the United
States of America."
or (ii) Purchaser shall have complied with Section 4.7 hereof.
5. California Commissioner of Corporations; SEC.
--------------------------------------------
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR SUCH EXEMPTION BEING AVAILABLE.
5.2 Restrictive Legends.
-------------------
(a) Each certificate representing (i) the Shares, (ii) shares
of Common stock issuable upon conversion of the Shares, and (iii) any other
securities issued in respect of the Shares upon any stock split, stock dividend,
recapitalization, merger or similar event (unless no longer required in the
opinion of counsel for the Company) shall be stamped or otherwise imprinted with
a legend substantially in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE
ARE HELD BY AN ENTITY WHICH IS NOT A
CITIZEN OR RESIDENT OF THE UNITED STATES
("FOREIGN INVESTOR"), SUCH SHARES MAY BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED NINETY (90) DAYS AFTER THE
DATE HEREOF TO ANOTHER FOREIGN INVESTOR
OR IF TO A UNITED STATES CITIZEN OR
RESIDENT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE
1933 SECURITIES ACT, AS AMENDED, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY, STATING THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT."
8
<PAGE>
(b) The certificates for the Shares (and any Common Stock
issued upon conversion thereof) shall also bear any legend required by any
applicable state securities law or any legend required by federal law upon the
issuance to or after a transfer of the Shares (or Common Stock issued upon
conversion thereof) to a U. S. person.
(c) In addition, the company shall make a notation regarding
the restrictions on transfer of the Shares in its stockbooks, and the Shares
(and any Common Stock issued on conversion thereof) shall be transferred on the
books of the Company only if transferred or sold pursuant to an effective
registration statement under the Securities Act covering such shares or pursuant
to and in compliance with the provisions of Section 4.7 hereof.
6. Conditions to Purchasers' Obligations at the Closing. The
----------------------------------------------------
obligation of each purchaser to purchase the Shares at the Closing is subject to
the fulfillment to the satisfaction of such Purchaser on or prior to the Closing
Date of the following conditions, any of which may be waived in whole or in part
by such Purchaser:
(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section
- -----------
3 hereof shall be true and correct when made, and shall be true and correct on
the Closing Date with the same force and effect as if they had been made on and
as of said date, subject to changes contemplated by this Agreement; and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it on or prior to the Closing Date.
(b) State Securities Laws. The Company shall have complied with the
---------------------
qualification or exemption requirements of applicable state securities laws.
(c) Certificate of Determination. The Company shall have duly
----------------------------
adopted and filed the Certificate of Determination with the California Secretary
of State.
(d) Opinion of Company's Counsel. Each of the Purchasers shall have
----------------------------
received from Morrison & Foerster, counsel to the Company, a favorable opinion
addressed to such Purchaser, dated the Closing Date and in form and substance
reasonably satisfactory to the purchasers and their counsel, as to the matters
stated in Sections 3.1, 3.2, (the fifth sentence thereof to the best of
counsel's knowledge), 3.3, 3.8 (to the best of counsel's knowledge), 3.9, 3.10
and 3.11 (to the best of counsel's knowledge).
9
<PAGE>
(e) Compliance Certificate. At the Closing there shall have been
----------------------
delivered to each of the Purchasers a certificate, dated the Closing Date,
signed by the Company's President certifying that the conditions specified in
Sections 6.1(a), (b), (c) and (g) have been fulfilled.
(f) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(g) Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement which need to be obtained prior to
the Closing.
(h) Investor Rights Agreement. The Company shall have entered into
-------------------------
the Investors Rights Agreement with each Purchaser.
7. Conditions to Company's Obligations. The obligations of the
-----------------------------------
Company under Sections 1.2 and 2.4 of this Agreement are subject to the
fulfillment at or before the Closing Date of each of the following conditions:
(a) Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of each of the Purchasers contained in Section 4
hereof shall be true as of the Closing Date; and the Purchasers shall have each
performed all obligations and conditions herein required to be performed or
observed by them on or prior to the Closing Date.
(b) Certificate of Determination. The Certificate of Determination
----------------------------
shall have been filed with the Secretary of State of the State of California.
(c) Minimum Investment. The Purchasers shall purchase an aggregate
------------------
of not less than $2,000,000 worth of Shares at the Closing.
(d) Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement which need to be obtained prior to
the Closing.
10
<PAGE>
8. Sale of Additional Shares.
-------------------------
Purchasers acknowledge that the Company intends to sell up to a total
of 12,000,000 Shares to the Purchasers and other qualified investors for cash at
a price per share of not less than $.50 following the Closing. The identity of
the purchasers of any Shares sold after the Closing Date (the "Additional
Shares") shall be determined in the sole discretion of the Company, and the
Company shall not be required to obtain any further consents, approvals or
waivers from Purchasers as to the issuance of the Additional Shares, provided
the price per share is not less than $.50 and paid in cash and such purchasers
of Additional Shares are not granted any rights, preferences or privileges as to
said Additional Shares (or otherwise in connection with the purchase thereof)
that are senior to or in addition to the rights provided for in this Agreement,
the Investors Rights Agreement or the Certificate of Determination. Each such
purchaser shall be required, as a condition to its purchase of any Additional
Shares to become a party to the Investors Rights Agreement.
9. Purchasers' Voting Obligations.
------------------------------
(a) During the period described in Subsection (b) below, each
Purchaser agrees to vote all Series A Shares, any Common Stock acquired on
conversion thereof and any other voting securities of the Company that such
Purchaser may subsequently acquire (collectively the "Securities") on all
matters to be voted on by the shareholders of the Company, in the same manner
and in the same proportion as the votes cast by the holders (exclusive of the
Purchasers) of Common Stock of the Company, except that Purchaser may vote the
Securities (i) in accordance with the provisions contained in the Certificate of
Determination with respect to the election of directors, and (ii) as it
determines as to any proposed amendment to the articles of incorporation of the
Company that Purchaser determines in good faith materially and adversely affects
the rights, preferences and privileges of the Shares (or any other series of
Preferred Stock that Purchaser may subsequently acquire); provided that, for the
purpose of the foregoing clause, the creation of an additional series of
Preferred Stock shall not be deemed to be adverse to Purchaser.
(b) The obligation of each Purchaser to vote the Securities in
accordance with Subsection (a) above shall commence as of the closing and
continue until the first to occur of the following: (i) June 30, 2000 or (ii)
the closing of the first underwritten offering of the Company's securities to
the general public that is effected with the Securities and Exchange commission
under the Securities Act.
11
<PAGE>
10. Miscellaneous.
-------------
10.1 Governing Law. This Agreement shall be governed in all
-------------
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
10.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any party hereto
and the closing of the transactions contemplated hereby.
10.3 Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto whose rights or obligations hereunder are affected by such
amendments.
10.4 Entire Agreement. This Agreement and the other documents and
----------------
agreements delivered pursuant hereto constitute the entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
10.5 Notices. Except as otherwise provided, all notices and other
-------
communications required or permitted hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid, addressed (a) if to the Purchaser
at the Purchaser's address set forth below its signature, or at such other
address as the Purchaser shall have furnished to the Company in writing, or (b)
if to any other holder of any of the Shares or other securities issued with
respect thereto, at such address such holder shall have furnished the Company in
writing, or until any such holder furnishes an address to the Company, then to
and at the address of the last holder of such securities who has so furnished an
address to the Company, or (c) if to the Company, at its address set forth
below, or at such other address as the Company shall have furnished to the
Purchaser in writing.
10.6 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least seventy-five (75%) of the outstanding Shares (including, for such
purposes, on a proportional basis, any shares of Common stock into which any of
the Shares have been converted that have not been sold to the public). Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each
12
<PAGE>
holder of any securities purchased under this agreement at the time outstanding
(including securities into which such securities have been converted), each
future holder of all such securities, and the Company.
10.7 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to the Company or to any holder of any
securities issued or to be issued hereunder, upon any breach or default of any
party hereto under this Agreement, shall impair any such right, power or remedy
of the Company or such holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of any similar breach of
default thereafter occurring; nor shall any waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of the Company or any holder of
any breach or default under this Agreement or any waiver on the part of the
Company or any holder of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement, or by law or
otherwise afforded to the Company or any holder, shall be cumulative and not
alternative.
10.8 Expenses. The Company and each Purchaser shall bear their
--------
own expenses and legal fees incurred on their behalf with respect to the
negotiation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
10.9 Legal Fees. In the event of any action at law, suit in
----------
equity or arbitration proceeding in relation to this Agreement or any Shares or
other securities of the Company issued or to be issued, the prevailing party, or
parties, shall be paid by the other party or parties a reasonable sum for
attorney's fees and expenses for such prevailing party or parties.
10.10 Finder's Fees.
-------------
(a) The company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold each Purchaser
harmless of and from any liability for commission or compensation in the nature
of a finder's fee of any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
13
<PAGE>
(d) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.17 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.18 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.19 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
Chen-Yueh Chin
/s/Alex C. Hui /s/Chen-Yueh Chin
By: ____________________________ ___________________________
Alex C. Hui, President (Sign Name)
No. of shares: 400,000
-------
14
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such purchaser, or any of its employees or representatives, are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY KIA HONG
__________________________
/s/Alex C. Hui /s/TAY KIA HONG
By: ____________________________ ___________________________
Alex C. Hui, President (Sign Name)
No. of Shares: 1,000,000
------------
14
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY TIAN LIANG
___________________________
/s/Alex C. Hui /s/TAY TIAN LIANG
By: ____________________________ ___________________________
Alex C. Hui, President (Sign Name)
No. of shares: 600,000
-------
14
<PAGE>
(c) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.14 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.15 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.16 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
Chih Ray Hsu
/s/Alex C. Hui /s/Chih Ray Hsu
By: ____________________________ ___________________________
Alex C. Hui, President (Sign Name)
No. of shares: 300,000
-------
14
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY THIAM YEW
____________________________
/s/Alex C. Hui /s/TAY THIAM YEW
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 600,000
-------
14
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY THIANG PHONG
____________________________
/s/Alex C. Hui /s/TAY THIANG PHONG
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 600,000
-------
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY THIAM SONG
____________________________
/s/Alex C. Hui /s/TAY THIAM SONG
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 600,000
-------
14
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
Jeffrey Young
____________________________
/s/Alex C. Hui /s/Jeffrey Young
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 300,000
-------
14
<PAGE>
(f) Each Purchaser (i) represents and warrants that it has
retained no tinder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.23 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.24 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.25 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
KOH TONG POAT
____________________________
/s/Alex C. Hui /s/KOH TONG POAT
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 300,000
-------
14
<PAGE>
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.11 Titles and subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.12 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
Sze-Wu Hsu
/s/Alex C. Hui /s/Sze-Wu Hsu
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 300,000
--------
14
<PAGE>
(e) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
10.20 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.21 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.22 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
Yu-Pu Hsu
/s/Alex C. Hui /s/Yu-Pu Hsu
By: ____________________________ ____________________________
Alex C. Hui, President (Sign Name)
No. of shares: 200,000
-------
14
<PAGE>
EXHIBITS
A - Certificate of Determination
B - Schedule of Exceptions
C - Investor Rights Agreement
<PAGE>
EXHIBIT 10.8
PIONEER SEMICONDUCTOR CORPORATION
SERIES B
PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is
made as of December 30, 1991 among Pioneer Semiconductor Corporation, a
California corporation (the "Company"), and those persons who are set forth on
the signature page hereof as purchasers of the Company's Series B Preferred
Stock hereunder (the "Purchasers").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
--------------------------------
1.1 Authorization of Shares. The Company will on or before the
-----------------------
Closing Date (as defined in Section 2 below) adopt and file with the Secretary
of State of the State of California the Restated Articles of Incorporation
("Restated Articles") in the form attached hereto as Exhibit A authorizing the
issuance of 4,000,000 shares of Series B Preferred Stock with the rights,
preferences and privileges set forth therein, and will authorize the issuance
pursuant to this Agreement of said 4,000,000 shares of its Series B Preferred
Stock, to be sold as set forth herein. The shares of Series B Preferred Stock
to be sold hereunder and pursuant to Section 8 hereof are sometimes referred to
as the "Shares."
1.2 Sale of Shares. Subject to the terms and conditions hereof, on
--------------
the Closing Date (as defined in Section 2 below) the Company will issue and sell
to each Purchaser, and each Purchaser severally agrees to purchase from the
Company, the number of Shares specified opposite the name of each such Purchaser
on the signature page hereto at a purchase price of $1.00 per share. The
Company's agreement with each of the Purchasers hereunder is a separate
agreement and the sale and issuance of Shares to each of the Purchasers are
separate sales and issuances. The purchase price for the Shares hereunder shall
be paid by way of cash (or cash equivalent check) or by way of cancellation of
indebtedness to the extent the company shall be indebted to a Purchaser at the
time of Closing.
1
<PAGE>
2. Closing Date; Delivery.
----------------------
2.1 First Closing Date. The first closing of the purchase and sale
------------------
of the Shares pursuant to this Agreement shall be held at the offices of
Morrison & Foerster, 755 Page Mill Road, Palo Alto, California, at 10:00 a.m. on
December 30, 1991, or at such other time and place as the Company and a majority
in interest of the Purchasers purchasing Shares at such closing may agree in
writing. The closing referred to in this Section 2.1 is hereinafter referred to
as the "First Closing Date" or "Closing Date."
2.2 Subsequent Closings. Following the First Closing and until
-------------------
January 31, 1992, the Company shall have the right, subject to the terms and
conditions hereof, to issue and sell Shares to existing Purchasers and to
additional persons who the Company shall be authorized to add to and include in
the Schedule of Purchasers, in such amounts as the Company and such Purchasers
shall agree. Any additional person added to the Schedule of Purchasers shall:'
(i) be deemed a "Purchaser" for all purposes of this Agreement; and (ii) be
required to execute this Agreement and that certain First Amended Investors
Rights Agreement in the form attached hereto as Exhibit C (the "Investors Rights
Agreement") as a condition to the purchase of Shares hereunder. The closing of
the purchase and sale of additional Shares pursuant to this Section 2.2 shall be
held at such time and place on or prior to January 31, 1992 as the Company and
such additional Purchasers may agree in writing. Any such closing referred to
in this Section 2.2 is hereinafter referred to as a "Subsequent closing" or
"Closing" and the date of a Subsequent closing is hereinafter referred to as a
"Subsequent Closing Date" or "Closing Date." The Company shall have the right
to extend the January 31, 1992 date for all purposes of this Section 2.2 for a
period of up to ninety (90) additional days.
2.3 Delivery. Subject to the terms of this Agreement, at each
--------
Closing, the Company will deliver to each Investor the certificates representing
that number of Shares to be purchased by that Purchaser from the Company at such
Closing, against payment of the purchase price therefor by a check payable to
the order of the Company or by wire transfer of immediately available funds.
3. Company Representations and Warranties. Except as set forth in
--------------------------------------
Exhibit B attached hereto, the Company hereby represents and warrants to the
Purchasers as follows:
2
<PAGE>
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws.
3.2 Capitalization. The authorized capital stock of the Company is
--------------
or will be upon filing of the Restated Articles of Incorporation: 30,000,000
shares of Common Stock, of which 4,500,000 shares are issued and outstanding;
and 20,000,000 shares of Preferred Stock, of which 5,200,000 shares are
designated Series A Preferred Stock, all of which shares are issued and
outstanding, and of which 4,000,000 are designated Series B Preferred Stock, of
which no shares are issued and outstanding. All such issued and outstanding
shares have been duly authorized and validly issued and are fully paid and
nonassessable. The rights, preferences and privileges of the Preferred Stock
will be as set forth in the Restated Articles. The Company has reserved
5,200,000 shares of its Common Stock for issuance upon the conversion of the
Series A Preferred Stock, 4,000,000 shares of its Common Stock for issuance upon
the conversion of the Series B Preferred Stock, and 2,910,000 shares of its
Common Stock for issuance to key employees, officers, directors and consultants
of the Company as may be determined from time to time by the Company's Board of
Directors. Except for (i) the conversion privileges of the outstanding shares
of Series A Preferred Stock and of the shares of Series B Preferred Stock to be
issued under this Agreement, (ii) options to purchase an aggregate of 800,800
shares of the Company's Common Stock issued to one director and nine employees
pursuant to the 1990 Stock Plan, and (iii) as set forth on Exhibit B, there are
no options, warrants, conversion privileges or other rights, or agreements with
respect to the issuance thereof, presently outstanding to purchase any of the
authorized but unissued stock of the Company. All such outstanding securities
of the Company were issued in compliance with all applicable federal and state
securities laws. The holders of record of the presently issued and outstanding
shares of Common Stock and Series A Preferred Stock of the Company are as set
forth on Exhibit B.
3.3 Authorization. All corporate action on the part of the
-------------
Company, its officers, directors and shareholders, necessary for the sale and
issuance of the Shares pursuant hereto (and of the shares of Common Stock
issuable upon conversion of the Shares) and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Closing. This
Agreement is a valid and binding obligation of the Company enforceable in
accordance with its terms. Except as set forth in Exhibit B, the Shares are not
subject to any preemptive rights or rights of first refusal.
3
<PAGE>
3.4 Financial Statements. The Company has delivered to each
--------------------
Investor its audited financial statements dated June 30, 1991 and its unaudited
internal financial statements for the three-month period ended September 30,
1991 (the "Financial Statements"). The Financial Statements are complete and
correct in all material respects and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other. The Financial Statements
accurately set out and describe the financial condition and operating results of
the company as of the dates, and for the periods, indicated therein, subject to
normal year-end audit adjustments. Except as set forth in the Financial
Statements, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
September 30, 1991 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
3.5 Title to Properties and Assets. The Company has good and
------------------------------
marketable title to its properties and assets held in each case subject to no
mortgage, pledge, lien, encumbrance or charge of any kind.
3.6 Patents. The Company has sufficient title and ownership of all
-------
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted without any known conflict with or
infringement of the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, and the Company
is not a party or bound by any options, licenses or agreements with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, proprietary rights and processes of any other person or entity.
Neither the Company nor any of its employees have received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of the employees of the
company are obligated under any
4
<PAGE>
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with his obligation to use his best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the best of the company's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees is now
obligated.
3.7 Material Contracts and Obligations. Set forth on Exhibit B is
----------------------------------
a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which the Company is a party or by which it is bound that are (i)
material to the conduct and operations of its business and properties; (ii)
involve any of the officers, consultants, directors, employees or shareholders
of the Company; or (iii) obligate the company to share, license or develop any
product or technology. Copies of such agreements and contracts and documentation
evidencing such liabilities and other obligations have been made available for
inspection by the Purchasers and their counsel. All of such agreements and
contracts are valid, binding and in full force and effect in all material
respects. All present employees have executed and all other employees of the
Company have executed or will execute a "Proprietary Information and Inventions
Agreement" concerning nondisclosure of confidential information and assignment
of inventions to the Company in the form previously delivered to the Purchasers
and their special counsel.
3.8 Litigation. There are no actions, proceedings or
----------
investigations pending or, to the best of the Company's knowledge and belief,
any basis therefor or threat thereof, against or affecting the Company, that,
either in any case or in the aggregate, might result in any material adverse
change in the business, prospects, condition, affairs or operations of the
Company or in any of its properties or assets, in any material impairment of the
right or ability of the Company to carry on its business as now conducted or as
proposed to be conducted, or in any change in the current equity ownership of
the company, and none that questions the validity of this Agreement or any
action taken or to be taken in connection herewith.
5
<PAGE>
3.9 Validity. The Shares to be purchased and sold pursuant to this
--------
Agreement (and the shares of Common Stock issuable upon conversion of the
Shares), when issued, sold and delivered in accordance with the terms and for
the consideration expressed herein, shall be duly and validly issued, fully paid
and nonassessable, and will be free and clear of any liens or encumbrances
caused or created by the Company, except that the Shares may be subject to
restrictions on transfer described in Exhibit B hereto, under state and/or
federal securities laws as set forth herein or as otherwise required at the time
a transfer is proposed.
3.10 Governmental Consents. All consents, approvals, orders,
---------------------
authorizations or registrations, qualifications, designations, declarations or
filings with any U.S. federal or state governmental authority on the part of the
Company required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of the
Closing. Based in part on the representations of the Purchasers set forth in
Section 4 below, the offer, sale and issuance of the Shares in conformity with
the terms of this Agreement are exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "Securities
Act").
3.11 Compliance with Other Instruments. The Company is not in, nor
---------------------------------
will the conduct of its business as proposed to be conducted result in any
violation, breach or default of any term of its Articles of Incorporation or
Bylaws, or in any material respect of any term or provision of any mortgage,
indenture, contract, agreement or instrument to which the Company is a party,
or, to its knowledge, of any provision of any foreign or domestic state or
federal judgment, decree, order, statute, rule or regulation applicable to or
binding upon the Company. The execution, delivery and performance of and
compliance with this Agreement, and the issuance of the Shares pursuant hereto
(and any shares of Common Stock issuable upon conversion of the Shares) will not
result in any such violation or be in conflict with or constitute a default
under any such term.
3.12 Disclosure. No representation or warranty by the Company in
----------
this Agreement or any statement or certificate furnished or to be furnished to
the Purchasers pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
6
<PAGE>
3.13 Registration Rights. Except as contained in the Investors
-------------------
Rights Agreement, the Company will not, as of the Closing, be under any
obligation, including any "piggy back" obligation, to register (as defined in
the Investors Rights Agreement) any of its presently outstanding securities or
any of its securities that may hereafter be issued.
4. Representations and Warranties of Purchasers. Each Purchaser
--------------------------------------------
severally and not jointly represents and warrants to the company as follows:
4.1 Authorization. All action on the part of purchaser necessary
-------------
for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby has been taken and,
assuming due execution and delivery by the Company, when executed and delivered
by Purchaser, this Agreement will constitute a legal, valid, binding and
enforceable obligation of Purchaser.
4.2 Experience. Purchaser has substantial experience in evaluating
----------
and investing in private placement transactions of securities in companies
similar to the Company so that it is capable of evaluating the merits and risks
of its investment in the Company and has the capacity to protect its own
interests.
4.3 Investment. Purchaser is acquiring the Shares (and the Common
----------
Stock issuable upon conversion thereof) for investment for its own account, not
as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof. Purchaser understands that the Shares (and the
Common Stock issuable upon conversion thereof) have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act")
by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Purchaser's
representations as expressed herein.
4.4 Rule 144. Purchaser acknowledges that the Shares (and the
--------
Common Stock issuable upon conversion thereof) must be held indefinitely unless
subsequently registered under the Securities Act or unless Purchaser avails
itself of an available exemption from such registration requirements. Purchaser
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions,
7
<PAGE>
including, among other things, the existence of a public market for the Shares,
the availability of certain current public information about the Company, the
resale occurring not less than two years after a party has purchased and paid
for the securities to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" and the number of
shares being sold during any three-month period not exceeding specified
limitations.
4.5 No Public Market. Purchaser understands that no public market
----------------
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Company's
securities.
4.6 Access to Data. Purchaser has had an opportunity to discuss
--------------
the Company's business, management and financial affairs with the Company's
management and has also had an opportunity to ask questions of the Company's
officers, which questions were answered to its satisfaction.
4.7 Restrictions on Transfers. Purchaser agrees that in no event
-------------------------
will it make a transfer or disposition of any of the Shares (or any Common Stock
issued upon conversion thereof) (other than pursuant to an effective
registration statement under the Securities Act), unless and until (i) Purchaser
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
disposition, and (ii) if requested by the Company, at the expense of Purchaser
or transferee, Purchaser shall have furnished to the Company an opinion of
counsel, reasonably satisfactory to the Company, to the effect that such
transfer may be made without registration under the Securities Act.
4.8 Due Diligence. The Purchaser has been solely responsible for
-------------
the Purchaser's "due diligence" investigation of the Company and its management
and business, for the analysis of the merits and risks of this investment and of
the fairness and desirability of the terms of the investment; that in taking any
action or performing any role relative to the arranging of the proposed
investment, such Purchaser has acted solely in the Purchaser's interest, and
that neither the Purchaser nor any of its agents or employees has acted as an
agent of the Company, or as an issuer, underwriter, broker, dealer or investment
advisor relative to any of the Securities.
8
<PAGE>
5. California Commissioner of Corporations; SEC.
--------------------------------------------
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
------------------------
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR SUCH EXEMPTION BEING AVAILABLE.
5.2 Restrictive Legends.
-------------------
(a) Each certificate representing (i) the Shares, (ii) shares
of Common Stock issuable upon conversion of the Shares, and (iii) any other
securities issued in respect of the Shares upon any stock split, stock dividend,
recapitalization, merger or similar event (unless no longer required in the
opinion of counsel for the company) shall be stamped or otherwise imprinted with
a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR
RULE UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN
EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
(b) Each certificate representing the Securities shall also
bear any legend required by any applicable state securities law. The Company
need not register a transfer of Securities, unless the conditions specified in
the foregoing legends are satisfied. The company may also instruct its transfer
agent not to register the transfer of any of the Securities unless the
conditions specified in the foregoing legends are satisfied.
9
<PAGE>
(c) Removal of Legends and Transfer Restrictions. The legend
--------------------------------------------
relating to the Securities Act endorsed on a stock certificate pursuant to
paragraph 5.2(a) of the Agreement and the stop transfer instructions with
respect to the Securities represented by such certificate shall be removed and
the Company shall issue a certificate without such legend to the holder of such
Securities if such Securities are registered under the Act and a prospectus
meeting the requirements of Section 10 of the Act is available or if such holder
provides to the Company an opinion of counsel for such holder of the Securities
reasonably satisfactory to the Company, or a no-action letter or interpretive
opinion of the staff of the Securities and Exchange Commission (the
"Commission") to the effect that a public sale, transfer or assignment of such
Securities may be made without restriction and without compliance with any
restriction such as Rule 144.
6. Conditions to Purchasers' Obligations at the Closing. The
----------------------------------------------------
obligation of each Purchaser to purchase the Shares at the Closing is subject to
the fulfillment to the satisfaction of such Purchaser on or prior to the Closing
Date of the following conditions, any of which may be waived in whole or in part
by such Purchaser:
(a) Representations and Warranties Correct; Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section
- -----------
3 hereof shall be true and correct when made, and shall be true and correct on
the Closing Date with the same force and effect as if they had been made on and
as of said date, subject to changes contemplated by this Agreement; and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it on or prior to the Closing Date.
(b) State Securities Laws. The Company shall have complied with
---------------------
the qualification or exemption requirements of applicable state securities laws.
(c) Restated Articles. The Company shall have duly adopted and
-----------------
filed the Restated Articles with the California Secretary of State.
(d) Opinion of Company's Counsel. Each of the Purchasers shall
----------------------------
have received from Morrison & Foerster, counsel to the Company, a favorable
opinion addressed to such Purchaser, dated the Closing Date and in form and
substance reasonably satisfactory to the Purchasers and their counsel, as to the
matters stated in Sections 3.1, 3.2, (the fifth sentence thereof to the best of
counsel's knowledge), 3.3, 3.8 (to the best of counsel's knowledge), 3.9, 3.10
and 3.11 (to the best of counsel's knowledge).
10
<PAGE>
(e) Compliance Certificate. At the Closing there shall have been
----------------------
delivered to each of the Purchasers a certificate, dated the Closing Date,
signed by the Company's President certifying that the conditions specified in
Sections 6.1(a), (b), (c) and (g) have been fulfilled.
(f) Proceedings and Documents. All corporate and other
-------------------------
proceedings in connection with the transactions contemplated at the Closing and
all documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(g) Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement which need to be prior to the
Closing.
(h) Investors Rights Agreement. The Company shall have entered
--------------------------
into the Investors Rights Agreement with each Purchaser.
7. Conditions to Company's Obligations. The obligations of the Company
-----------------------------------
under Sections 1.2 and 2.4 of this Agreement are subject to the fulfillment at
or before the Closing Date of each of the following conditions:
(a) Representations and Warranties; Performance of Obligations.
----------------------------------------------------------
The representations and warranties of each of the Purchasers contained in
Section 4 hereof shall be true as of the Closing Date; and the purchasers shall
have each performed all obligations and conditions herein required to be
performed or observed by them on or prior to the Closing Date.
(b) Restated Articles. The Restated Articles shall have been filed
-----------------
with the Secretary of State of the State of California.
(c) Minimum Investment. The Purchasers shall purchase an
------------------
aggregate of not less than $2,000,000 worth of Shares at the Closing.
(d) Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement which need to be obtained prior to
the Closing.
11
<PAGE>
8. Miscellaneous.
-------------
8.1 Governing Law. This Agreement shall be governed in all
-------------
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
8.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any party hereto
and the closing of the transactions contemplated hereby.
8.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto whose rights or obligations hereunder are affected by such
amendments.
8.4 Entire Agreement. This Agreement and the other documents and
----------------
agreements delivered pursuant hereto constitute the entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
8.5 Notices. Except as otherwise provided, all notices and other
-------
communications required or permitted hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid, addressed (a) if to the Purchaser,
at the Purchaser's address set forth below its signature, or at such other
address as the Purchaser shall have furnished to the Company in writing, or (b)
if to any other holder of any of the Shares or other securities issued with
respect thereto, at such address such holder shall have furnished the Company in
writing, or until any such holder furnishes an address to the Company, then to
and at the address of the last holder of such securities who has so furnished an
address to the Company, or (c) if to the Company, at its address set forth
below, or at such other address as the Company shall have furnished to the
Purchaser in writing.
8.6 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least seventy-five percent (75%) of the outstanding Shares (including, for such
purposes, on a proportional basis, any shares of Common Stock into which
12
<PAGE>
any of the Shares have been converted that have not been sold to the public).
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this agreement at the
time outstanding (including securities into which such securities have been
converted), each future holder of all such securities and the Company.
8.7 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to the Company or to any holder of any
securities issued or to be issued hereunder, upon any breach or default of any
party hereto under this Agreement, shall impair any such right, power or remedy
of the Company or such holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of any similar breach of
default thereafter occurring; nor shall any waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of the Company or any holder of
any breach or default under this Agreement or any waiver on the part of the
Company or any holder of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, or by law or otherwise
afforded to the Company or any holder, shall be cumulative and not alternative.
8.8 Expenses. The Company and each Purchaser shall bear their own
--------
expenses and legal fees incurred on their behalf with respect to the
negotiation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
8.9 Legal Fees. In the event of any action at law, suit in equity
----------
or arbitration proceeding in relation to this Agreement or any Shares or other
securities of the Company issued or to be issued, the prevailing party, or
parties, shall be paid by the other party or parties a reasonable sum for
attorney's fees and expenses for such prevailing party or parties.
8.10 Finder's Fees.
-------------
(a) The Company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold each Purchaser
harmless of and from any liability for commission or compensation in the nature
of a finder's fee of any broker or other person or firm (and the costs and
13
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
--------------------------------
By: /s/ ALEX C. HUI /s/ HSU CHIH-FANG
-------------------------------- --------------------------------
Alex C. Hui, President (Sign Name)
No. of shares: 100,000
-------
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
DATO TAY KIA HONG
--------------------------------
By: /s/ Dato Tay Kia Hong
-------------------------------- --------------------------------
Alex C. Hui, President (Sign Name)
No. of shares:
-------
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY TIAN LIANG
--------------------------------
By: /s/ Tay Tian Liang
-------------------------------- --------------------------------
Alex C. Hui, President (Sign Name)
No. of shares:
-------
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY THIANG PHONG
-----------------------------
/s/ Tay Thiang Phong
By: ____________________________ _____________________________
Alex C. Hui, President (Sign Name)
No. of shares: ______
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY THIAM YEW
-----------------------------
/s/ Tay Thiam Yew
By: ____________________________ _____________________________
Alex C. Hui, President (Sign Name)
No. of shares: ______
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
TAY THIAM SONG
-----------------------------
/s/ Tay Thiam Song
By: ____________________________ _____________________________
Alex C. Hui, President (Sign Name)
No. of shares: ______
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
of and from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
Purchaser, or any of its employees or representatives, are responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
KOH TONG POAT
-----------------------------
/s/ Koh Tong Poat
By: ____________________________ _____________________________
Alex C. Hui, President (Sign Name)
No. of shares: ______
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
of and from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
Purchaser, or any of its employees or representatives, are responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
JEFFREY YOUNG
-----------------------------
/s/ Jeffrey Young
By: ____________________________ _____________________________
Alex C. Hui, President (Sign Name)
No. of shares: ______
14
<PAGE>
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has retained
no finder or broker in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company harmless
of and from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
Purchaser, or any of its employees or representatives, are responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability. Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASER
HSU, YU PU
-----------------------------
/s/ Hsu, Yu Pu
By: ____________________________ _____________________________
Alex C. Hui, President (Sign Name)
No. of shares: ______
14
<PAGE>
EXHIBITS
A - Restated Articles of Incorporation
B - Schedule of Exceptions
C - First Amended Investors Rights Agreement
D - Schedule of Investors
<PAGE>
EXHIBIT 10.9
PIONEER SEMICONDUCTOR CORPORATION
SERIES C
PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 21 day of July, 1993 by and among Pioneer Semiconductor
Corporation, a California corporation (the "Company"), and each of those persons
who are set forth on the signature page hereof as purchasers of the Company's
Series C Preferred Stock hereunder (herein individually a "Purchaser" and
collectively, the "Purchasers")
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
--------------------------------
1.1 Authorization of Shares. The Company shall on or before the
-----------------------
Closing Date (as defined in Section 2 below) adopt and file with the Secretary
of State of the State of California the Restated Articles of Incorporation of
the Company (the "Restated Articles") in substantially the form attached hereto
as Exhibit A authorizing the issuance of 1,875,000 shares of Series C Preferred
---------
Stock of the Company, with the rights, preferences and privileges set forth
therein, and will authorize the issuance pursuant to this Agreement of said
1,875,000 shares of its Series C Preferred Stock, to be sold as set forth
herein. The 1,875,000 shares of Series C Preferred Stock to be sold hereunder
are sometimes referred to as the "Shares."
1.2 Sale of the Shares. Subject to the terms and conditions hereof,
------------------
on the Closing Date (as defined in Section 2 below) the Company shall issue and
sell to each Purchaser, and each Purchaser severally, and not jointly, agrees to
purchase from the Company, the number of Shares specified below the name of each
such Purchaser on the signature page hereto at a purchase price of $1.60 per
share. The Company's agreement with each of the Purchasers hereunder is a
separate agreement and the sale and issuance of Shares to each of the Purchasers
are separate sales and issuances. The purchase price for the Shares hereunder
shall be paid by way of cash (or cash equivalent check) or by way of
cancellation of indebtedness to the extent the Company shall be indebted to a
Purchaser at the time of Closing.
1
<PAGE>
2. Closing Date Delivery
---------------------
2.1 First Closing Date. The first closing of the purchase and sale
------------------
of the Shares pursuant to this Agreement shall be held at the offices of
Morrison & Foerster, 755 Page Mill Road, Palo Alto, California, at 10:00 a.m.
(P.D.T.) on July 21, 1993, or at such other time and place as the Company and a
majority in interest of the Purchasers purchasing Shares at such Closing may
agree in writing. The closing referred to in this Section 2.1 is hereinafter
referred to as the "First Closing Date" or "Closing Date."
2.2 Subsequent Closings. Following the First Closing and until such
-------------------
time as the Company shall have issued and sold all of the 1,875,000 shares of
Series C Preferred Stock described in subsection 1.1 above, the Company shall
have the fight, subject to the terms and conditions hereof, to issue and sell
Shares to existing Purchasers and to additional persons who the Company shall be
authorized to add to and include in the Schedule of Purchasers, in such amounts
as the Company and such Purchasers shall agree. Any additional person added to
the Schedule of Purchasers shall: (i) be deemed a "Purchaser" for all purposes
of this Agreement; and (ii) be required to execute this Agreement and that
certain Second Amended Investors Rights Agreement in the form attached hereto as
Exhibit C (the "Investors Rights Agreement") as a condition to the purchase of
- ---------
Shares hereunder. The closing of the purchase and sale of additional Shares
pursuant to this Section 2.2 shall be held at such time and place as the Company
and such additional Purchasers may agree in writing. Any such closing referred
to in this Section 2.2 is hereinafter referred to as a "Subsequent closing" or
"Closing" and the date of a Subsequent Closing is hereinafter referred to as a
"Subsequent Closing Date" or "Closing Date."
2.3 Delivery. Subject to the terms of this Agreement, at each
--------
Closing, the Company shall deliver to each Purchaser a certificate representing
the number of Shares to be purchased by that Purchaser from the Company at such
Closing, against payment of the purchase price therefor by way of (i) a check
payable to the order of the Company, (ii) wire transfer of immediately available
funds, (iii) cancellation of indebtedness to the extent the Company shall be
indebted to such Purchaser, or (iv) a combination of the foregoing.
3. Representations and Warranties of the Company. Except as set forth
---------------------------------------------
in the Schedule of Exceptions attached hereto as Exhibit B (the "Schedule of
---------
Exceptions"), the Company hereby represents and warrants to each Purchaser that:
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized and validly existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws.
2
<PAGE>
3.2 Capitalization. The authorized capital stock of the Company is
--------------
or will be upon filing of the Restated Articles of Incorporation: 50,000,000
shares of Common Stock, of which 3,885,313 shares are issued and outstanding;
and 20,000,000 shares of Preferred Stock, of which 5,200,000 shares are
designated Series A Preferred Stock, all of which shares are issued and
outstanding, 4,000,000 shares are designated Series B Preferred Stock, 2,150,000
of which are issued and outstanding and 1,875,000 shares are designated Series C
Preferred Stock, of which no Shares are issued and outstanding. All such issued
and outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. The rights, preferences and privileges of the
Preferred Stock will be as set forth in the Restated Articles. The Company has
reserved 5,200,000 shares of its Common Stock for issuance upon the conversion
of the Series A Preferred Stock, 4,000,000 shares of its Common Stock for
issuance upon the conversion of the Series B Preferred Stock, and 2,737,187
shares of its Common Stock for issuance to key employees, officers, directors
and consultants of the Company as may be determined from time to time by the
Company's Board of Directors. Except for (i) the conversion privileges of (a)
the outstanding shares of Series A Preferred Stock and Series B Preferred Stock
and (b) the shares of Series C Preferred Stock to be issued under this
Agreement, (ii) options to purchase an aggregate of 1,223,313 shares of the
Company's Common Stock issued to one director and twenty-eight employees
pursuant to the Company's 1990 Stock Plan, (iii) the rights provided in the
Investors Rights Agreement, and (iv) as set forth in the Schedule of Exceptions,
there are no options, warrants, conversion privileges or other rights, or
agreements with respect to the issuance thereof, presently outstanding to
purchase any of the authorized but unissued stock of the Company. All such
outstanding securities of the Company were issued in compliance with all
applicable federal and state securities laws. The holders of record of the
presently issued and outstanding shares of Common Stock, Series A Preferred
Stock and Series B Preferred Stock of the Company are as set forth in the
Schedule of Exceptions.
3.3 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders, necessary for the sale arid issuance
of the Shares pursuant hereto (and of the shares of Common Stock issuable upon
conversion of the Shares) and the performance of the Company's obligations
hereunder has been taken or will be taken prior to the Closing. This Agreement
is a valid and binding obligation of the Company enforceable in accordance with
its terms. Except as set forth in the Schedule of Exceptions, the Shares are not
subject to any preemptive rights or rights of first refusal.
3.4 Financial Statements. The Company has delivered to each
--------------------
Investor its audited financial statements dated June 30, 1992 and its unaudited
internal financial statements for the eleven-month period ended May 31, 1993
(the "Financial Statements"). The Financial Statements are complete and correct
in all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other. The Financial Statements accurately set
out and describe the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein, subject to normal year-end
3
<PAGE>
audit adjustments. Except as set forth in the Financial Statements, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to May 31, 1993 and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in the Financial Statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
The Company maintains and will continue to maintain a standard system of
accounting established and administered in accordance with generally accepted
accounting principles.
3.5 Title to Properties and Assets. The Company has good and
------------------------------
marketable title to its properties and assets held in each case subject to no
mortgage, pledge, lien, encumbrance or charge of any kind.
3.6 Patents. The Company has sufficient title and ownership of all
-------
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted and as proposed to be conducted without any known conflict with or
infringement of the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, and the Company
is not a party or bound by any options, licenses or agreements with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, proprietary rights and processes of any other person or entity.
Neither the Company nor any of its employees have received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks,
tradenames, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of the employees of the
Company are obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
his obligation to use his best efforts to promote the interests of the Company
or that would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the best of the Company's knowledge,
conflict with or result in a breech of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated.
3.7 Material Conflicts and Obligations. Set forth in the Schedule
----------------------------------
of Exceptions is a list of all agreements, contracts, indebtedness, liabilities
and other obligations to which the Company is a party or by which it is bound
that are (i) material to the conduct and operations of its business and
properties; (ii) involve any of the officers, consultants, directors, employees
or shareholders of the Company; or (iii) obligate the Company to share, license
or develop any product or technology. Copies of such agreements and contracts
and documentation evidencing such liabilities and other obligations have been
made available for inspection by the Purchasers. All of such agreements and
contracts are valid, binding and in
4
<PAGE>
full force and effect in all material respects. All present employees have
executed and all other employees of the Company have executed or will execute
the Company's standard "Proprietary Information and Inventions Agreement"
concerning nondisclosure of confidential information and assignment of
inventions to the Company in the form made available to the Purchasers.
3.8 Litigation. There are no actions, proceedings or investigations
----------
pending or, to the best of the Company's knowledge and belief, any basis
therefor or threat thereof, against or affecting the Company, that, either in
any case or in the aggregate, might result in any material adverse change in the
business, prospects, condition, affairs or operations of the Company or in any
of its properties or assets, in any material impairment of the right or ability
of the Company to carry on its business as now conducted or as proposed to be
conducted, or in any change in the current equity ownership of the Company, and
none that questions the validity of this Agreement or any action taken or to be
taken in connection herewith.
3.9 Validity. The Shares to be purchased and sold pursuant to this
--------
Agreement (and the shares of Common Stock issuable upon conversion of the
Shares), when issued, sold and delivered in accordance with the terms and for
the consideration expressed herein, shall be duly and validly issued, fully paid
and nonassessable, and will be free and clear of any liens or encumbrances
caused or created by the Company, except that the Shares may be subject to
restrictions on transfer described in the Schedule of Exceptions hereto under
state and/or federal securities laws as set forth herein or as otherwise
required at the time a transfer is proposed.
3.10 Governmental Consents. All consents, approvals, orders,
---------------------
authorizations or registrations, qualifications; designations, declarations or
filings with any U.S. federal or state governmental authority on the part of the
Company required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of the
Closing. Based in part on the representations of the Purchasers set forth in
Section 4 below, the offer, sale and issuance of the Shares in conformity with
the terms of this Agreement are exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "Securities
Act").
3.11 Compliance with Other Instruments. The Company is not in, nor
---------------------------------
will the conduct of its business as proposed to be conducted result in any,
violation, breach or default of any term of the Restated Articles or its Bylaws,
or in any material respect of any term or provision of any mortgage, indenture,
contract, agreement or instrument to which the Company is a party, or, to its
knowledge, of any provision of any foreign or domestic state or federal
judgment, decree, order, statute, rule or regulation applicable to or binding
upon the Company. The execution, delivery and performance of and compliance with
this Agreement, and the issuance of the Shares pursuant hereto (and any shares
of Common Stock issuable upon conversion of the Shares) will not result in any
such violation or be in conflict with or constitute a default under any such
term.
5
<PAGE>
3.12 Disclosure. No representation or warranty by the Company in
----------
this Agreement or any statement or certificate furnished or to be furnished to
the Purchasers pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
3.13 Registration Rights. Except as contained in the Investors
-------------------
Rights Agreement, the Company will not, as of the Closing, be under any
obligation, including any "piggy back" obligation, to register (as defined in
the Investors Rights Agreement) any of its presently outstanding securities or
any of its securities that may hereafter be issued.
4. Representations and Warranties of the Purchasers. Each Purchaser,
------------------------------------------------
severally and not jointly, represents and warrants to the Company that:
4.1 Authorization. All action on the part of Purchaser necessary
-------------
for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby has been taken and,
assuming due execution and delivery by the Company, when executed and delivered
by Purchaser, this Agreement will constitute a legal, valid, binding and
enforceable obligation of Purchaser.
4.2 Experience. Purchaser has substantial experience in evaluating
----------
and investing in private placement transactions of securities in companies
similar to the Company so that it is capable of evaluating the merits and risks
of its investment in the Company and has the capacity to protect its own
interests.
4.3 Investment. Purchaser is acquiring the Shares (and the Common
----------
Stock issuable upon conversion thereof) for investment for its own account, not
as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof. Purchaser understands that the Shares (and the
Common Stock issuable upon conversion thereof) have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act")
by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Purchaser's
representations as expressed herein.
4.4 Rule 144. Purchaser acknowledges that the Shares (and the
--------
Common Stock issuable upon conversion thereof) must be held indefinitely unless
subsequently registered under the Securities Act or unless Purchaser avails
itself of an available exemption from such registration requirements. Purchaser
is aware of the provisions of Rule 144 promulgated under the Securities Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the Shares, the availability of certain current
public information about the Company, the resale occurring not
6
<PAGE>
less than two years after a party has purchased and paid for the securities to
be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.5 No Public Market. Purchaser understands that no public market
----------------
now exists for any of the securities issued by the Company and that the Company
has made no assurances that a public market will ever exist for the Company's
securities.
4.6 Access to Data. Purchaser has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with the Company's
management and has also had an opportunity to ask questions of the Company's
officers, which questions were answered to its satisfaction.
4.7 Restrictions on Transfers. Purchaser agrees that in no event
-------------------------
will it make a transfer or disposition of any of the Shares (or any Common Stock
issued upon conversion thereof) (other than pursuant to an effective
registration statement under the Securities Act), unless and until (i) Purchaser
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
disposition, and (ii) if requested by the Company, at the expense of Purchaser
or transferee, Purchaser shall have furnished to the Company an opinion of
counsel, reasonably satisfactory to the Company, to the effect that such
transfer may be made without registration under the Securities Act.
4.8 Due Diligence. The Purchaser has been solely responsible for
-------------
the Purchaser's "due diligence" investigation of the Company and its management
and business, for the analysis of the merits and risks of this investment and of
the fairness and desirability of the terms of the investment; that in taking any
action or performing any role relative to the arranging of the proposed
investment, such Purchaser has acted solely in the Purchaser's interest, and
that neither the Purchaser nor any of its agents or employees has acted as an
agent of the Company, or as an issuer, underwriter, broker, dealer or investment
advisor relative to any of the Securities.
5. California Commissioner of Corporations; SEC.
-------------------------- -----------------
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATION OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITION
UPON SUCH QUALIFICATION BEING OBTAINED OR SUCH EXEMPTION BEING AVAILABLE.
7
<PAGE>
5.2 Restrictive Legends.
-------------------
(1) Each certificate representing (i) the Shares, (ii) shares
of Common Stock issuable upon conversion of the Shares, and (iii) any other
securities issued in respect of the Shares upon any stock split, stock
dividend, recapitalization, merger or similar event (collectively, the
"Securities") (unless no longer required in the opinion of counsel for the
Company) shall be stamped or otherwise imprinted with a legend substantially in
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES AS OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144
OR ITS SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE."
(2) Each certificate representing the Securities shall also
bear any legend required by any applicable state securities law. The Company
need not register a transfer of the Securities, unless the conditions specified
in the foregoing legends are satisfied. The Company may also instruct its
transfer agent not to register the transfer of any of the Securities unless the
conditions specified in the foregoing legends are satisfied.
(3) Removal of Legends and Transfer Restrictions. The legend
--------------------------------------------
relating to the Securities Act endorsed on a stock certificate pursuant to
paragraph 5.2(a) of this Agreement and the stop transfer instructions with
respect to the Securities represented by such certificate shall be removed and
the Company shall issue a certificate without such legend to the holder of such
Securities if such Securities are registered under the Act and a prospectus
meeting the requirements of Section 10 of the Act is available or if such
holder provides to the Company an opinion of counsel for such holder of the
Securities reasonably satisfactory to the Company, or a no-action letter or
interpretive opinion of the staff of the Securities and Exchange Commission
(the "Commission") to the effect that a public sale, transfer or assignment of
such Securities may be made without restriction and without compliance with any
restriction such as Rule 144.
6. Conditions to Purchaser's Obligations at the Closing. The
----------------------------------------------------
obligation of each Purchaser to purchase the Shares at the Closing is subject
to the fulfillment to the satisfaction of such Purchaser on or prior to the
Closing Date of the following conditions, any of which may be waived in whole
or in part by such Purchaser:
8
<PAGE>
6.1 Representations and Warranties Correct: Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section 3
- -----------
hereof shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of said date, subject to changes contemplated by this Agreement; and the Company
shall have performed all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing Date.
6.2 State Securities Laws. The Company shall have complied with
---------------------
the qualification or exemption requirements of applicable state securities laws.
6.3 Restated Articles. The Company shall have duly adopted and
-----------------
filed the Restated Articles with the Secretary of State of the State of
California.
6.4 Opinion of Company's Counsel. Each of the Purchasers shall
----------------------------
have received from Morrison & Foerster, counsel to the Company, a favorable
opinion addressed to such Purchaser, dated the Closing Date and in form and
substance reasonably satisfactory to the Purchasers and their counsel, as to the
matters stated in Sections 3.1, 3.2, (the fifth sentence thereof to the best of
counsel's knowledge), 3.3, 3.8 (to the best of counsel's knowledge), 3.9, 3.10
and 3.11 (to the best of counsel's knowledge).
6.5 Compliance Certificate. At the Closing there shall have been
----------------------
delivered to each of the Purchasers a certificate, dated the Closing Date,
signed by the Company's President certifying that the conditions specified in
Section 6.1 have been fulfilled.
6.6 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers, and the Purchasers shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
6.7 Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement which need to be obtained prior to
the Closing.
6.8 Investors Rights Agreement. The Company shall have entered
--------------------------
into the Investors Rights Agreement with each Purchaser.
7. Conditions to Company's Obligations. The obligations of the Company
-----------------------------------
to each Purchaser at the Closing under this Agreement are subject to the
fulfillment by that Purchaser on or before the Closing Date of each of the
following conditions:
9
<PAGE>
7.1 Representations and Warranties: Performance of Obligations. The
----------------------------------------------------------
representations and warranties of each of the Purchasers contained in Section 4
hereof shall be true as of the Closing Date; and the Purchasers shall have each
performed all obligations and conditions herein required to be performed or
observed by them on or prior to the Closing Date.
7.2 Restated Articles. The Restated Articles shall have been filed
-----------------
with the Secretary of State of the State of California.
7.3 Payment of Purchase Price. The Purchaser shall have delivered
-------------------------
to the Company the purchase price for the Shares to be purchased thereby under
this Agreement.
7.4 Consents and Waivers. The Company shall have obtained any and
--------------------
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement which need to be obtained prior to
the Closing.
8. Miscellaneous.
-------------
8.1 Governing law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
8.2 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by any Party hereto
and the closing of the transactions contemplated hereby.
8.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto whose rights or obligations hereunder are affected by such
amendments.
8.4 Entire Agreement. This Agreement and the other documents and
----------------
agreements delivered pursuant hereto constitute the entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
8.5 Notices. Except as otherwise provided, all notices and other
-------
communications required or permitted hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid, addressed (a) if to the Purchaser,
at the Purchaser's address set forth below its signature, or at such other
address as the Purchaser shall have furnished to the Company in writing, or (b)
if to any other holder of any of the Shares or other securities issued with
respect thereto, at such address such holder shall have furnished the Company in
writing, or until any such holder furnishes an address to the Company, then to
and at the address of the last holder of such securities who has so furnished an
address to the Company,
10
<PAGE>
or (c) if to the Company, at its address set forth below, or at such other
address as the Company shall have furnished to the Purchaser in writing.
8.6 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least seventy-five percent (75%) of the outstanding Shares (including, for such
purposes, on a proportional basis, any shares of Common Stock into which any of
the Shares have been converted that have not been sold to the public). Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this agreement at the time
outstanding (including securities into which such securities have been
converted), each future holder of all such securities, and the Company.
8.7 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to the Company or to any holder of any
securities issued or to be issued hereunder, upon any breach or default of any
party hereto under this Agreement, shall impair any such right, power or remedy
of the Company or such holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of any similar breach of
default thereafter occurring; nor shall any waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of the Company or any holder of
any breach or default under this Agreement or any waiver on the part of the
company or any holder of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement, or by law or otherwise
afforded to the Company or any holder, shall be cumulative and not alternative.
8.8 Expenses. The Company and each Purchaser shall bear their own
--------
expenses and legal fees incurred on their behalf with respect to the
negotiation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
8.9 Legal Fees. In the event of any action at law, suit in equity
----------
or arbitration proceeding in relation to this Agreement or any Shares or other
securities of the Company issued or to be issued, the prevailing party, or
parties, shall be paid by the other party or parties a reasonable sum for
attorney's fees and expenses for such prevailing party or parties.
11
<PAGE>
8.10 Finder's Fees.
-------------
(1) The Company (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold each Purchaser
harmless of and from any liability for commission or compensation in the nature
of a finder's fee of any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible.
(2) Each Purchaser (i) represents and warrants that it has
retained no finder or broker in connection with the transactions contemplated by
this Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which such Purchaser, or any of its employees or representatives, are
responsible.
8.11 Titles and Subtitles. The titles of the paragraphs and
-------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
8.12 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 Severability Should any provision of this Agreement be
------------
determined to be illegal or unenforceable, such determination shall not affect
the remaining provisions of this Agreement.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASERS:
By: /s/ Alex C. Hui
-------------------------------- -------------------------------
Alex C. Hui, President Name:
No. of Shares:
-----------------
Address:
-------------------------------
-------------------------------
-------------------------------
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASERS:
By: /s/ Alex C. Hui /s/ ????
--------------------------------- -------------------------------
Alex C. Hui, President Name:
No of Shares:
------------------
Address:
Chye Seng Tannery (PTE) Ltd.
-------------------------------
No. 10 Weld Road
-------------------------------
Singapore, 0820
-------------------------------
Tel: 2928944/5
-------------------------------
Fax: 2969875
-------------------------------
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASERS:
By: /s/ Alex C. Hui Lue Shakmer <???>
--------------------------------- -------------------------------
Alex C. Hui, President Name:
No of Shares: 312.500
------------------
Address:
12-1 F.261.SECI
-------------------------------
Tunhwas Road
-------------------------------
Taipei Taiwan
-------------------------------
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
PIONEER SEMICONDUCTOR CORPORATION PURCHASERS:
By: /s/ Alex C. Hui Lix Chih Chuong
--------------------------------- -------------------------------
Alex C. Hui, President Name:
No of Shares: 312.500
------------------
Address:
12-1 F.261.SECI
-------------------------------
Tunhwas Road
-------------------------------
Taipei, Taiwan
-------------------------------
16
<PAGE>
Exhibit 11.1
Statement Regarding Computation of Net Income Per Share
<TABLE>
<CAPTION>
Three Months
Fiscal Year Ended June 30, Ended September 30,
----------------------------------------- ------------------
1995 1996 1997 1996 1997
---- ---- ---- ---- -----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Weighted average common shares 2,097 2,150 2,165 2,164 2,346
Common stock equivalents:
Preferred shares 4,613 4,613 4,613 4,613 4,613
Dilutive options using treasury stock method 488 722 538 671 475
Warrants 1 8 - - -
Cheap stock pursuant to SEC rules: (1)
Options granted 543 543 543 543 543
Common shares issued 233 233 233 233 233
------ ------ ------ ------ ------
Shares used in computing per share data 7,975 8,269 8,092 8,224 8,210
====== ====== ====== ====== =======
Net Income $2,041 $4,710 $1,578 $ 185 $ 1,023
====== ====== ====== ====== =======
Net income per common and equivalent share $ 0.26 $ 0.57 $ 0.20 $ 0.02 $ 0.12
====== ====== ====== ======= =======
</TABLE>
(1) Includes all common shares issued and options, warrants and other rights
to acquire shares of common stock at a price less than the initial public
offering price granted by the Company during the period subsequent to
November 6, 1996 (using the treasury stock method until shares are issued
and an estimated initial public offering price), pursuant to the rules of
the Securities and Exchange Commission.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM SEPTEMBER 30, 1997
UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,544
<SECURITIES> 0
<RECEIVABLES> 4,626
<ALLOWANCES> 1,543
<INVENTORY> 6,445
<CURRENT-ASSETS> 19,557
<PP&E> 6,729
<DEPRECIATION> 2,840
<TOTAL-ASSETS> 24,086
<CURRENT-LIABILITIES> 6,022
<BONDS> 0
0
7,717
<COMMON> 259
<OTHER-SE> 9,900
<TOTAL-LIABILITY-AND-EQUITY> 24,086
<SALES> 11,398
<TOTAL-REVENUES> 11,398
<CGS> 6,839
<TOTAL-COSTS> 9,964
<OTHER-EXPENSES> 30
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,527
<INCOME-TAX> 504
<INCOME-CONTINUING> 1,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,023
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
